New research from payment consultancy firm Valuechain finds past energy analyses of Bitcoin were incomplete, inaccurate, and unfairly biased against crypto.
The Bitcoin blockchain gets a bad rap from environmentalists and critics because its proof-of-work (PoW) programming used to settle transactions is widely portrayed as a hoggish energy glutton that's stomping all over ecological ideals with its massive carbon footprint.
Some of the most frequently touted research bashing Bitcoin's power use comes from the University of Cambridge, which pegs Bitcoin's annual power drain at more than 121 terawatt-hours (TWh), ranking it in the top 30 electricity consumers worldwide. In fact, if Bitcoin was a country, it would be sucking down more energy than either the Netherlands or Pakistan according to the Cambridge data.
To give a sense of how much energy that is, the WorldCounts website states that a single terawatt can power 10 billion, 100-watt bulbs at the same time. And the power panning against Bitcoin isn't just from theoretical academicians, it's also coming from leaders within the crypto community itself.
Cardano cofounder Charles Hoskinson verbally bludgeoned Bitcoin's energy inhalation in a top-tier media article last month stating, "Bitcoin's energy consumption has more than quadrupled since the beginning of its last peak in 2017 and it is set to get worse because energy inefficiency is built into Bitcoin's DNA. Bitcoin's carbon footprint will get exponentially worse because the more its price rises, the more competition there is for the currency and thus the more energy it consumes."
Flipping the script and energy switch on Bitcoin's energy use
Frankly, it's easy to lob eco-bombs against the first and most valuable crypto, even though Bitcoin is down 70% today across cryptocurrency exchanges, from its peak price of $69,000 set in November 2021. However, a recently published peer-reviewed research report calls into question the environmental-focused bluster against Bitcoin. Payment consultancy firm Valuechain published the 27-page white paper titled "Bitcoin: Cryptopaments Energy Efficiency" after conducting four years' worth of research and data compilation.
The publication asserts that past energy analyses of Bitcoin -- including the aforementioned University of Cambridge research -- were incomplete, inaccurate, and unfairly biased against crypto. For example, Valuechain specifically criticized a central bank paper titled "The Carbon Footprint of Bitcoin" for cherry-picking debit card use -- which is a small element within traditional banking -- as the isolated comparator against Bitcoin's entire ecosystem.
"It's essential to compare Bitcoin energy consumption with all the aspects of the classical monetary payment system. This covers: banknotes and coins cash management in ATM systems, card payments, point of sale (POS) payments, banking and inter-banking energy consumption, etc .We've endeavored in our paper to answer mathematically and scientifically all these challenges for the benefit of decision makers, researchers, politicians, legislators and industry representatives," as stated in the white paper.
The Valuechain study went on to calculate the average lifespan of Bitcoin mining rigs; the surge in use of hydro, wind, and solar power by BTC miners; and miners' adoption of energy-stingy mining tech to determine that Bitcoin's global network consumes 88.95 TWh per year -- almost 50% less than the Cambridge estimate.
Perhaps even more electrifying were the results Valuechain discovered using "physics, information science and economics" to compute, compare, and define an accurate energy use assessment of the traditional banking system -- which was determined to have a shocking annual energy use profile of 4,981 TWh compared to Bitcoin's 89 TWh.
"We demonstrate that Bitcoin consumes 56 times less energy than the classical system, and that even at the single transaction level, a PoW transaction proves to be 1 to 5 times more energy efficient. When Bitcoin Lightning layer is compared to Instant Payment scheme, Bitcoin gains exponentially in scalability and efficiency, proving to be up to a million times more energy efficient per transaction than Instant Payments," the Valuechain paper reads.
These data serve as reliable, supercharged counter measures that should erode anti-BTC sustainability biases, while bolstering Bitcoin's reputation as a "net good" in pursuit of net zero emissions going forward.
FAQs
Estimates showed that, in 2023, dedicated mining companies with highly efficient setups would consume about 155,000 kilowatt hours (kWh) of electricity to mine one Bitcoin. The average energy consumed for one Bitcoin transaction is 851.77 kWh, equivalent to about a month of electricity for the average US household.
How much energy does traditional banking use? ›
This includes the energy demands of banking data centers, which are the largest contributors, estimated at 225.45 TWh. Additionally, physical bank branches, independent ATMs, and card networks like VISA consume 22.68 TWh, 2.91 TWh, and 7.81 TWh respectively.
Why does Bitcoin waste so much energy? ›
Why so much electricity? Essentially, crypto tokens are generated by having a computer solve complicated puzzles. That requires a lot of computing power, generally done by specialized computers running calculations 24 hours a day.
Why is Bitcoin better than banks? ›
Strengths of Bitcoin
Decentralization: Bitcoin operates on a decentralized network of nodes, eliminating the need for intermediaries like banks. This autonomy gives individuals more control over their finances.
How much energy does it take to mine bitcoin? ›
The New York Times recently equated the total power consumed by Bitcoin annually to what's used by Finland in one year. The fact is that even the most efficient Bitcoin mining operation takes roughly 155,000 kWh to mine one Bitcoin. By way of comparison, the average US household consumes about 900 kWh per month.
Does ethereum use less energy than Bitcoin? ›
The CCAF, known for estimating the Bitcoin network's energy consumption over the past several years, says Ethereum's consumption totaled 58.26 Terawatt hours (TWh) between 2015 and the so-called Merge. Switzerland's annual electricity consumption is 54.88 TWh, while Bitcoin's is 143.9 TWh, according to the CCAF.
Does mining Bitcoin take more energy than gold mining? ›
38,347 kWh
of electrical energy is used to mine a BTC worth of gold. Interestingly, the chart reveals that even in the most optimistic case, Bitcoin mining is actually more energy-intensive than gold mining. Given a more realistic number, the difference increases fast.
How much energy does the US banking system use? ›
The report found that banking and gold consume around 263.72 TWh per year and 240.61 TWh per year, respectively, while Bitcoin consumes much less energy — 113.89 TWh per year.
Is traditional banking safer than online banking? ›
Online banks are safe if they have FDIC insurance, and they typically offer competitive interest rates and low or no account fees. These benefits alone are often enough to get people on board. Even though digital banks offer lower fees and convenience, some people may not be comfortable doing all their banking online.
How much energy does Bitcoin use compared to banking? ›
“Bitcoin uses 0.5% of world energy consumption. Banking uses 56 times more energy than Bitcoin,” Michel Khazzaka, a cybersecurity engineer and cryptographer, told Cointelegraph.
Whether Bitcoin is a waste or not is a subjective argument. One side says too much energy is being used to create currency; another says the energy footprint is less than that of traditional financial networks.
What is the power problem with Bitcoin? ›
Bitcoin alone is estimated to consume 127 terawatt-hours (TWh) a year — more than many countries, including Norway. In the United States, cryptocurrency activity is estimated to emit from 25 to 50 million tons of CO2 each year, on par with the annual emissions from diesel fuel used by US railroads.
Can Bitcoin replace banks? ›
Bitcoin's technology relies on algorithmic trust, and its decentralized system offers an alternative to the current system. However, because of the issues it raises and faces, it is unlikely that it will replace central banks anytime soon.
Who is better than Bitcoin? ›
Ethereum (ETH)
An altcoin is an alternative to bitcoin. The leading altcoin debuted in 2015 and ranks second to bitcoin in market capitalization. What sets the ethereum blockchain apart is its introduction of smart contracts. These contracts are pieces of code that run decentralized applications.
Will Bitcoin replace the dollar? ›
Will Cryptocurrency Replace Fiat Money? It's unlikely that cryptocurrency, in its current form, will replace fiat currency in developed countries. However, it is possible in financially struggling nations.
Does Bitcoin store energy? ›
It proposes a structure to store excess renewable energy in cryptocurrency units (CCUs) like Bitcoin (BTC). CESSs can be charged during off-peak intervals and, conversely, they discharge during high-demand periods to reduce the overall operational cost of MGs.
How much energy does Bitcoin use compared to a country? ›
Globally, the mining of bitcoin currently consumes more than 129 terawatt-hours of electricity per year – as much as Finland's electricity consumption and a good 30 percent more than Switzerland's.
Is blockchain energy intensive? ›
Some argue that estimates of blockchain's power consumption are overblown, but even if that's true, it's still far from energy efficient. In fact, it poses an awkward conundrum: this technology was invented to make transactions more efficient is itself profoundly wasteful.
How long does it take to mine 1 Bitcoin? ›
The length of time it takes to mine 1 Bitcoin can vary. Each committed Bitcoin block releases 3.125 Bitcoin. To answer the central question in mind, it takes an average of 10 minutes to mine not just 1 Bitcoin but 3 — and that rate will fluctuate over time.
