Bitcoin Energy Consumption Is More Efficient and Greener Than Todays Banking System
Although the issue is not new, Bitcoin’s recent surge has triggered old debates once more. While some consider Bitcoin as an ecological threat, others oppose the criticisms claiming it is based on partial data and information. The latter group states that today’s banking system consumes much more energy than Bitcoin. Also, studies illustrate that Bitcoin mining is mostly based on renewable energy sources.
Cryptocurrencies like Bitcoin utilize the mining process done by computers solving equations to extract new coins. This process is designed to reward miners with Bitcoins approximately every 10 minutes. To maintain this design the more computers work to solve the equations, hence, the problems become harder to solve. This situation has caused miners to use even more processing power and ultimately create a growing energy demand.
Different organizations have conducted various studies regarding the amid growing concerns about electricity consumption. Countries based on mostly fossil fuels have a more negative impact on the environment than the countries that use mostly green or renewable energies. The results also conclude that the environmental impact can be reduced if more efficient equipment is provided or miners settle in colder climates where less energy is needed to cool the computers.
Two mostly referred databases estimating Bitcoin’s energy consumption are Cambridge Bitcoin Electricity Consumption Index (CBECI) and digiconomist.net. However, both indexes provide highly different results concerning the issue. While CBCEI illustrates Bitcoin’s energy consumption as 77.78 terawatts per hour (TWh), digiconomist.net shows the data as 111.08 TWh. This large discrepancy, around 44%, makes researchers question how accurate the information is, based on the CBECI and digiconomist.net databases.
Another ambiguity lies in inaccurate data indicating that China captures 65% of Bitcoin mining. However, according to the current studies on hash rate, China’s weight in Bitcoin mining has been slightly declining that has recently dropped to 50%. Moreover, as mentioned above, Bitcoin mining mostly (around 76% – 78%) uses renewable energy resources such as hydropower, wind, solar, and geothermal energy. For instance, in the US, Washington State has been a center for mining activities since energy consumption is based on hydroelectric power in the state, reducing power costs.
Prominent organizations like Deutsche Bank Research, the Chinese National Energy Agency, and Morgan Stanley confirm that Bitcoin is far more efficient and environmentally friendly than traditional financial systems. On the other hand, the energy consumption of the modern banking system is much higher than Bitcoin. Statistics highlight that the contemporary banking system uses around 140 TWh yearly depending on delivery trucks, servers, branches, and ATMs worldwide.