Galaxy Digital Claims Banks Use More Than Double The Energy of BTC
3 min read
According to a report published this month by digital assets firm Galaxy Digital, the world’s banking system uses more energy than BTC.
“Given BTC’s transparency, it is easy to estimate BTC’s energy usage,” the report reads, adding, “This results in frequent criticism of BTC, but these critiques are rarely levied against other traditional industries.”
To that end, the report compares BTC’s energy consumption to traditional payments, savings and settlements, as well as gold’s identity as a non-sovereign store of value.
Led by CEO Mike Novogratz, Galaxy Digital is an asset management firm operating in the digital assets, cryptocurrency, and blockchain industries. Amidst ongoing debate about BTC’s energy consumption—spurred on by Elon Musk’s recent u-turn on BTC—Galaxy Digital has come to BTC’s defense.
BTC’s energy use in context
The report makes some preliminary estimations on BTC’s energy consumption.
It claims that on publication date—May 13, 2021—the BTC network consumed an estimated total of 113 terawatt-hours (TWh) per year. TWh is a unit of energy equal to an output of one trillion watts per hour, and it’s used to track the annual energy consumption of entire countries.
These figures aren’t enough, however, to make a direct comparison between the two systems.
Unlike the BTC network—which covers everything from mining operations to processing transactions—the banking industry consists of banking data centers, bank branches, ATMs, and card networks. Galaxy Digital has also excluded central banks from its analysis.
While the banking system does not directly report electricity consumption data, Galaxy Digital claims the banking system uses approximately 263 TWh of energy each year—more than double the amount of energy the BTC network consumes.
Similarly, the report claims BTC is not as energy-intensive as gold, which according to Galaxy Digital’s estimation consumes about 240 TWh per year. The report arrived at this figure by converting estimated greenhouse gas emissions from the gold industry and converting it to a TWh figure using a converter provided by the International Energy Agency (IEA).
Fact-checking Galaxy Digital’s stance
According to Cambridge University’s BTC Electricity Consumption Index, Galaxy Digital has significantly understated BTC’s energy consumption.
Today, the BTC network is estimated to consume about 144 TWh per year, well over the 113 TWh figure cited by the digital assets firm. This figure comfortably places BTC among the world’s top 30 countries by energy consumption.
The report also claims that BTC can benefit the energy sector by creating “perfect use cases” for intermittent and excess energy. While that is true in theory, the data shows BTC is not actually incentivizing the use of intermittent and excess energy.
According to Cambridge University, only 39% of the BTC network is powered by renewable energy. This figure is contested, often by appeal to Coinshares’ estimate that over 75% of the network uses renewable energy.
However, last month, a coal mine in China flooded and was forced to close. This caused a drop in BTC’s hash rate to levels not seen since November 2020, serving as a clear indication that the BTC mining industry is still heavily reliant on fossil fuels.
“China’s current obsession with coal plants—despite greenhouse emission promises—means that certain miners can take advantage of cheap ‘dirty’ power in some regions,” Jason Deane, BTC analyst at Quantum Economics, told Decrypt at the time.
Even Galaxy Digital’s primary claim—that BTC is less energy-intensive than international banking—is up for debate.
In a 2017 Hacker Noon post, Carlos Domingo, CEO of crypto compliance company Securitize, suggested that all bank data servers, bank branches, and ATMs combined amounted to about 100 TWh per year—a far cry from the 263 TWh figure cited by the digital assets company.
But as Galaxy Digital says, the answer to whether or not BTC is worth its energy costs is subjective. The report concludes:
“So, if we return one last time to the original question: Is the BTC network’s electricity consumption an acceptable use of energy? Our answer is definitive: yes.”
The fact remains that BTC consumes an immense amount of energy—well over most of the world’s countries—and based on Cambridge University’s index, demand looks like it’s only going up.
Decrypt has asked Galaxy Digital for the source it used to claim BTC consumes 113 TWh of energy per year, and will update the article if we hear back.
