Bitcoin mining uses electricity because computers are running solving math problems as fast as possible. In the early days of Bitcoin computers and then graphic cards are used for Bitcoin mining. These are being replaced with specialized chips made specifically for Bitcoin mining (ASICs – Application-Specific Integrated Circuits). These use significantly less electricity but there is still a significant amount of electricity used.
The electricity goes towards recording the transactions and securing the system. It is an extremely complicated comparison to other currencies and payment systems. For instance, pressing coins and printing money uses a significant amount of resources as well as transporting it. Banks, credit cards, and PayPal all expend significant resources in tracking fraud which does not exist in Bitcoin. Recent stories that claim that Bitcoin is an “environmental disaster” is a gross exaggeration.
The statistics at blockchain.info are based on 650 Watts per GigaHash. New Bitcoin miners (such as Avalon asics) operates at 625 watts for a 65 GigaHash unit or about 10 Watts per GigaHash. Our articles shows that in a few months the electricity usage will be about 120 megawatt-hours, about 5% of what is being estimated today.