A new study on bitcoin’s energy consumption, efficiency and scalability puts banking in a bad light. The study reveals that traditional banks use 56 times more energy than bitcoin. The study by Michel Khazakka writes that bitcoin payments are “one million times more efficient” than traditional bank payments.
Four years of research
The work of Khazzaka, an IT engineer and cryptographer, is based on four years of research and proposes, among other things, a new way to assess bitcoin’s energy consumption. In an interview with Cointelegraph, Khazakka said the following: “The Bitcoin Lightning Network and bitcoin in general are great and very efficient solutions that deserve to be adopted on a global scale. The invention is brilliant enough, efficient enough and powerful enough to get mass adoption.”
Khazzaka, who founded the consultancy Valuechain in 2021, comes up with an alternative to the way the Cambridge Bitcoin Electricity Consumption Index assesses bitcoin’s energy consumption. By taking into account the lifetime of mining equipment, as well as the rate at which new IT materials come into circulation, Khazzaka arrives at an energy consumption of 88.95 TWh per year. This is far less than the energy consumption Cambridge attributes to bitcoin.
The banking comparison
Khazzaka is a payment specialist who wrote his dissertation on cryptography in 2003 and discovered bitcoin in 2011. For traditional banking, he arrives at a total energy consumption of 4,981 TWh. He bases this on the creation of money, the transport of money and the physical infrastructure of banks, among other things. At the time of writing, the Bitcoin system is 5.7 times more efficient than banking, according to Khazzaka.
Adding the Lightning Network, the protocol can theoretically process more transactions without consuming additional energy “and that’s magic” is how Khazzaka talks about bitcoin. The study concludes that the combination of bitcoin and the Lightning Network is 194 million times more efficient than the classic payment system.
According to Khazakka, the main conclusion of his research is that the banking industry should adopt blockchain and perhaps even bitcoin. Although Khazzaka’s conclusion may be surprising to cypherpunks and anarcho-capitalists who have nothing to do with banking, the author is convinced that the technology can improve banking.
Banking uses 2.88 per cent of all energy
If the figures in Khazzaka’s study are correct, this means that banking is responsible for 2.88 per cent of global energy consumption. In comparison, bitcoin’s 0.05 percent is nothing. It should be added, however, that bitcoin’s total volume is dwarfed by traditional banking. The study is an interesting new way of looking at the issue.
1st you need to understand that the total banking consumption is in energy not in electricity. the correct result is 4981 TWh/yr and it's a lower bound. the total world energy consumption is more than 173000 TWh/yr in 2019. https://t.co/nsNjlyQaZh
— Michel KHAZZAKA (@kneisseh) June 11, 2022
Bitcoin has been criticised from a traditional perspective for its energy consumption. However, it now appears that our current systems are doing a lot worse. A global payment system built on bitcoin could be a great solution to this. The world would run on a fair form of money and we would also use less energy to do so. To achieve this, however, the Lightning Network still has some way to go in terms of user-friendliness.
