Amid lingering concerns about Bitcoin’s energy consumption (BTC), a new study indicates that the traditional banking system uses significantly more power than the Bitcoin network.
Michael Novogratz’s Galaxy Digital Cryptocurrency Company published a Friday report titled “On Bitcoin’s Power Consumption: A Quantitative Approach to a Subjective Question,” providing open-source access to its methodology and calculations.
Compiled by Galaxy’s mining arm, the study estimates Bitcoin’s annual electricity consumption at 113.89 TWh, including power for miners’ demand, miners power consumption, power consumption of the pool and the energy consumption of the nodes. This amount is at least twice less than the total energy consumed by the banking system as well as by the gold industry on an annual basis, according to Galaxy estimates.
Although Bitcoin’s energy consumption is transparent and easy to track in real time using tools such as the Cambridge Bitcoin Electricity Consumption Index, the assessment of the energy consumption of the he gold industry and the traditional financial system is not that simple, said Galaxy Digital Mining.
“The banking industry does not directly report electricity consumption data,” the report said, adding that the retail and commercial banking system requires multiple layers of settlement, while Bitcoin offers final settlement. Taking into account Galaxy’s estimates of the energy consumption of bank data centers, bank branches, ATMs and card network data centers, the total annual energy consumption of the banking system is estimated at 263, 72 TWh worldwide.
In order to calculate the energy consumption of the gold industry, Galaxy Digital Mining implemented estimates of the industry’s total greenhouse gas emissions provided in the World’s Gold Council report titled “Gold and climate change: current and future impacts ”. As estimated in the study, the gold industry uses approximately 240.61 TWh per year. “These estimates can exclude major sources of energy consumption and emissions that are second-order effects of the gold industry such as the energy and carbon intensity of the tires used in gold mines,” he said. Galaxy noted.
Galaxy Digital’s analysis of Bitcoin’s power consumption comes amid a major crypto market crash that follows Tesla CEO Elon Musk’s decision to stop accepting BTC as payment for car purchases due to environmental concerns. “Cryptocurrency is a good idea on many levels and we believe it has a bright future, but it can’t come at a cost to the environment,” the CEO wrote on Twitter last week.
Musk’s move drew wide-scale criticism from the crypto community, with some arguing that SpaceX should shift its rockets to “more sustainable energy” so as not to “look like a big clueless hypocrite.”
Crypto markets lost over $ 500 billion after Musk took to Twitter with his announcement, with Bitcoin dropping below $ 43,000 today for the first time since early February. The executive apparently brought more stress to the market by hinting that Tesla was planning to remove Bitcoin from its balance sheet soon.