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New findings reveal that Bitcoin usage may have a smaller carbon footprint than the classical banking system.
Bitcoin’s popularity has skyrocketed within the last few years as more institutions turn to cryptocurrency and the solutions it provides. However, despite its numerous advantages, the king crypto has come under fire for its massive energy consumption rates. The digital coin reportedly uses 122 TWh of electricity per year, more than is used by some countries, such as Finland.
How BTC’s Power Consumption Fares Against Banking
However, according to a recent study, the leading crypto might be less energy-intensive than earlier thought. This is especially true in comparison with the present traditional banking system. Michel Khazzaka, IT engineer, cryptographer, and founder of payments consultancy firm, Valuechain, set out to prove this using physics, information science, and economics. In his abstract unceremoniously titled Bitcoin: Cryptopayments Energy Efficiency, Khazzaka demonstrates that Bitcoin is not as energy-demanding as perceived.
Using an open-sourced methodology, Michel sets out to systematically prove that adopting crypto-payments might help alleviate the world’s energy crisis.
In his abstract, Khazzaka comes up with a different estimated Bitcoin energy consumption rate, calculating that the coin consumes about 88.95 TWh per year. This is significantly lesser than the initial 122 TWh rate put forward by the Cambridge Bitcoin Electricity Consumption Index (CBECI). Khazzaka cites the use of inaccurate figures and an anti-Bitcoin bias as the reason for the disparity between the estimates.
Khazzaka then takes an in-depth look at the energy needs of traditional banking. He systematically calculates and compiles the energy consumption rates of different components of the legacy banking sector. From energy used to mint money, to energy expended by employees during commutes, Khazzaka collates the values for each component and arrives at a startling result.
Bitcoin “a Hundred Million Times” More Energy Efficient
Indeed, the banking sector, in total, consumes about 4,891 TWh of energy annually. This is approximately 56 times the value of Bitcoin’s estimate. Additionally, Khazzaka adds that his calculations do not take into account the fairly recent L2 protocol, the Lightning Network.
The Lightning Network allows for increased numbers of transactions without actually increasing energy consumption. Michel ultimately concludes that with the Lightning Network being utilized to its full potential, Bitcoin could be up to 194 million times more efficient than classical banking.
Bitcoin’s energy consumption has long been at the receiving end of criticism. This is why Khazzaka’s latest research could be a rare reprieve not only for Bitcoin, but for the crypto market.
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