New figures on Bitcoin’s (BTC) power 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 Michael Khazzaka, computer engineer, cryptographer and consultant, estimates that Bitcoin payments are “a million times more efficient” than the traditional financial system. Furthermore, the banking sector “uses 56 times more energy than cryptocurrency.”
The report compiles nearly four years of research and suggests a new calculation to estimate the power consumption of Bitcoin’s proof-of-work consensus. In an interview, Khazzaka told Cointelegraph:
“Bitcoin Lightning, and Bitcoin in general, are really good and very efficient technology solutions that deserve to be adopted on a large scale. This invention is ingenious, efficient and powerful enough to get mass adoption.”
Khazzaka, who founded payment consultancy Valuechain in late 2021, proposes an alternative to the energy estimates provided by the Cambridge Bitcoin Electricity Consumption Index (CBECI). The index, often cited by Cointelegraph, estimates that Bitcoin consumes approximately 122 TW/H per year.
Considering the average lifespan of Bitcoin mining rigs/rigs, as well as the pace of creation of new computing materials, Khazzaka suggests that Bitcoin consumes 88.95 TWh per year, considerably less than the Cambridge estimate.
A payments specialist who wrote his thesis on cryptography in 2003 and discovered Bitcoin in 2011, Khazzaka also puts the banking sector under the microscope to effectively compare the two monetary systems. Khazzaka told Cointelegraph that “really underestimates all aspects of the banking sector,” and contrary to what critics say, his report is “biased towards the banking system.”
However, taking into account money creation, transportation, physical banking infrastructure energy consumption, etc., it comes to a figure of 4,981 TWh. Rounding up, the “classic payments” sector consumes 5,000 TWh per year. Therefore, banking consumes 56 times more energy than Bitcoin.
The report examines the efficiency of transactions revealing that currently, “with the 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 is 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 power. And this is magical.”
The report concludes that the combination of Bitcoin and the Lightning Network allows Bitcoin to be “194 million” times more energy efficient than a classic payment system.
For Khazzaka, the report reveals that “The banking and payments sector needs to embrace Blockchain technology and maybe Bitcoin.” While Khazzaka’s conclusion may come as a surprise to pro-crypto space cypherpunks and anarcho-capitalists, Khazzaka believes that Bitcoin could, in fact, benefit banking:
“If they are brave enough, Blockchain technology will improve their efficiency and scalability.”
Although Bitcoin’s energy usage is frequently criticized, the investigation into the banking sector will be welcome news to many.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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