The Myth Of Bitcoin Power Consumption
The past few months there have been a lot of Bitcoin critics and news agencies talking about the enormous power consumption of Bitcoin. While it is true that Bitcoin uses a lot of power, it is not used for no reason and is nowhere near as bad as it is said to be compared to other financial instruments. — A coinhub network analysis.
Bitcoin’s power consumption
Bitcoin’s current estimated annual electricity consumption is about 70 TWh a year, this is around the same as the country of Chile uses. While this is a very substantial amount of energy, comparing Bitcoin’s energy consumption with other financial instruments such as the energy consumption of gold mining, printing of fiat currencies and financial markets it really puts it into perspective.
Let’s look at the energy consumption of fiat currencies.
The low estimate for electricity used for the printing of fiat currencies all around the world is around 18.4 million GJ; 5,11 TWh. This is ofcourse a lot less than Bitcoin’s 70 TWh, but keep in mind there is a lot more to it than just printing the money. Include armoured trucks, buildings, computer networks, creditcard networks, bank energy usage (both physical and computational) and much much more energy used by fiat currencies and all the infrastructure around it and you will end up with a number higher than Bitcoin’s. Keep in mind this number does not even include the multi billion litre water costs and other materials.
More interesting though is the energy consumption of gold.
The low estimate for energy used by mining for gold is 476 million gigajoules; about 132 TWh. Now this is almost double Bitcoin’s current usage. The production of gold requires even more water than the printing of money, gold production uses about 810 billion litres of water as opposed to the ‘small’ 10 billion litres used for global currency printing. With the production of gold, a lot of other waste is created such as cyanide and waste rock.
The ‘’usefulness’’ of this energy use.
Many people claim all the energy used by the Bitcoin network is wasted and serves no use, while in reality all this energy is used to secure the network from hackers and bad actors. This energy use is the reason Bitcoin has never been hacked, unlike some fiat systems and third party companies. To a certain extent you could also say the printing of fiat wastes a lot of energy too, paper bills used in the U.S. have a life span of less than 10 years for example.
Gold is even worse, as only 10–15% of gold mined is actually used in technology while most is used for jewelry and investments, respectively. Is all this energy, water and labour not being wasted too? These same people usually claim Bitcoin’s sole use is speculation, so it wouldn’t be too different from gold aside from the jewelry.
Where is Bitcoin’s energy coming from?
When you take a look at the locations of Bitcoin mines in China (2016) you start to see a pattern between location and electricity oversupply. Most Bitcoin mines are located in areas with more power than is being used, and therefore does not use energy that could otherwise be used for households etc. As much of this is hydroelectric or waste energy.
While Bitcoin does consume vast amounts of energy, this is not for no reason, is not more than fiat or gold, and is often waste energy. The problem is not so much increasing energy usage, as the entire world increases it’s energy use every single year, but figuring out ways to increase our energy production sustainably. Bitcoin is just another consumer of energy, not the monster they make it out to be.
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