Debates and measures on climate change and energy reduction are likely to be at the forefront of issues in 2021. In particular, the shift in energy production from fossil fuels like coal to so-called green alternatives like wind or solar power.
“Enough of burning and drilling and mining our way deeper. We are digging our own graves,” with these words the unelected UN Secretary-General Guterres opened the climate conference in Glasgow earlier this year.
When it comes to Bitcoin, many politicians and central bankers are sounding the alarm because so-called Bitcoin mining is a huge consumer of energy, and mining for it should be banned to prevent energy thieves from stealing energy as well as polluting the world. But does Bitcoin really consume that much energy and what do its direct competitors consume?
According to research by Galaxy Digital Mining, Bitcoin’s energy consumption is really only a very small fraction of global energy consumption, and furthermore, the global financial system consumes far more energy than the Bitcoin network.
The global annual energy consumption is 166,071 TWh/year and the Bitcoin network consumes approximately 113.89 TWh/year. Energy consumption of the Bitcoin network is mainly due to the mining of Bitcoin, which consumes about 99.8% of the energy, from the nodes for transactions and the pools that coordinate the mining.
The study also shows that Bitcoin clearly consumes less energy compared to its competitor the banking system. Total global banking system consumption is 238.92 TWh per year. Bitcoin, on the other hand, consumes almost half of that. Moreover, the energy consumption of the Bitcoin network is also synonymous with the security of the network. The more computing units participate in the network, the more decentralized the network becomes, and its security increases. This is something that is certainly not the case with the central banking system.
What’s more, Bitcoin miners compete in a market whose main cost is energy. Thus, Bitcoin miners strive to find the cheapest form of energy to be the most profitable. With solar power where the sun shines for half of the year or wind power where the wind blows all the time, this could be a solution. Now, most regions of the world cannot produce constant solar power or wind power, which increases the demand for reliable green power. Nuclear power could definitely be the solution. In addition, the voices of those responsible for crypto farms who are in favor of nuclear power are increasing.
Here, the decision-makers could take a real step in the clean direction.