Bitcoin’s energy consumption is one of the main issues dividing the cryptosphere and justifying the regulators’ relentless assault on it. While many critics claim that the network’s operation makes it one of the most energy-intensive systems on the planet, the latest report published by the firm Valuechain suggests otherwise. It reveals that the banking system consumes 56 times more energy than Bitcoin. Details in the following.
4 years of research and a new approach to calculate energy consumption
The report that unmasked the banking system was published by Michel Khazzaka, a computer engineer, who founded the payments consultancy Valuechain in 2021. Among other things, he took a new approach to estimating the energy consumption of the Bitcoin network for this research and analyzed four years of data. While the Cambridge Bitcoin Electricity Consumption Index, which is often used as a benchmark, estimates that Bitcoin consumes about 122 TWh per year, Khazzaka instead reports a consumption of 88.95 TWh per year.
To arrive at such an estimate, the founder of Valuechain took into account the average lifespan of bitcoin mining machines as well as the rate of creation of new computing materials. He then made a comparison with the banking system based on the creation and transportation of money, as well as the energy consumption of the latter’s physical infrastructure. Mr. Khazzaka came to the conclusion that the banking system consumes about 4,981 TWh each year, or 56 times more energy than bitcoin.
Bitcoin transactions are much more efficient
Valuechain’s report also looked at the efficiency of the two systems and again argues in favor of bitcoin. In fact, it states that mass adoption of the Lightning network will allow Bitcoin to be up to 194 million times more energy efficient than a traditional payment system. “Lightning will allow Bitcoin to do more transactions without consuming more energy. And that’s magic,” Khazzaka said.
While critics might be tempted to accuse Valuechain’s founder of bias, he assures that his report is “biased in favor of the banking system.” In fact, he recommended that the latter adopt blockchain, or even bitcoin, to better serve their customers’ needs. “If they are brave enough with blockchain technology, it will improve their efficiency and scalability,” he concluded.
Needless to say, this report will be hotly contested by Bitcoin critics and defenders of the traditional financial system who are opposed to the emergence of cryptocurrencies. However, it does put Bitcoin’s energy consumption back into perspective as that of a financial system and no longer as a mere technological innovation.