Compare with banking system and gold industry
The mining division of Galaxy Digital, a major US crypto asset (cryptocurrency) investment company, has released a report on the energy consumption of Bitcoin (BTC). In this article, I will give an overview of a report that compares the power consumption status of Bitcoin with the banking system and gold that are often referred to for Bitcoin.
Bitcoin’s annual energy consumption was significantly lower than both, according to estimates. The estimated annual power consumption is about 114 TWh (terawatt hour) for Bitcoin, about 241 TWh for gold, and about 264 TWh for the banking sector. Note that traditional banking systems and the gold industry do not disclose energy consumption, so this figure was estimated by Galaxy Digital taking into account various factors.
First, Bitcoin’s direct power consumption is due to the three nodes that verify and relay transactions, the mining pool, and the mining machine. Of these, about 99.8% was due to the operation of mining machines, accounting for an overwhelming proportion.
The Bitcoin network together consumes an estimated 113.89 TWh per year.
Next, on the gold industry, Galaxy Digital published the 2018 Gold Industry in the World Gold Council’s report, Gold and Climate Change: Current and Future Impacts. See Total Greenhouse Gas Emissions (GHG). The annual energy consumption was calculated from that value.
Much of the carbon emissions come from the gold mining and refining process. Excluding indirect emissions from jewelry processing and investment for comparison with Bitcoin, the annual GHG emissions of gold were 100 million tons of CO2 (carbon dioxide tons). From that figure, Galaxy Digital estimates that the annual power consumption is about 240.61 TWh.
The banking industry does not report power consumption data. Galaxy Digital derives power consumption from information about “bank data centers, bank branches, ATMs, card network data centers,” and more.
Taking into account various factors such as the area of the data center, the total number of branches, business hours, the average power consumption of small and medium-sized enterprises in the world, and the number of transactions, the annual power consumption of the banking system is estimated to be 263.72 TWh.
Thus, according to the report, both gold and the banking system consume more power annually than Bitcoin. The detailed calculation method is published in the report.
Incentive to utilize surplus electricity
Galaxy Digital also disagreed with Bitcoin’s criticisms of “stealing energy from more productive ways of using electricity” and “leading to increased energy consumption.”
Bitcoin miners tend to demand low-cost electricity to maximize profits. At that time, as cheap electricity, an incentive is given to use energy that may be surplus or underutilized in the energy market.
For example, methane is a by-product of the oil extraction process and cannot be transported without a pipeline, so it is generally released into the atmosphere or burned. However, the greenhouse effect of methane is said to be 25 times that of the same amount of CO2, which has a large environmental burden. One of the solutions is to use it for Bitcoin mining.
Companies such as Crusoe Energy Systems have built infrastructure to recover methane and are using it for Bitcoin mining. The generator burns methane with 99% efficiency, reducing emissions by 24 times compared to when it is released into the atmosphere.
The report also noted that some parts of Bitcoin mining utilize renewable energy such as wind and solar, which also helps to provide revenue to these sectors.
That’s all for the report, but it’s worth noting that the cryptocurrency industry has recently accelerated its efforts to address energy issues. For example, in April, the international industry alliance “Crypto Climate Accord” was launched. It announced that it aims to reduce greenhouse gas emissions of the entire cryptocurrency industry to virtually zero by 2040.
Relation: “Zero greenhouse gas emissions in the cryptocurrency industry” ── Cryptocurrency climate agreement
Reference: Galaxy Digital
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“Cryptocurrency” means “cryptographic assets”