Bitcoin uses less energy than traditional finance, study results showed

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Bitcoin uses less energy than traditional finance, study results showedA recently published study compared the energy demand between Bitcoin and traditional finance. The study authors found that BTC now uses 56 times less energy. Even with the current PoW system dependent on miner labor, a transaction in the Bitcoin network is five times more energy efficient than in a conventional financial system.

Bitcoin is less energy intensive than the TradFi industry

The study defines money as a unit of account, a medium of exchange and a store of value. In this regard, Bitcoin and traditional currencies are similar.

When calculating the energy consumption of banknotes and coins, the authors take into account the energy required to print paper money, renew coins, operate ATM systems, transfer money, using electronic payment systems (EPOS), issuing payment cards, managing bank branches, hiring bank employees and interbank banking management.

Following detailed calculations for each category, they estimate that the classical monetary system (TradFi) consumes 4,981 terawatt hours of energy per year.

The Bitcoin calculation, however, excluded the tier two solution, Bitcoin Lightning, and considered the current PoW system. After calculating the energy consumption of mining equipment, the authors concluded that the upper energy limit for Bitcoin is 88.95 terawatt hours per year.

– We can conclude that the Bitcoin PoW cryptocurrency system consumes at least 56 times less energy than the classic electronic money and payment system – written in the study.

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Energetic efficiency

After calculating the energy consumption, the authors used the data to verify the energy efficiency of each system by evaluating the amount of work done and the power involved. When determining the energy efficiency levels of each system, the authors take into account the time required to complete a transaction.

It usually takes about 10 minutes to confirm and complete the transaction on the BTC network. Traditional payment, on the other hand, is usually completed within one to five business days. This means that a classic payment transaction is 288 times slower than a Bitcoin transaction.

The duration of a traditional payment can increase up to seven working days if it is a cross-border payment. In such cases, BTC transactions are executed 1008 times faster.

Finally, the authors compared the best-case scenarios of the two systems: traditional finance instant payments and the Bitcoin Lightning Network. The instant payments network in traditional finance uses the same hardware and speeds up the payment process only by prioritizing specific tasks. Thus, the energy consumption of instant payment networks remains substantially the same as in traditional finance, while the duration of transactions is reduced.

Bitcoin Lightning scales much better than instant payments with 31 trillion transactions per year. Lightning is 194 million and 1 million times more energy efficient than traditional and instant payments.

– Lightning at a single transaction level enables Bitcoin to become 194 million times more energy efficient than a conventional payment and up to 1 million times more energy efficient than an instant payment in traditional finance – abstract.

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