The machines performing the “work” [to make the Bitcoin network function, and to make new bitcoins by so-called “mining”] are consuming huge amounts of energy while doing so. …
The continuous block mining cycle incentivizes people all over the world to mine Bitcoin. As mining can provide a solid stream of revenue, people are very willing to run power-hungry machines to get a piece of it. Over the years this has caused the total energy consumption of the Bitcoin network to grow to epic proportions, as the price of the currency reached new highs.
Compared to the electricity consumption of entire countries, Bitcoin mining ranks 64th in the world — behind Morocco and Serbia, but ahead of Oman and the Slovak Republic.
The electricity used to mine Bitcoins currently costs about US$1.5 billion per year (30 TWh), and is rising at a prodigious rate (it was 23 TWh a month ago).
While Bitcoin Mining is only currently consuming 0.13% of the world’s electricity output, it’s growing incredibly quickly.
On current growth rates, Bitcoin will consume 100% of the world’s electricity by 2020.
At a very basic level Bitcoin mining requires expensive and power hungry computer hardware. As the IEEE explains:
Mining power is high and getting higher, thanks to a computational arms race. Recall that the required number of zeros at the beginning of a hash is tweaked biweekly to adjust the difficulty of creating a block — and more zeros means more difficulty.
The Bitcoin algorithm adds these zeros in order to keep the rate at which blocks are added constant, at one new block every 10 minutes. The idea is to compensate for the mining hardware becoming more and more powerful.
When the hashing is harder, it takes more computations to create a block and thus more effort to earn new bitcoins, which are then added to circulation.
To better understand how this whole process works have a look at Investopedia’s guide.