Bitcoin energy consumption is much lower than the current banking system

in hive-110112 •  4 years ago 

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Bitcoin waste of energy theory is a useless work

The latest hot topic in the cryptocurrency industry is Bitcoin's proof of work (PoW) energy consumption and whether this consumption is efficient. This topic was triggered by some articles published during the last year, and software engineer Stephen Diehl recently criticized the power consumption of the network.

In addition to thinking that crypto assets are "a huge smoking Chernobyl", Diehl also stated, "Bitcoin economics is a Ponzi investment plan, behind which is a collective delusion, that is, after you buy To convince a sillier person that it can create value out of thin air."

Diehl's criticism of Bitcoin's energy consumption is full of obvious fallacies, but he also didn't realize how Satoshi Nakamoto's cryptocurrency network is more energy efficient than most people think. Diehl and many others did not realize the cost of maintaining today's banking system, which is supported by a large amount of energy consumption and is dedicated to servers, branch offices and ATMs.

There is a huge difference in the Bitcoin power consumption index

Most of the consumption data from the BTC network comes from the Cambridge Bitcoin Electricity Consumption Index (CBECI). Interestingly, analysts and mainstream media reporters also refer to the Bitcoin Energy Consumption Index of digiconomist.net. Unfortunately, the annualized consumption (TWh) data of CBECI and digiconomist.net are very different.

Statistics from digiconomist.net show that the BTC network captured 77.78TWh, while CBECI showed that the network was 111.08TWh. When trying to estimate the network data consumption of encrypted assets, this is a huge difference (44% difference). However, these are the data sources most used by Bitcoin opponents, and they do not hesitate to say that BTC's electricity consumption is a "waste".

In addition, we don’t even know how accurate the CBECI data is, because a team member from the Cambridge Centre for Alternative Finance (CCAF) recently explained to news.Bitcoin.com that the CBECI map is not up to date and will be updated in 2021. This has led to many reports that China accounts for 65% of Bitcoin computing power, which may be completely inaccurate. In July 2020, a hashrate report written by Bitooda stated that the centralization of Bitcoin's computing power in China is gradually decreasing, down to 50%.

It is more likely that CBECI has a more accurate estimate of the lower limit of BTC network energy consumption. The estimated lower limit of this theory is approximately 4.6 gigawatts on January 19, 2021, or 39.3 TWh per year. In addition, there are countless rebuttals and data points showing that people who complain about Bitcoin's energy consumption are overreacting.

Research shows that more than 75% of crypto miners use renewable energy

For example, anti-Bitcoin environmentalists have not weighed against the fact that most miners in the PoW mining industry use renewable energy sources such as hydropower, wind, solar, and geothermal energy. There are some reports that more than 70% of the world’s crypto miners use hybrid renewable energy to power facilities. In addition, there are many efforts dedicated to energy cogeneration.

Cambridge University's third global crypto asset benchmark study in 2020 also showed that 76% of digital currency miners use renewable energy. Supporting this data are reports by Deutsche Bank Research, China National Energy Administration, Morgan Stanley and Coinhares. The reports of these four organizations emphasized that "78% of Bitcoin's electricity consumption comes from renewable energy."

There are countless reminders and practical examples that the electricity usage methods used by Bitcoin miners are far more efficient than all financial systems on the planet. Two years ago, Bitfury's investor and board director Bill Tai explained in detail that Satoshi smiled because of the green energy used by Bitcoin miners today.

"For many years, it has been clear to me that the mining of Bitcoin and other PoW-based cryptocurrencies is driving positive changes in the infrastructure of energy production—the speed is accelerating." Tai explained at the time. The investor is also the chairman of Hut8's board of directors. He said that the company has a "environmentally friendly" policy in the construction process. Tai detailed that in order to achieve scale, the most effective source of electricity is not based on fossil fuels, but on the marginal cost of water, solar and wind energy.

The high costs that modern banking systems cannot solve

And then ultimately the cost of the modern banking system, something that Bitcoin opponents never considered when criticizing the energy consumption of cryptocurrencies. A large number of articles and statistics show that the annual energy consumption of the current banking system far exceeds 140 TWh. In a study, Katrina Kelly-Pitou, a researcher who "studies clean energy technologies, especially the transition to a low-carbon energy system," said that the energy conversation around Bitcoin is "too simplistic."

In addition, the researcher also emphasized that "Bitcoin's energy consumption is not as bad as you think." Subsequently, Carlos Domingo, a writer for Hacker Noon, said that comparing Bitcoin's electricity consumption with Visa's electricity consumption is completely "fallacy."

Domingo said:

"Stop complaining about Bitcoin, start complaining about the Christmas lights."

The relative cost has not increased

In October last year, researchers Yo-Der Song and Tomaso Aste published a report in which they emphasized that the cost of Bitcoin mining “has never really increased”. In the paper, Aste and Song detailed that the Bitcoin network consumes a lot of energy, but the researchers still managed to estimate the "lower limit of global mining energy costs from 2010 to 2020."

"Although hash activity has increased by 10 billion times and total energy consumption has increased by 10 million times, we found that the cost relative to transaction volume has neither increased nor decreased since 2010," the paper points out.

The researchers added:

"This is consistent with the following view: In order to ensure the security of the blockchain system and prevent double-spending attacks, the cost of proof of work must be a substantial part of the value that can be transferred through the network. We estimate that in the Bitcoin network , This ratio is about 1%."

Obviously, the Bitcoin mining industry is not as wasteful as the current banking system. The contemporary banking system is full of servers, ATM machines and branches, and there are rampant fraud and manipulation. Nonetheless, today's sober people and members of the cancel culture want to "criminalize Bitcoin" because it is suspected of "damaging the environment." As always, these critics are full of emotional views and weak signals of virtue, and there is not a lot of facts to support them.

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Hello @cheng-shuki wonderful post and very informative it is really a fact of consideration that bitcoin consumes less energy than the present banking and finance system.