Cryptocurrencies are currently experiencing a price drop, and many analysts attribute the share on this fact to the well-known Elon Musk. He only recently stated that his company Tesla will stop accepting Bitcoin payments and the reason is supposed to be its impact on the environment. We omit the fact that Musk is becoming known for deliberately influencing the prices of cryptocurrencies through similar statements, which he then uses to his financial advantage. We would rather look at what most debates completely omit - comparing the consumption of Bitcoin with the consumption of the banking system and the consumption of the gold mining industry.
Bitcoin power consumption is relatively easy to monitor. With tools like the Cambridge Bitcoin Electricity Consumption Index, you can even track it real-time. A study by Galaxy Digital estimates that Bitcoin together consumes approximately 115 TWh per year. This number includes the consumption of mining, pools and also the consumption of individual nodes.
Approximately 160,000 TWh of energy is produced worldwide each year and up to 50,000 TWh is lost due to inefficiency. The total consumption of Bitcoin thus represents only 0.25% of the energy that we literally waste every year and only 0.5% of the energy that we consume. It must also be said that we do not know exactly the share of renewables used to produce energy for the operation of Bitcoin. However, it is economically most advantageous for miners to look for the cheapest possible energy, and therefore especially for energy from surpluses and renewable sources.
Using the current global average of approximately 0.6 tonnes of CO2 per kWh of electricity produced, Bitcoin mining emits 70 million tonnes of CO2 per year. In a broader view, it is certainly necessary to compare this number with the "competition" of Bitcoin.
To calculate energy consumption in gold, Galaxy Digital has implemented estimates of total emissions in the industry from a report by the World Gold Council entitled "Gold and Climate Change: Current and Future Impacts." It is estimated that this industry consumes approximately 240 TWh of energy per year. Moreover, this number is far from total, as gold is associated with a number of other processes in its refining and processing.
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The fundamental difference we see compared to Bitcoin is the fact that gold mining leaves huge devastated areas in the world, which will probably never return to their original state. In 2020, approximately 3,500 tonnes of gold were mined worldwide and another 1,300 were recycled. According to Dell, each kilogram of gold mined consumes almost 50 MWh of energy and produces 20 tons of CO2. In the jewellery industry, which takes 50% of the world's demand for gold, these numbers are even higher, reaching 35 tonnes of CO2 per kilogram of gold and up to 80 MWh per gram. Together, this industry consumes almost 270 TWh of energy per year and produces 145 million tons of CO2.
In the comparison of these 3 sectors, the bank gets to the first (worst) place and therefore the reproaches of its representatives towards Bitcoin are literally ridiculous. It is estimated that its data centres, bank branches, ATMs and data centres of card companies together consume almost 270 TWh of energy per year. However, this is a very simplified estimate and some others report a value of up to 700 TWh per year, which represents up to 400 million tonnes of CO2.
These numbers are very difficult to estimate, as the current financial system includes a number of separate sectors that are directly involved in its functioning. In the estimate, we do not include, for example, the energy used to produce banknotes and coins, nor the materials themselves (plastics, metals and paper) used to produce them.
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As the mentioned studies and their numbers clearly show us, Bitcoin is more than good compared to the competition. If we (in theory) stop gold mining today and completely replace the banking sector with cryptocurrencies, energy consumption would ultimately fall. This would, of course, also reduce CO2 production.
In addition, cryptocurrencies and their miners are economically motivated to make the most of waste energy and renewables. Bitcoin consumption is already half of what we estimate for the gold industry and one-fifth of the estimate for the banking sector.