2021-5-18 21:19 |
Galaxy Digital Mining has released a report, “On Bitcoin’s Energy Consumption,” taking a quantitative approach to a question that is more subjective.
In its report, Galaxy compared Bitcoins energy usage to other industries, namely banking and gold.
Bitcoin is a fundamentally novel technology and not a precise substitute for the legacy system, which is more than just a settlement layer or solely a store of value.
And though there is no denying that the Bitcoin network consumes a substantial amount of energy, this energy consumption is what makes it so robust and secure, states the report.
All the criticism Bitcoin has received regarding its energy usage gained spotlight last week after Tesla CEO Elon Musk cited the “insane” usage level as the reason for suspending Bitcoin transactions.
“But these critiques are rarely levied against other traditional industries,” it said. While most often compared to the traditional banking system and gold, unlike Bitcoin’s transparency, these industries are opaque and do not publicly disclose their energy footprints.
When it comes to Bitcoin, nodes, mining pools, and mining machines are the three sources that are direct energy consumers, out of which ASIC machines designed to execute Proof of Work (PoW) required to settle transactions and secure the network accounts for 99.8% of this consumption.
According to Cambridge University’s Bitcoin Electricity Consumption Index, however, the Bitcoin network is estimated to consume about 144 TWh per year, more than 114 TWh cited by the report.
The report then points out that while the global annual electricity generation is ~26,730 TWh/yr, the amount of electricity lost in transmission and distribution each year is ~2,205 TWh/yr.
As such, the largest network can actually benefit the energy sector by creating “perfect use cases for intermittent and excess energy,” reads the report.
While Twitter CEO has joined forces with Cathie Wood’s Ark Invest to work in this direction, it is yet to be realized, and for now, just under 40% of the Bitcoin network is powered by renewable energy. However, this is contested by CoinShares’s estimate of over 75% of the network using renewable energy. Ark Invest on the ongoing heated debate around Bitcoin’s energy consumption sparked by Musk, said,
“The concerns around Bitcoin’s energy consumption are misguided. Contrary to consensus thinking, we believe the impact of bitcoin mining could become a net positive to the environment.”
The energy footprint of “always-on” electrical devices in American households meanwhile is ~1,375 TWh/yr, says the digital asset manager’s report.
The fact that the Bitcoin network works 24 hours a day, 365 days per year, “it can offer financial freedom to people around the world without the luxury of stable and accessible financial infrastructure.” The report concludes,
“Is the Bitcoin network’s electricity consumption an acceptable use of energy? Our answer is definitive: yes.”
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