New data for Bitcoin (bitcoin) energy consumption, efficiency, and scalability help expose banking while giving the world’s largest cryptocurrency a new lease of life.
a research report post IT engineer, cryptographer and consultant Michel Khazzaka has calculated that bitcoin payments are “million times more efficient” than the traditional financial system. Additionally, the banking industry “uses 56 times as much energy as Bitcoin.”
The report brings together nearly four years of research and proposes a new calculation method to estimate Bitcoin’s proof-of-work energy consumption. In an interview, Khazzaka told Cointelegraph:
“Bitcoin Lightning and Bitcoin, in general, are very great and very effective technical solutions that deserve mass adoption. This invention is good enough, efficient enough, and powerful enough to be mass adopted.”
Khazzaka, who founded payments consultancy Valuechain in late 2021, has proposed an alternative to energy estimates provided by the Cambridge Bitcoin Electricity Consumption Index (CBECI). the index, Cointelegraph frequently citedit is estimated that Bitcoin consumes about 122 TW/H per year.
Taking into account the average lifespan of Bitcoin miners and the rate at which new IT materials are created, Khazzaka suggests that Bitcoin consumes 88.95 TWh per year, well below Cambridge’s estimate.
A payments expert who wrote papers on cryptography in 2003 and discovered bitcoin in 2011, he also put banking under the microscope to effectively compare the two monetary systems. Khazzaka told Cointelegraph that he “really underestimated every aspect of the banking industry” and that, contrary to critics, his report was “biased toward the banking system.”
Nonetheless, he came up with a figure of 4,981 TWh, taking into account the creation of money, the transport of money, the energy consumption of brick-and-mortar banking infrastructure, etc. After rounding up, the Classic Payments segment consumes 5,000 TWh per year. Thus, banking uses 56 times as much energy as Bitcoin.
The report examines transaction efficiency, showing that currently, “at the current block size, ηmax = 5.7 times the energy efficiency of a classical system if blocks are filled to maximum capacity.” However, this does not take into account Account Lightning Network. In the interview, Kazaka explained:
“Lightning will allow the Bitcoin protocol to do more transactions without consuming more energy. It’s amazing.”
The report concluded that the combination of Bitcoin and the Lightning Network makes Bitcoin “194 million” times more energy efficient than traditional payment systems.
For Khazzaka, the report suggests that “the banking and payments industry needs to adopt blockchain, and possibly even bitcoin.” While Khazzaka’s conclusions may come as a surprise to cypherpunks and anarcho-capitalists who love the crypto space, Khazzaka Think Bitcoin can actually benefit the banking industry:
“If they are brave enough with blockchain technology, it will improve their efficiency and scalability.”
Although Bitcoin’s energy use is often criticized, An investigation into the banking industry will be good news for many.