flexibeast.space - gemlog - 2023-01-13

Bitcoin's energy consumption

In May 2021, an article posted on nasdaq.com[a] referenced a ‘recent’ report which:

found that Bitcoin consumes 113.89 terawatt hours (TWh) per year, while the banking industry consumes 263.72 TWh per year.

— “Research: Bitcoin Consumes Less Than Half The Energy Of The Banking Or Gold Industries”

Cryptoboosters like to refer to this sort of data as proof that Bitcoin (and its underlying proof-of-work algorithm) isn't actually an outrageous energy-guzzling carbon-emitting monster. (Although such people are a bit quieter nowadays, perhaps due to the ongoing crypto collapse[b].)

In March 2021, there were 363 397 Bitcoin transactions per day.

— “Number of daily transactions on the blockchain of Bitcoin from January 2017 to July 6, 2021”

April and May 2021 were lower, but let's err on the side of being generous towards Bitcoin.

In contrast, it was estimated that 2018,

roughly 1.01 billion credit card transactions occur[ed] every day around the world.

— “The Average Number of Credit Card Transactions Per Day & Year”

Note that's just credit card transactions, not all financial transactions. And it also seems reasonable to assume that number had only increased by March 2021, particularly as that was around the start of the COVID pandemic. But again, let's give Bitcoin the advantage, and not only work with this figure, but also (obviously incorrectly) assume that credit card transactions alone are responsible for the energy consumption of 263.72 TWh annually.

So Bitcoin consumes 113.89 / 12 = 9.491 TWh per month, while credit card transactions consume 263.72 / 12 = 21.977 TWh per month.

But in a month, Bitcoin processes only 363 397 * 31 = 11 265 307 transactions, while there are 1 010 000 000 * 31 = 31 310 000 000 credit card transactions processed.

So each Bitcoin transaction consumed 9 491 000 000 / 11 265 307 ≅ 842. 498 kWh, whereas each credit card transaction consumed 21 977 000 000 / 31 310 000 000 = 0.702 kWh.

Bitcoin consumes roughly 842.498 / 0.702 ≅ 1200 times more electricity per transaction than a credit card does, assuming that credit card transactions are responsible for the entirety of the banking sector's energy usage.

But of course, credit card transactions are in fact only part of all the financial transactions taking place globally daily, and increasing the number of transactions to better reflect this would only decrease the ‘0.702 kWh per transaction’ figure.

On the other hand, if credit card transactions used energy at the same rate as Bitcoin, it would require 1 010 000 000 * 842.498 kWh ≅ 851 TWh daily, or 851 * 365 = 310 615 TWh annually. Yet in 2019, “the primary energy used by humans worldwide was about 160,000 terawatt-hours”[c]!

Further info: the Cambridge Bitcoin Electricity Consumption Index.

“Cambridge Bitcoin Electricity Consumption Index”

A previous related post of mine:

“Is (cryptocurrency) winter coming?”

🏷 cryptocurrency,environment


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[a] The Nasdaq “is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume”.

Wikipedia: ‘Nasdaq’

[b] Cf. e.g.:

“Crypto collapse: DCG’s problem is Grayscale, FTX Bahamas agreement, DeFi trading arrest, Silvergate Bank, Huobi, Binance”

Of particular interest to those reading this in Geminispace is the discussion about the ‘Gemini’ crypto exchange's involvement in this mess, which i first came across when trying to find out more about the Gemini smolweb/indienet/etc project, despite the two being (thankfully) entirely unrelated.

[c] Wikipedia: “Watt” / “Terawatt”