A study revealed that Bitcoin’s energy efficiency is significantly higher compared to that of a traditional banking system. Banking transactions consume 56 times more electricity than blockchain payments in BTC.
IT engineer and founder of Valuechain consulting company Michel Khazzaka published the results of a four-year study of Bitcoin’s energy efficiency based on an innovative Proof-of-Work approach to estimating energy consumption. He says Bitcoin payments are “a million times more efficient” than the legacy financial system, which is energy-intensive and harms the planet far more than BTC.
Khazzaka suggests an alternative approach to estimating online electricity consumption, different from the Cambridge Bitcoin Electricity Consumption Index (CBECI) counting system. For example, according to CBECI’s estimate of total annual consumption, Bitcoin consumes about 122 TW/h annually. On the other hand, considering the average lifespan of the mining equipment in the study and the BTC network’s efficiency and scalability, Khazzaka argues that Bitcoin consumes 88.95 TW/h per year, 27% less than the CBECI estimates.
Examining the banking sector and its energy efficiency in parallel using a similar model, relying on banks’ energy-intensive mechanisms such as money creation and transportation, as well as the energy consumption of physical banking infrastructure, Khazzaka calculates the banking sector’s energy consumption at 4,981 TW/h per year, nearly 5,500% higher than that of BTC.
In the report, the author also examines BTC transaction efficiency, showing that currently, “at current block size and if the blocks are filled to their maximum capacity,” the first cryptocurrency’s energy efficiency is 5.7x higher than the traditional banking system. Khazzaka also noted that the Lightning Network payment protocol allows the Bitcoin network to perform more transactions without consuming more energy. By doing so, the Lightning Network allows Bitcoin to become “194 million” times more energy efficient than the classic payment system.
The author argues that the early introduction of blockchain technology into the traditional banking infrastructure and BTC’s acceptance as legal tender can improve the banking industry’s energy efficiency and “save the planet.”
BTC miners are often targeted by regulators who accuse them of excessive energy consumption. This forces mining companies to increasingly switch to green energy sources, boosting their balance sheet by nearly 60% in the past year.
Bitcoin shows very high volatility, but despite that, Blockware Intelligence analysts recently concluded that in eight years, one in 10 people on the planet would be using BTC. In terms of transaction volume, Bitcoin is now second only to Visa and Mastercard networks, surpassing such giants as American Express, Discover and PayPal.
