You may or may not have recently read an article about the power consumption behind the bitcoin network, which has been labelled by as an “environmental disaster” – while I see the basic premise behind that thought process, I believe the opposite is in fact the case, and I hope to prove it with numbers below.
A positive environmental impact is one that reduces current levels of consumption, and for that reason I would like to compare the bitcoin network to Western Union.
Here’s some key facts about Western Union
- $81 billion/year in transactions
- 8,800 Employees
- 510,000 “agent locations”
On this basis we can conservatively estimate the power consumption required to send $81 billion worth of transactions.
8,800 employees will each use about 13.4KWH per day (350 watts each for computing equipment 24 hours/day. 600 watts each for heating and lighting, 8 hours per day)
We can also guess that each of the 510,000 agent locations have some amount of power consumption dedicated to processing Western Union transactions, and at 50 watts for a small device, we are very conservatively estimating each agent uses 1.2KHW per day.
So the Western Union employees total power consumption is around 116.1MWH per day, and the agents power consumption is to the tune of 612MWH/day, for a total of around 728MWH each and every day. That is 8.98MWH for every $1 billion in transactions
By comparison, a very loose estimate of the bitcoin networks current usage, comes in at 975MHW/day.
The only number we need then, in order to make a straight comparison, is how much currency volume the bitcoin network processes each year.
Annualised based on $35million per day (it has been over $100million/day recently), bitcoin processes $12.7 billion worth of transactions per year. So those numbers come in at 76.77MWH for every billion in transactions.
Ok, that doesn’t make bitcoin look very environmentally friendly. 9.98MWH for Western Union, and 76.77MWH for bitcoin… However…
Every four years bitcoins relative power consumption will halve, along with the bitcoin mining block reward, and as mining becomes less profitable. This has absolutely no negative impact on the integrity of the bitcoin network, but it does reduce power consumption (since miners need to operate at a profit).
Based on extremely conservative numbers, which are in turn based on multiple variables and on the assumption that current power consumption figures will continue:
- In 2016 the bitcoin network will use 38.38MHW per $1billion in transactions
- In 2020 the bitcoin network will use 19.19MHW per $1billion in transactions
- In 2024 the bitcoin network will use 9.59MHW per $1billion in transactions
- In 2028 the bitcoin network will use 4.79MHW per $1billion in transactions
- In 2032 the bitcoin network will use 2.39MHW per $1billion in transactions
- In 2036 the bitcoin network will use 1.19MHW per $1billion in transactions
- In 2040 the bitcoin network will use 0.59MHW per $1billion in transactions
- In 2044 the bitcoin network will use 0.29MHW per $1billion in transactions
- In 2048 the bitcoin network will use 0.14MHW per $1billion in transactions
It’s definitely not quite this simple, however it is very representative of the long term environmental impact and associated trend of the bitcoin network.
In truth the power consumption of bitcoin mining hardware has recently been reduced by a factor of over 5600%, and power consumption will increasingly become a smaller percentage of miners revenue required to break even.
In fact, based on a 5 month ROI for new hardware purchases (which is acceptable for such a new and evolving technology), power consumption represents only 5% of a miners operating costs. With those numbers, the power consumption will likely reduce to about 9.75MWH/day in total, or 0.76MWH per $1billion in transactions.
In summary, with the new hardware being over 5600% more power efficient than existing mining hardware, the bitcoin network is already over 10 times more energy efficient than Western Union, and these power consumption figures will continue to halve every four years for the foreseeable future. It is likely to level out in or around 2036, by which point it will use approximately 0.011MWH/day to process $1billion in the course of a year. Or about 76,000% more energy efficient than Western Union.
On this basis I think it is fair to conclude bitcoin is a roaring environmental success.