Recently Release The study compared Bitcoin with traditional financial energy requirements and found that Bitcoin currently uses one-56th of the energy. Even with today’s PoW systems, a single Bitcoin transaction is five times more energy efficient than a traditional transaction.
Bitcoin Lightning, on the other hand, is 194 million times and 1 million times more energy efficient than traditional and immediate payments, respectively.
This study defines money using three utilities as an account unit, a medium of exchange, and a valuable store. In this respect, both Bitcoin and fiat currencies are comparable.
Energy consumption
The author first calculates the energy consumption of fiat currencies and Bitcoin.
Fiat money
When calculating the energy consumption of banknotes and coins, the author writes banknotes, updates coins, runs ATM systems, sends cash, uses electronic payment systems (EPOS), issues card payments, operates bank offices. It uses the energy required to hire bank staff and manages it with interbanking in mind.
As a result of detailed calculations for each category, the author estimates: The traditional currency system consumes 4,981 terawatt hours per year.
Bitcoin
Bitcoin Lightning, a Layer 2 solution for Bitcoin, is excluded and takes into account the current PoW system. After calculating the energy consumption of various mining facilities, the author concludes: The maximum energy Bitcoin uses 88.95 terawatt hours per year.
The paper states:
“We can conclude that Bitcoin PoW’s crypto payment system consumes at least about 56 times less energy than traditional electronic currencies and payment systems.”
Energy efficiency
After calculating the energy consumption, the author uses that input to calculate the energy efficiency of each system by assessing the associated workload and power.
In determining the energy efficiency level of each system, the author takes into account the time it takes for each to complete one transaction.
Bitcoin and traditional finance
Bitcoin transactions usually take about 10 minutes to be confirmed and completed. Traditional payments, on the other hand, are usually made within 1-5 business days.This means Traditional payment transactions are 288 times slower than Bitcoin transactions..
Traditional payment periods can be up to 7 business days for cross-border payments. In these cases Bitcoin transactions appear 1,008 times faster than traditional transactions..
Bitcoin Lightning and Instant Payment
Finally, the author compares the best scenarios of both systems: traditional financial immediate payments to Bitcoin’s Lightning Network.
Traditional financial instant payment networks use the same hardware and accelerate the payment process only by prioritizing specific tasks. Therefore, the energy consumption of the instant payment network remains about the same as traditional finance itself, but with a shorter duration.
However, Bitcoin’s lightning-fast is much larger than immediate payments, with 31 trillion transactions per year. The comparison results reflect that as well. The report states:
“With lightning at the single transaction level, Bitcoin is 194 million times more energy efficient than traditional payments and up to 1 million times more energy efficient than instant payments Tx.”
