Cambridge Bitcoin Electricity Consumption Index - The impact of BTC in the World

[Kakmakr]

Ok, now how much does the same transaction cost to buy a Tesla with fiat currency?

Now, remember to take into account that the transaction in the Banking system are processed by giant mainframes/database servers that are supported by 24/7 Air conditioning and CCTV monitoring etc.. etc..

A transaction between different Banks doubles the need for this hardware and supporting infrastructure (modems/switches/backup devices etc.)

Ok, so reconciliation and auditing are also done.. so you have people working in a Office environment that are using computers and printers and air conditioning that are consuming electricity.. (They have to drive to work / Armored vehicles transport cash / Coins have to be minted / Paper notes has to be manufactured)

Do you get the "hidden" picture into what the alternative method of payment are costing in CO2 emissions and electricity cost? (I have not even started on the manufacturing of credit cards / debit cards / ATMs / Credit card machines etc.) 

[tertius993]

Bitcoin Network Power Consumption Estimate

First, note that Bitcoin mining efficiency does not matter when estimating the trend of the power consumption of the entire Bitcoin network.

The power consumption of the entire network depends on five things:
 
x = the exchange rate [USD/BTC]
e = the era [0..32]
f = the average fees per hour [BTC/hour]
c = the average cost of energy [USD/kWh]
r = the average percentage of income miners spend on energy [unit less ratio]

From the era we can calculate the average hourly BTC subsidy rate:
s = 6(50/2^e) [BTC/hour]

And the average amount of BTC all the miners in the world make per hour:
b = s + f [BTC/hour]

From this we can calculate the amount of USD per hour all the miners in the world make:
u = bx [USD/hour]

Given the worldwide average percentage of income miners spend on energy the amount spent worldwide on energy is:
ur [USD/hour]

And finally, the worldwide power consumption is given by:
P = ur/c [kW]
   = bxr/c [kW]
   = (s + f)xr/c [kW]
   = (6(50/2^e) + f)xr/c [kW]

Notice that mining efficiency does not enter into this equation and does not matter.

You do not need to know or estimate the average overall efficiency of the mining network unless you want to calculate the difficulty and/or hash rate.

Let’s put in some numbers:

x = $50,000; the exchange rate [USD/BTC]
e = 3; the era [0..32]
f = 5; the average fees per hour [BTC/hour]
c = $0.03; the average cost of energy [USD/kWh]
r = 0.8; the average percentage of income miners spend on energy [unit less ratio]

P = (6(50/2^e) + f)xr/c [kW]
   = (6(50/2³) + 5) 50000 ( 0.8 ) / 0.03 = 56,666,666 [kW] = 57 Gigawatts

World power production/consumption is about 15,000 Gigawatts.

Bitcoin mining will trend toward 57/15,000 = 0.38 % of world power production given these values.

This scales by BTC price so:

BTC at $500,000 means power consumption would trend to 3.8% of worldwide power.

BTC at $5,000,000 means power consumption would trend to 38% of worldwide power.

I turned this into a spreadsheet so I could plug in the variables and play about with it a bit.

It seems to me that the key assumption is "r = the average percentage of income miners spend on energy [unit less ratio]" and setting this to 0.8.

In short the model says power consumption is directly linked to the price - as the price goes up miners earn more and they spend more on electricity.

It drops with each halving of course as the block reward drops, but if as anticipated fees replace some or all of that lost income the effect will be smaller.

Couple of worked examples, using more or less the numbers above, the only difference was to use average fee income over the last few days to get 4.56 BTC/hour for the current era, increased to 9 BTC/hour for the next:

Current era (3), fee income 4.56/hour:

Price: $50,000    Energy consumed: 56 GW
Price: $100,000  Energy consumed: 112 GW
Price: $200,000  Energy consumed: 224 GW

Next era (4), fee income 9/hour:

Price: $50,000   Energy consumed: 37 GW
Price: $100,000 Energy consumed: 74 GW
Price: $200,000 Energy consumed: 148 GW

As you can see according to the model the energy consumed is a straight line with the price.  And at current rates bitcoin at $200k suggests about 1.5% of total world energy production will go to Bitcoin mining - anyone who doesn't think that is insane, really needs their head examining ...

How did you come to the 0.8 value for r?  And do you think it will change over time? 

I presume it is really a competition thing, if a miner can manage on a smaller margin, they can spend more on power (i.e. r will be greater) and thus bring in more income.  There is actually no incentive to drive r down.

[stompix]

So at the next halving we could have 10 BTC/hour in fees and 6(50/2⁴) = 18.75 BTC/hour from the subsidy, all at a higher price.
We will have to see how it all plays out...

Yeah, totally overlook the fact that fees aren't going to halve but I doubt it will reach those numbers.
If we assume a higher price and double income in BTC for fees this will have to be 4 times bigger on average in $ for a tx since we're still going to have roughly the same amount of transactions a day.  As of right now, we're surpassing almost daily a minimum fee of 7-8$ for inclusion in the next block that should rise to 30-35$ which might affect the price in a negative way, nobody is going to pay constantly 30$ to move around 500$ and there aren't that many people moving millions.

Of course, the biggest question will be the effect of LN as this will help split the initial cost since you can make hundreds inside the network to cover for the initial fee but I don't think anyone could even approximate how this will impact the total fee spent.
In short, yeah, still my bad, probably that 75% will be something around 50% at best and more likely 40%.

So, the next thing that might help keep consumption down.
Let's hope the semiconductors crisis keeps going on for around two years so no new gear will be shipped and we stay flat as we did for almost 3 months.

How much research have you actually done? I was studying this very topic two days ago.
~
Bitcoin - 32.56 TWh Global baning system - 140TWh

2018 Numbers, the hash rate was 40Exa, now it's close to 140Exa.
Read the new numbers before telling others how much research they have done.

[RickDeckard]

How much research have you actually done? I was studying this very topic two days ago.
The global banking system uses 4x more electricity than bitcoin does and is nowhere near as safe.
Though I do agree they both use a lot of electricity.
The problem is how the electricity is made and not so much about how much is needed.

Bitcoin - 32.56 TWh Global baning system - 140TWh

https://medium.com/@zodhyatech/which-consumes-more-power-banks-or-bitcoins-8302750fe2bc

I ask you not to assume that I made this thread in order to bash BTC and it's ecosystem in some way. I just found those articles and wanted to hear what the community might think of them. And it turns out they actually have a lot of (informative) things to say, I'm glad that I did in fact started this topic.

How many people in the world used bitcoin today? Half a million? How many people used banknotes? 5 billion?
How many people used BTC to buy food today? How many used cash?
I don't know why people are immediately getting triggered and rush to compare it to something else and their only defense is to point fingers: "Look, this is worse!"

This is actually a fair comparison. I guess that there will always be a group of people ready to grab pitchforks against BTC and they will basically attack it in any way possible, and the energy consumption is right there for the taking. If we do stop for a second to think the amount of energy that banks and such use (and have used!) to power up the economy, I'm sure they'll have a harder time trying to justify why they only make calculations for BTC only.

Ok, now how much does the same transaction cost to buy a Tesla with fiat currency?

Now, remember to take into account that the transaction in the Banking system are processed by giant mainframes/database servers that are supported by 24/7 Air conditioning and CCTV monitoring etc.. etc..

A transaction between different Banks doubles the need for this hardware and supporting infrastructure (modems/switches/backup devices etc.)

Ok, so reconciliation and auditing are also done.. so you have people working in a Office environment that are using computers and printers and air conditioning that are consuming electricity.. (They have to drive to work / Armored vehicles transport cash / Coins have to be minted / Paper notes has to be manufactured)

Do you get the "hidden" picture into what the alternative method of payment are costing in CO2 emissions and electricity cost? (I have not even started on the manufacturing of credit cards / debit cards / ATMs / Credit card machines etc.) 

This basically sumps up the point I brought before, well said. I wonder if there are similar tools that have been made to "estimate" the amount of processing power it takes to make global economy work? Or at least a particular bank to operate and such?

[TangentC]

How much research have you actually done? I was studying this very topic two days ago.
The global banking system uses 4x more electricity than bitcoin does and is nowhere near as safe.
Though I do agree they both use a lot of electricity.

Safe is a relative term, my bank account is FDIC insured to $250000.
Any Bitcoin , I own is not insured, if I lose the password, then it is gone
if I get hacked , then the bitcoin is gone.
If I die, and my children don't have my password, then bitcoin is also gone.

So in my existence, FIAT is safer.
Lose my bank password, the bank will reset it.
if the bank gets hacked, the funds will be restored.
My children can use the legal system to gain access to my bank account after my death.

So safe is not a good term.
You can say bitcoin is a good hedge against hyper inflation of fiat,
but so is oil, gold , real estate or any other commodity.  

One other point , the claim the banking system uses 4X the electricity of bitcoin,
has anyone calculated the number of transactions processed by all Banks verses bitcoin.
My guess is Banks process 1000X more transactions per second than bitcoin,
so in the end they are thousands of time more efficient for their energy usage.

[Ozero]

0.6% is not a very large amount. Also, the proportion of renewable sources in electricity production is growing with every passing year. Why no one is talking about the environmental footprint of minting coins and printing banknotes? How much ecological damage is done by the mining of metals that are being used to mint coins? Also, how much forest is cut down every year, for printing banknotes? Once mined, Bitcoin is indestructible. On the other hand, banknotes and coins need to be replaced time to time.

Including for this reason, I do not see any serious fears of obtaining energy to mine bitcoins. Nowadays solar panel production technologies are getting cheaper every day. The construction of power plants is very beneficial even for individuals on the roofs of houses and it can completely solve the problem of cheap clean energy. The sun can still be considered an inexhaustible source of such energy.

[Kong Hey Pakboy]

Including for this reason, I do not see any serious fears of obtaining energy to mine bitcoins. Nowadays solar panel production technologies are getting cheaper every day. The construction of power plants is very beneficial even for individuals on the roofs of houses and it can completely solve the problem of cheap clean energy. The sun can still be considered an inexhaustible source of such energy.

That is if the government and the people is on the same page when it comes to a power plant construction or even solar farms, most of the time people are not in favor of power plants near their neighborhood because of the possible ergonomic hazard and solar farms take up a lot of land and people that care about their taxes will not be easily persuaded. Not to mention that a lot of countries are slowly dismantling their nuclear power plant because they favor coal power plant. Only way to save this is for an innovation in power storage and not power generation.