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Bitcoin Energy Consumption Compared to Gold in Report by Galaxy Digital

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Energy consumption of the Bitcoin network has been a hot topic over the past couple of weeks.  While no one has ever claimed Bitcoin mining to be a clean process, how bad is it really? And more importantly, ‘Is the Bitcoin network’s electricity consumption an acceptable use of energy?’.  Galaxy Digital has recently put together a report looking to answer just that.

Synopsis

In its report, titled ‘A Quantitative Approach to a Subjective Question’, Galaxy Digital looked to go beyond simple claims of dirty energy being used for BTC mining.  Rather, they opted to take a quantitative approach to determining actual power consumption.  For these numbers to have real meaning, context is required.  The report compares consumption of the Bitcoin network to that of Gold and traditional banks – the two sectors which Bitcoin is built to disrupt.

While we won’t dive deep in to the details of how each figure was obtained, they do provide a clear picture of where the Bitcoin network stands compared to its purported competitors.

Sourced from ‘A Quantitative Approach to a Subjective Question’ by Galaxy Digital

Bitcoin113.89 TWh of energy per year
Gold240.61 TWh of energy per year
Banking System263.72 TWh of energy per year

In addition to the energy required, the Gold sector stands out in particular due to the amount of emission it produces.  It is believed that the ‘Total gold market emissions’ equates to 126,359,000 tonnes of CO2e.

Overall, justification of energy consumption will vary between individuals.  Galaxy Digital summed up its case supporting Bitcoin with the following statement.

“Subjective views on the Bitcoin network’s importance vary, but Bitcoin’s properties do not.  Anyone can use Bitcoin.  Anyone can hold bitcoins for themselves.  And Bitcoin transactions can provide probabilistically final settlement in an hour, 24 hours a day, 365 days per year.

These features can offer financial freedom to people around the world without the luxury of stable and accessible financial infrastructure.  The network can benefit the energy sector by creating perfect use cases for intermittent and excess energy.  And the network will only scale further if network adoption warrants it.”

Built-In Solution

Regardless of how the power is created and subsequently utilized by BTC miners, there is a part of the process that is important to remember – Miners are in the game to make money.

As the Bitcoin network continues to grow, so will the associated hash-rate and difficulty of mining.  This means that the more efficient a miner’s operation is, the more profitable they will be.

While it may not solve issue of energy sourcing, this adaptive difficulty which Bitcoin has built-in can be viewed as a solution to ensuring miners will never stop striving to be as efficient as possible.

Divisive

Looking beyond the aforementioned report by Galaxy Digital, various other high-profile individuals have shared similar opinions on the subject in recent weeks.  Opinions which notably differ greatly from that of Elon Musk.

Mark Cuban states,

“We at Mavs.com will continue to accept BTC/ETH/DOGE because we know that replacing gold as a store of value will help the environment.”

Kevin O’Leary states,

“There’s a whole new generation of miners emerging in the Nordic countries, in Northern Canada, in Sweden, in Switzerland, in France, where they are using hydroelectricity, sometimes excess hydroelectricity, and flaring off natural gas where it’s being burned already to create electricity… So they’re doing it on a carbon-neutral or reduced carbon footprint and creating an asset that doesn’t have as much, you know, sustainability issues as gold has.”

Initiatives

Regardless of whether you believe the energy consumption of the Bitcoin network is an issue, it could always be better.  There is no reason to stop striving for a cleaner means of mining the world’s most popular digital asset.  The following are a couple of companies which have recognized this, and are offering/will offer unique approaches to the issue.

Ninepoint ETF
  • Through strategic partnerships, Ninepoint offers carbon-neutral Bitcoin via its ETF. The offsetting of carbon emission, as a result of the Bitcoin held in its fund, is achieved through various conservation efforts in the Amazon.
Neptune Digital Assets
  • As opposed to offsetting the negative effects of BTC mining, Neptune Digital Assets has opted to try and reduce them to begin with. It aims to do so by offering BTC mining fueled by renewable energy sources such as solar, wind, etc.
Lightning Network
  • The second layer protocol known as the Lightning Network can be viewed as a different approach to addressing energy concerns of the Bitcoin network. While others may look to decrease the amount of energy used to mine BTC, the Lightning Network stands to greatly increase the assets utility, and efficiency – thereby increasing the justification for energy consumed.

Each of these three examples attempt to tackle the issues surrounding Bitcoin’s environmental impact in a different manner.  Moving forward, the industry as whole will need to turn to each.

  1. Increase use of renewable energy
  2. Offset carbon emissions
  3. Increase network utility to justify environmental impact.

Joshua Stoner is a multi-faceted working professional. He has a great interest in the revolutionary 'blockchain' technology. In addition to this, he is a licenced Paramedic in Nova Scotia, Canada. As such, he can provide emergency care/medicine to any situation necessitating it.

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