Study: Banking system consumes twice as much energy as Bitcoin each year

Amid continued concerns over Bitcoin’s energy consumption, a new study suggests that the traditional banking system consumes significantly more energy than the Bitcoin network.

Michael Novogratz’s cryptocurrency company Galaxy Digital released a report titled “On Bitcoin’s Energy Consumption: A Quantitative Approach to a Subjective Question” on Friday, making its methodology and calculations open source.

The study, written by Galaxy's mining division, estimates that Bitcoin's annual electricity consumption, including miner demand, miner power consumption, mining pool power consumption and node power consumption, is 113.89 terawatt-hours. According to Galaxy's estimates, this figure is at least two times lower than the total energy consumed by the banking system and the gold industry each year.

Source: Galaxy Digital

Galaxy Digital Mining said that while Bitcoin’s energy consumption is transparent and easy to track in real time using tools such as the Cambridge Bitcoin Electricity Consumption Index, assessments of energy usage in the gold industry and traditional financial systems are not as clear.

"The banking industry does not directly report electricity usage data," the report said, adding that retail and commercial banking systems require multiple settlement layers, with Bitcoin providing final settlement. Based on Galaxy's estimates of electricity usage in bank data centers, bank branches, ATMs and card network data centers, the total annual energy consumption of the banking system is estimated to be 263.72 terawatt hours.

To calculate the energy consumption of the gold industry, Galaxy Digital Mining estimated the total greenhouse gas emissions of the gold industry based on the World Gold Council's report "Gold and Climate Change: Current and Future Impacts". According to the study's estimates, the gold industry uses approximately 240.61 terawatt hours per year. Galaxy noted: "These estimates may not include key energy use and emission sources that are second-order effects of the gold industry, such as the energy and carbon concentration of tires used in gold mines."

Galaxy's analysis of Bitcoin's energy consumption comes as Tesla CEO Elon Musk decided to stop accepting Bitcoin as payment for cars due to environmental concerns, causing the cryptocurrency market to plummet. The CEO tweeted last week: "Crypto is a great idea on many levels, and we believe it has a great future, but this cannot come at a huge cost to the environment."

Musk’s move sparked widespread criticism from the cryptocurrency community, with some saying SpaceX would have to switch its rockets to “more sustainable energy sources” to avoid “looking like an ignorant hypocrite.”

The cryptocurrency market lost more than $500 billion in value following Musk's statement on Twitter, with Bitcoin today dropping below $43,000 for the first time since early February. The CEO has clearly put more pressure on the market.