Mining and the environment
Mining, PoW and, consequently, Bitcoin are often criticized due to their unfriendliness towards the environment. Especially when there are PoS and other, much more "eco-friendly" consensus algorithms that allow you to create cryptocurrencies and at the same time not threaten the world with global warming.
But before blaming Bitcoin for all its sins, you should figure out how bad it is for the environment. It is clear that if you take his indicators out of context, then you will not be able to say anything good about him. Yes, the energy consumption is enormous, and this is really not at all "eco-friendly" on the part of the first cryptocurrency.
But what will these mind-boggling figures mean when compared with energy consumption in other areas?
Banks vs BTC
Paylesspower, an energy company from Texas, conducted a comparative study of Bitcoin's energy consumption and the global banking system. And since it is the high consumption of electricity that is the reason why Bitcoin is considered "dirty" for the environment, in fact, the researchers implicitly compared the ecological footprint left by BTC and banks.
According to this analysis, it turned out that Bitcoin's energy consumption is 35.4% lower than that of the global banking system. The blockchain of the first cryptocurrency consumes approximately 167.14 TWh (terawatt-hour) of energy annually, while banking worldwide consumes about 258.85 TWh of electricity per year.
If we take the figures provided by Paylesspower as a basis, it turns out that Bitcoin is losing the competition for the title of the main threat to the environment to traditional finance. But still, before criticizing the banking infrastructure, let's look at how the researchers came to the above figures.
Research methodology
Alas, in a topic as politicized as ecology today, the results of any research, even those published in the most reputable scientific journals, should be questioned. Therefore, for more unbiased conclusions, it is worth considering the methodology of the work carried out. Paylesspower did not hide this information and described the path they took to get the final figures.
Everything turned out to be quite simple with Bitcoin: Many people are interested in its energy consumption, so there are already quite a lot of studies on this subject that can be referred to. The final figure of annual consumption was obtained based on the Bitcoin Energy Consumption Index. Banks are much less transparent in this regard — there are significantly more different variables and it is more difficult to obtain accurate data for analysis.
Summary data
The study in question took into account different types of banking activities that are associated with significant energy costs, namely: data centers, bank branches, ATMs and credit card networks.
Here's what happened: data centers accounted for 225.45 TWh, physical bank branches — 22.68 TWh, independent ATMs — 2.91 TWh, and card networks such as VISA — 7.81 TWh. The total is 258.85 TWh per year.
The authors note that the indicators for the banking sector turned out to be quite approximate. Due to the incompleteness of the data (although the segment is considered well studied and open — many of the information in it is opaque), a number of assumptions and extrapolations had to be made.
Moreover, the energy consumption of banks is not limited to the activities listed above, so it is very likely that the real consumption of banks is even higher. But at the same time, this study conveys the approximate order of expenses.
Digital Gold versus Real Gold
In addition to the banking system, the results of comparing the environmental friendliness of Bitcoin, which is called "digital gold", with real gold may be interesting. The study prepared by the Galaxy Digital team provides interesting data on this matter. Thus, they estimate the energy consumption associated with gold mining at 240.61 TWh. That is, it is also much more than Bitcoin.
Conclusion
Although bitcoin is often criticized because of the energy costs associated with its mining, the situation is not so clear. If you look at the bigger picture, the environmental footprint left by Bitcoin and mining remains smaller compared to traditional banks or even gold mining.
This material and the information in it do not constitute an individual or other investment recommendation. The editorial board's opinion may not coincide with the opinions of the author, analytical portals and experts.