Bitcoin uses 50 times less energy than traditional banking, new study shows

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New research from payments advisory firm Valuechain shows previous energy analysis of Bitcoin was incomplete, inaccurate and unfairly biased towards crypto.


Important points

  • A recent peer-reviewed white paper notes that Bitcoin’s blockchain consumes nearly half the annual energy of previous estimates.
  • The Valuechain publication also shows that Bitcoin is 56 times more energy efficient than the current banking system.

The Bitcoin blockchain gets a bad rap from environmentalists and critics because its Proof-of-Work (PoW) programming, which is used to process transactions, is widely portrayed as a piggy energy guzzler, with its massive carbon footprint all ecological Ideals trampled.

Some of the most touted research into bitcoin’s electricity consumption comes from the University of Cambridge, which puts bitcoin’s annual electricity consumption at more than 121 terawatt hours (TWh) and ranks it among the top 30 electricity consumers in the world. If Bitcoin were a country, it would siphon even more energy than 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 light bulbs at once. And the power panning against Bitcoin is not only coming from theoretical academics, but also from leaders within the crypto community itself.

Charles Hoskinson, co-founder of Cardano, verbally bludgeoned Bitcoin’s energy inhalation in a high-profile media article last month, stating, “Bitcoin’s energy consumption has more than quadrupled since it began its last peak in 2017 and will only get worse because of built-in energy inefficiency.” The DNA of Bitcoin. Bitcoin’s carbon footprint will deteriorate exponentially because the higher the price, the more competition there is for the currency and the more energy it consumes.”

Flipping the script and power switch turns on bitcoin’s energy consumption

Honestly, it’s easy to throw eco-bombs at the first and most valuable crypto, even though Bitcoin is down 70% today across all cryptocurrency exchanges compared to its peak price of $69,000 set in November 2021. However, as evidenced by a recent peer-reviewed research paper, it challenges the environmental rant against bitcoin. Payments advisory firm Valuechain released the 27-page white paper, titled “Bitcoin: Cryptopaments Energy Efficiency,” after four years of research and data collection.

The publication claims that previous energy analyzes of Bitcoin — including the aforementioned University of Cambridge research — were incomplete, inaccurate, and unfairly biased towards crypto. For example, Valuechain specifically criticized a central bank paper titled “The Carbon Footprint of Bitcoin” for cherry-picking the use of debit cards — which are a minor element within traditional banking — as an isolated comparison to Bitcoin’s overall ecosystem.

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“It is important to compare Bitcoin’s energy consumption with all aspects of the classical monetary payment system. This includes: banknotes and coins, cash management in ATMs, card payments, point-of-sale (POS) payments, bank and interbank energy consumption, etc. In our paper, we have endeavored to mathematically and scientifically address all these challenges for the benefit of policy makers, researchers, politicians, legislators and industry representatives,” says the white paper.

The Valuechain study went on to calculate the average lifespan of bitcoin mining rigs; the increase in the use of water, wind and solar energy by BTC miners; and the adoption of low-energy mining technology by miners to find 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 uncovered by using “physics, information science and economics” to calculate, compare and define an accurate energy consumption assessment of the traditional banking system – which was projected to have a shocking annual energy consumption profile of 4,981 TWh compared to bitcoins 89 TWh.

“We show that Bitcoin uses 56 times less energy than the classical system and that a PoW transaction proves to be 1 to 5 times more energy efficient even at the single transaction level [the] Bitcoin Lightning Layer is compared to [the] Through the instant payment system, Bitcoin gains exponential scalability and efficiency, proving to be up to a million times more energy efficient than instant payments per transaction,” the Valuechain paper reads.

This data serves as reliable, supercharged countermeasures that should undermine anti-BTC sustainability biases while bolstering Bitcoin’s reputation as a “net good” in the pursuit of net-zero emissions in the future.

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