A comprehensive research framework for Bitcoin’s energy use: Fundamentals, economic rationale, and a pinch of thermodynamics

Abstract

The energy use of Bitcoin is fiercely debated among academics, practitioners, and the general public. This debate is often biased and characterized by a lack of understanding. Therefore, I start this paper with a discussion of the fundamentals of Bitcoin, which includes the clarification of widely held misconceptions. Next, I illustrate how Bitcoin is related to energy and describe the underlying incentive mechanism. In the main body of the paper, I discuss various components of Bitcoin’s energy use, including the amount, composition, and geographical distribution of the energy, as well as emerging positive and negative effects. These components are then combined into a comprehensive framework that provides a solid foundation for future academic research and presents practitioners with the big picture of how and why Bitcoin requires energy and whether this can be justified from an environmental point of view.