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Dutch bank ING is flustered over the fact bitcoin consumes so much energy. Recently, the bank released a report saying bitcoin transactions consume as much electricity as a house does in a month. They seem to believe this is problematic, since traditional electronic payment methods do not use near as much energy, according to the bank. They went on to say fiat cash will still be how people get paid and pay taxes.
How Much Energy Bitcoin Consumes
An ING senior economist, Teunis Brosens, explained why power usage is so high. “By making sure that verifying transactions is a costly business, the integrity of the network can be preserved as long as benevolent nodes control a majority of computing power.”
The economist then went on to compare bitcoin energy consumption to his household appliances. A Business Insider article captured his thoughts:
This number needs some context. 200 kWh is enough to run over 200 washing cycles. In fact, it’s enough to run my entire home over four weeks, which consumes about 45 kWh per week costing €39 of electricity (at current Dutch consumer prices).
Trusted Third Parties Equals Less Energy Consumption
The ING banker went on to mention that bitcoin’s energy usage model stands in “stark contrast” with legacy financial systems’ energy consumption. He said bitcoin consumes an “exponentially larger” amount of energy. The banker made it seem as if Bitcoin were going to drain all the world of electricity if people do not continue to use the old, “trusted” payment gateways.
The Business Insider article provided the banker’s quote: “Bitcoin’s energy costs stand in stark contrast to payment systems that have the luxury of working with, trusted counterparties. E.g. Visa takes about 0.01kWh (10Wh) per transaction which is 20,000 times less energy.”
Bankers Use More Electricity than Bitcoiners
However, it is not 100% factual that bitcoiners consume “exponentially larger” amount of energy than legacy financial systems. The bankers did not take into account the energy they are using to run their antiquated system. One blog article in 2015 on Webonanza claimed the legacy financial banks consume more energy than bitcoin miners. Only the offices of the top 20 US banks consumes 2628 MW, whereas the bitcoin network consumed 246 MW, according to the article (at that time). The site elaborated:
“So the top 20 US banks’ offices alone consumes 2628 MW. One may argue on what value, if any, these organizations provide to the citizens of the world for this energy consumption (and carbon footprint), especially considering the bailouts. And they are only open for a few hours per day, on ‘bank days’.”
Fiat Money is Here to Stay, Say the Bankers
Nonetheless, the ING banker concluded by saying that fiat money is here to stay. People will still continue getting their salaries paid in fiat, and they will continue paying tax in fiat. The banker seemed to imply that innovation was unnecessary and legacy financial systems were here to stay, because government and central banks said so. It will be interesting to see what people think about the energy consumption of bitcoin compared to legacy system electricity usage.
Do you agree with the bankers? Does bitcoin power consumption cause a problem? Should people rely on centralized, trusted third parties since energy consumption is so high? Let us know in the comments section below.
Images courtesy of Shutterstock and Business Insider