- The report was published by Galaxy Digital, a crypto mining company of Michael Novogratz.
- Bitcoin’s energy consumption is below 114 TWh, whereas the traditional financial system consumes over 260 TWh & the gold industry consumes over 240 TWh per year.
- The crypto market lost $500 billion after Tesla discontinued accepting Bitcoin payments for cars.
Elon Musk’s criticism of Bitcoin for its energy consumption has led to an intense debate. Amid the intense debate, Galaxy Digital published a report on Bitcoin’s energy consumption against that of the banks & the gold industry. Their research report states that Bitcoin is not even consuming half the energy that the traditional financial industry consumes.
The report titled “On Bitcoin’s Energy Consumption: A Quantitative Approach to a Subjective Question” was published by Galaxy Digital, a cryptocurrency firm of Michael Novogratz. The report has also made its methodology and calculations open source for review.
Bitcoin vs. The Traditional Financial System & Gold Industry
Galaxy Digital is a crypto mining company, and in its study, the firm found that the annual electricity consumption of Bitcoin is 113.89 terawatts per hour. It includes power consumption in mining, pooling, and node operations powering the Bitcoin transactions.
As per the estimates of Galaxy Digital, Bitcoin energy consumption is not even half of the energy consumption of the traditional financial industry & the gold industry. In its report, Galaxy Digital stated that in the case of Bitcoin, tracking its energy consumption is easy. Anyone who wishes to track the energy consumption of Bitcoin can use tools like Cambridge Bitcoin Electricity Consumption Index.
Now, when it comes to the energy consumption of the traditional financial system & gold industry, there are no such tools available. Hence, calculating the energy usage of the traditional financial & gold industry is not that straightforward.
The report says: “The banking industry does not directly report electricity consumption data.” Compared to Bitcoin, where there is only one settlement layer – the final one, there are multiple settlement layers in both retail and commercial banking.
In total, the global financial system consumes around 263.72 TWh of energy, which encompasses energy consumption at bank branches, banking & card network data centers, and ATMs.
To calculate the energy consumption of the gold industry, Galaxy Digital used a report from the World Gold Council. The report was titled Gold and climate change: Current and future impacts, and it estimates that the global gold industry consumes 240.61 TWh energy per year. Galaxy Digital also clarified that this figure is most likely missing energy consumption by some of the crucial segments of the gold industry.
“These estimates may exclude key sources of energy use and emissions that are second-order effects of the gold industry like the energy and carbon intensity of the tires used in gold mines.”
Is Galaxy Digital’s Report an Answer to Musk’s Criticism of Bitcoin?
We are in the middle of the biggest market crash in 2021 so far. It all began with a tweet from Musk, where he announced that Tesla won’t accept Bitcoin payments anymore. Such a tweet from Musk led to a wide-scale criticism of Musk and SpaceX. Many Twitter users said that SpaceX will soon have to use sustainable energy to make sure that Musk does not look like a “clueless big hypocrite.”
The impact of Musk’s tweet has caused a market meltdown of sorts, with the crypto market losing over $500 billion soon. The Bitcoin holders were also concerned that Tesla may soon offload Bitcoin from its balance sheet. If that happens, it will put even more negative pressure on BTC prices.
Now, considering that the report from Galaxy Digital is out a week after Musk’s infamous tweet on Bitcoin, it is likely that the research report was made public to deliver a befitting reply to anyone who is criticizing Bitcoin for its energy consumption.