New report sheds light on banking energy use vs Bitcoin
IT engineer and cryptographer Michel Khazzaka argues in a new report that the banking sector uses 56 times more energy than Bitcoin. The report, Bitcoin: Cryptopayments Energy Efficiency, is based on almost four years of research and suggests a new calculation for estimating Bitcoin’s proof-of-work energy consumption
Khazzaka says that most studies criticising proof of work’s energy consumption do so without evaluating its efficiency compared to classic electronic payment systems
“When Bitcoin Lightning layer is compared to Instant Payment scheme, Bitcoin gains exponentially in scalability and efficiency, proving to be up to a million times more energy efficient per transaction than Instant Payments,” Khazzaka explains
The proof of work consensus mechanism has recently come under increasing scrutiny from environmental lobby groups and governments, but a new report argues otherwise.
“We demonstrate that Bitcoin consumes 56 times less energy than the classical system, and that even at the single transaction level, a PoW transaction proves to be 1 to 5 times more energy efficient,” the author says.
The report compares Bitcoin’s energy consumption against that of the various levers of the monetary payment system, including banknotes and coins, cash management in ATM systems, card payments, point of sale (POS) payments, banking and interbanking energy use.
It’s a mistake to compare Bitcoin to Visa only, says Khazzaka, since a card scheme does not execute a payment transaction from end to end as Bitcoin does. There is a lot happening in the background in a card scheme, with banks and other players having to settle transactions between them after the transaction has been made, all contributing to energy consumption. “In comparison, a transaction in bitcoin is final in near real-time, it is a push payment in only one step,” the report says.