A new paper that has appeared on SSRN, entitled Bitcoin: Cryptopayments Energy Efficiency, claims that Bitcoin is energy efficient when you compare it to the classical electronic payment system. The paper’s author says that critics fail to compare Bitcoin energy usage with that of the existing electronic payment network we interact with when sending money between bank accounts.
Author Michel Khazzaka writes in the Abstract that:
“We demonstrate that Bitcoin consumes 56 times less energy than the classical system, and that even at the single transaction level, a PoW transaction proves to be 1 to 5 times more energy efficient.”
Khazzaka claims that a single transaction on the Lightning network makes Bitcoin 194 million times more energy efficient when compared to a classical payment and a million times more efficient than an instant payment transaction.
According to the data in the report, the total energy usage of the classical payment system is 4,981 TWh/yr, supports 3.14 trillion transactions per year and uses 1.58 kWh per transaction. Bitcoin without Lightning has a total energy usage of 88.95 TWh/yr, can make 133 million transactions per year, and uses between 460 and 653 kWh per transaction.
In the best possible scenario, Bitcoin could use 52.8 TWh/yr, have a transaction capacity of 545 million per year, and use 97 kWh per transaction. None of this is that great for Bitcoin but when you factor in Lightning, things tip heavily in favour of Bitcoin. With Lightning factored in, the total energy use per year is 88.95 TWh/yr, 31.54 trillion transactions can take place a year, and each transaction uses a measly 0.00282 kWh. This means it can handle far more transactions than the current system and uses far less energy.
The 27-page paper is free to download from SSRN if you would prefer to scrutinise the data for yourself. It certainly makes for interesting reading given how much negativity there has been about the energy use of the Bitcoin network.
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