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The growing concerns over climate change coupled with the need for energy conservation to sustain green life on the planet has given rise to a series of arguments that tried to examine two popular means of wealth storage today. Bitcoin and traditional banking were assessed to pinpoint which one consumes more energy than the other. The research conducted by Michel Khazzaka found Bitcoin to be more energy-saving than banking. The report given by Michel found banking as consuming 56 times more energy than Bitcoin.
Although Bitcoin mining consumes a lot of energy, it is less significant compared to the amount of energy consumed by the banking system. Banking in itself requires a lot of energy to execute its many processes including running its servers, ATMs, banking machines, etc. Bitcoin generally only requires energy for mining and for running smart contracts.
This article examines these two popular means of wealth storage to determine which of the duo consumes more energy than the other.
What Is Bitcoin?
Whenever we talk about cryptocurrency today, the first thing that comes to mind is Bitcoin. This is because Bitcoin is the first cryptocurrency ever launched and has become the most valuable cryptocurrency today with the highest capital invested into it. It serves as a decentralized means of payment built on a blockchain and designed to protect the user’s identity when buying Bitcoin.
What Amount of Energy Is Consumed by Bitcoin?
Bitcoin is basically created through mining. It is this mining that consumes a lot of energy. According to a research conducted by Cambridge Center for Alternative Finance (CCAF), mining Bitcoin consumes over 110 Terawatt Hours annually, which is roughly 0.55% of global electricity production. Added to this, sending and receiving Bitcoin consumes energy, but on a lower level.
What Is the Amount of Energy Consumed by Banking?
Banking involves a lot of processes that consume energy. For instance, a lot of energy is needed to establish the structures for banking, the servers to be used, the ATM machines, computers for banking, and other sophisticated devices needed for banking. The traditional banking system has been found to consume over 130 Terawatt Hours annually on running the servers and the ATMs used in banking. This also includes other activities carried out in the course of banking.
Bitcoin and Banking: Which Consumes More Energy?
Generally, banking consumes more energy than Bitcoin. According to the report published by Michel Khazzaka on Valuechain, banking was found to consume 56 times more energy than Bitcoin. The research carried out found Bitcoin to be by far more energy-saving than banking.
This means, using Bitcoin as a means of wealth storage is more eco-friendly than the traditional banking system. The major instances where Bitcoin consumes high energy is during the mining process.
Other transactions involving Bitcoin often require less amount of energy to execute them. The case is quite different for banking, which needs a lot of energy to set up the structures, run the servers, create the ATM, attend to customers, mint the banking currency and transport them across the banks.
Advantages of Using Bitcoin Over the Banking System
- Consumes less energy.
- Offers a decentralized means of wealth storage.
- Does not require physical structures.
Disadvantages of Using Bitcoin
- Prices are very volatile and could fall over time.
- Prone to attacks and hacking.
Advantages of Banking over Bitcoin
- More secure than Bitcoin.
- Users are known and hence not easy to hack.
Disadvantages of Banking
- Does not offer users the desired privacy.
- A lot of charges are placed on banking services.