Analysis of Bitcoin’s proof-of-work and the Lightning Network exposes the banking system as energy-hungry, demonstrating that Bitcoin is better for the planet.
Fresh figures on Bitcoin’s (BTC) energy consumption, efficiency and scalability serve to expose the banking sector while bathing the world’s largest cryptocurrency in a new light.
A research report published by Michel Khazzaka, an IT engineer, cryptographer and consultant, calculates that Bitcoin payments are a “million times more efficient” than the legacy financial system. Plus, the banking sector “uses 56 times more energy than Bitcoin.”
The report compiles almost four years of research and suggests a new calculation for estimating Bitcoin’s proof-of-work energy consumption, Khazzaka told Cryptowallcity:
“Bitcoin Lightning, and Bitcoin, in general, are really great and very efficient technological solutions that deserve to be adopted on a large scale. This invention is brilliant enough, efficient enough, and powerful enough to get mass adoption.”
Khazzaka, who founded payments consultancy Valuechain in late 2021, proposes an alternative to the energy estimates provided by Cambridge Bitcoin Electricity Consumption Index (CBECI). The index, often cited by Cryptowallcity, estimates that Bitcoin consumes roughly 122 TW/H per year.
Taking into account the average lifespan of Bitcoin mining machines as well as the rate at which new IT materials are created, Khazzaka suggests that Bitcoin consumes 88.95 TWh per year, considerably less than Cambridge’s estimate.
Nonetheless, taking into account the creation of money, transporting money, physical banking infrastructure energy consumption, etc, he arrives at a figure of 4,981 TWh. Rounded up, 5,000 TWh is consumed by the “classical payments” sector every year. Consequently, banking uses 56 times more energy than Bitcoin.
The report examines transaction efficiency revealing that currently, “at current block size and if the blocks are filled to their maximum capacity ηmax = 5.7× better energy efficiency than the classical system.” However, that’s without taking into account the Lightning Network. In the interview, Khazzaka explained:
“Lightning will allow the bitcoin protocol to do more transactions without consuming more energy. And this is magic.”