A new study states that the traditional banking system consumes much more energy than the Bitcoin (BTC) network amid the ongoing concerns over Bitcoin’s energy consumption.
It has been reported that Michael Novogratz’s cryptocurrency firm, Galaxy Digital, released a report titled “On Bitcoin’s Energy Consumption: A Quantitative Approach to a Subjective Question,” providing open-source access to its methodology and calculations.
The team at Galaxy Digital Mining wrote an excellent white paper examining #bitcoin’s energy usage. Did you know that 19x more energy is lost in transmission than Bitcoin miners consume? Great research here—and we open sourced our methodology.https://t.co/bTR40GdiSP pic.twitter.com/wjd92RmC1l — Galaxy Digital Research (@glxyresearch) May 14, 2021
However, compiled by Galaxy’s mining arm, the study estimates Bitcoin’s annual electricity consumption to stand at 113.89 terawatts per hour, including energy for miner demand, miner power consumption, pool power consumption, and node power consumption.
According to Galaxy’s estimations, this amount is at least two times lower than the total energy consumed by the banking system as well as the gold industry on an annual basis.
Galaxy Digital Mining stated that while Bitcoin’s energy consumption is transparent and easy to track in real-time by using tools like Cambridge Bitcoin Electricity Consumption Index, the evaluation of energy usage of the gold industry and the traditional financial system is not that straightforward.
The report said that the banking industry does not directly report electricity consumption data. The retail and commercial banking system requires multiple settlement layers, while Bitcoin offers the final settlement. Given Galaxy’s estimations of power usage by banking data centers, bank branches, ATMs, and card networks’ data centers, the total annual energy consumption of the banking system is estimated to be 263.72 TWh globally.
Who would have thought? According to Galaxy’s estimates, the annual energy consumed by the banking industry is 146 TWh more than the energy usage of #Bitcoin. https://t.co/FaohiFiZIk — Cointelegraph (@Cointelegraph) May 17, 2021
Likewise, in order to calculate the energy consumption of the gold industry, Galaxy Digital Mining implemented estimates for the industry’s total greenhouse gas emissions provided in the World’s Gold Council’s report titled “Gold and climate change: Current and future impacts.”
As estimated in the study, the gold industry utilizes roughly 240.61 TWh per year.
“These estimates may exclude key sources of energy use and emissions that are second order effects of the gold industry like the energy and carbon intensity of the tires used in gold mines.”
Moreover, Galaxy Digital’s analysis on Bitcoin’s energy 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 promising future, but this cannot come at great cost to the environment.”
Musk’s move spurred wide-scale criticism from the crypto community, with some stating that SpaceX would have to switch its rockets to “more sustainable energy” in order to not “look like a clueless big hypocrite.” Crypto markets shed over $500 billion after Musk took to Twitter with his announcement, with Bitcoin slipping below $43,000 for the first time since early February.
Thus, the executive apparently brought more stress to the market by hinting that Tesla has plans to dump Bitcoin from its balance sheet soon.