Author: Scott Chipolina
Translation: Chen Zou
Recently, Galaxy Digital released a report comparing the energy consumption of Bitcoin and traditional finance. Finally, it concluded that the banking system in the world consumes more energy than Bitcoin. Although this conclusion is positive for Bitcoin, the authenticity of some data is still questionable.
“Green Bitcoin” under the Galaxy Digital report
The report states, “In view of Bitcoin’s network transparency, it is easy to estimate Bitcoin’s energy usage, which has also led to Bitcoin’s frequent criticism, but these criticisms are rarely directed at other traditional industries.”
To this end, the report compares Bitcoin’s energy consumption with traditional payments, savings and settlements, and gold (as a non-sovereign value store). In the ongoing debate about Bitcoin’s energy consumption, Galaxy Digital has begun to defend Bitcoin.
Galaxy Digital claims that on May 13, 2021, the Bitcoin network is estimated to consume a total of 113 terawatt hours (TWh) per year. Compared with the banking industry, Bitcoin energy consumption covers everything from mining operations to processing transactions. The banking industry consists of bank data centers, bank branches, ATMs, and bank card networks. Galaxy Digital excluded the central bank from its analysis.
Although the banking system does not directly report power consumption data, Galaxy Digital claims that the banking system uses about 263 terawatt hours of energy each year, more than double the energy consumed by the Bitcoin network. Similarly, the report stated that Bitcoin is not as energy intensive as gold. According to Galaxy Digital’s estimates, gold consumes about 240 terawatt hours per year. The report derives this data by converting the estimated greenhouse gas emissions of the gold industry and using the International Energy Agency’s (IEA) carbon emission/energy consumption converter to convert it into terawatt hours.
Are the numbers in the report really accurate?
According to the Bitcoin Power Consumption Index of the University of Cambridge, Galaxy Digital greatly underestimates Bitcoin’s energy consumption. Today, the Bitcoin network is estimated to consume about 144 terawatt-hours per year, far exceeding the 113 terawatt-hours quoted by the digital asset company. This number makes Bitcoin one of the top 30 countries in the world for energy consumption. But even so, some people still say, “The energy consumption of gold and banks is still much higher.” Then we continue to look at.
The report also claims that Bitcoin is a “perfect use case” that can store intermittent and excess energy value, benefiting the energy sector. Although this is theoretically correct, the data shows that Bitcoin does not actually incentivize the use of intermittent and excess energy.
According to data from the University of Cambridge, only 39% of the Bitcoin network is powered by renewable energy. This number is controversial, and Coinshares estimates that more than 75% of the network uses renewable energy. However, the closure of a coal mine area last month directly caused the computing power to drop to the level since November 2020, which is also evidence that the Bitcoin mining industry is still heavily dependent on fossil fuels.
In an article by Hacker Noon in 2017, Carlos Domingo, CEO of Securitize, a cryptocurrency compliance company, proposed that all bank data servers, bank branches, and ATMs add up to approximately 100 TWh per year, which is similar to what Galaxy Digital cited The 263 TWh number is a far cry.
Galaxy Digital’s conclusion
But as Galaxy Digital said, the answer to whether Bitcoin is worth its energy cost is subjective.
The report states, “So, if we finally return to the original question. Is the power consumption of the Bitcoin network acceptable? Our answer is clear: yes”.
The fact is that Bitcoin consumes a lot of energy, even far more than most countries in the world, and according to Cambridge University’s index, Bitcoin’s energy demand will only increase in the future.