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How Much Energy Does Bitcoin Really Use? Cambridge Weighs In
Explore the University of Cambridge's updated findings on Bitcoin's energy consumption. Dive into the revised Bitcoin Electricity Consumption Index, understand the reasons behind the changes, and get insights from experts in the crypto industry.
The Bitcoin⚡️ Energy Standard
September 22, 2023
Table Of Content
A Major Update to the Bitcoin Electricity Consumption Index
Discrepancies in Previous Estimates
Reasons for the Revision
Cambridge's New Model
Other Expert Opinions
Conclusions
FAQ
In the realm of cryptocurrency, Bitcoin stands as a pioneering force, driving both admiration and criticism. One of the most debated topics surrounding Bitcoin is its energy consumption. Critics argue that the digital currency's environmental footprint is alarmingly high, while proponents believe the benefits outweigh the energy costs. The University of Cambridge, a renowned institution, has delved deep into this matter, updating its Bitcoin Electricity Consumption Index (CBECI) to shed light on the true energy consumption of Bitcoin mining. This article explores Cambridge's findings, comparing previous estimates with the updated figures and understanding the reasons behind the revisions.
A Major Update to the Bitcoin Electricity Consumption Index
After three years, the University of Cambridge has introduced a significant update to its Bitcoin Electricity Consumption Index (CBECI). This update aims to provide a more precise evaluation of the global energy consumption of Bitcoin miners. The primary finding? Previous power consumption estimates were considerably higher than the actual figures.
Discrepancies in Previous Estimates
In 2021, the initial CBECI model projected Bitcoin's electricity consumption to be 104 terawatt-hours (TWh). This was 15.0 TWh more than the updated model's estimate of 89.0 TWh. To put this in perspective, a terawatt-hour is equivalent to one trillion watts being used for one hour. If an average incandescent lightbulb were to be used for one hour daily, it would consume 21,900 watt-hours in a year.
For 2022, the university revised its power consumption estimate downwards by 9.8 TWh, from 105.3 TWh to 95.5 TWh. This places Bitcoin's energy use for that year on par with the energy consumed by U.S. tumble dryers, which is approximately 108 TWh.
Reasons for the Revision
The initial methodology assumed that every "profitable" hardware model released in the past five years contributed equally to the network's hashrate. This approach was effective for most of Bitcoin's existence. However, it began showing its limitations in 2021, especially after China's ban on Bitcoin mining. The ban led to an overestimation of older hardware models and an underestimation of newer, more efficient ones.
ASIC hardware devices, which are specifically designed for efficient Bitcoin mining, have seen significant improvements in efficiency and power over the years. The ban in China resulted in a shortage of data center capacity, leading to the logical conclusion that mining operators would have already upgraded to newer machine models.
Cambridge's New Model
While the updated Cambridge model is an improvement, it still has its limitations. The model faced challenges during highly profitable mining periods, where the old hardware distribution estimates showed a disproportionately large number of older devices.
Cambridge's new approach incorporates recent hardware mining deliveries. However, it still relies on several "assumptions and simplifications." The findings of this report align with a study by Coin Metrics from June, which used blockchain-based fingerprints to identify dominant mining hardware. While the Coin Metrics study was not integrated into Cambridge's new methodology, its findings are held in high regard.
Other Expert Opinions
Karim Helmy, the lead author of the Coin Metrics report, expressed satisfaction with Cambridge's updated figures, especially since they now consider public company hardware data. However, he believes there are still inaccuracies, particularly in bull markets. For instance, Cambridge's estimate of a significant increase in energy consumption per terahash between 2020 and 2021 is likely not reflective of actual occurrences.
Daniel Batten, founder of CH4 Capital, also supported Cambridge's findings. His model estimates Bitcoin's current power demand to be 13.095 GW, compared to Cambridge's 12.89 GW. This represents the energy required for all active mining devices to operate.
Conclusion
The energy consumption of Bitcoin mining has long been a topic of contention, with varying estimates causing confusion and debate. The University of Cambridge's recent update to its CBECI provides a clearer picture, revealing that previous estimates might have been overblown. While the new model offers a more accurate representation, it's essential to note that no model is perfect, and assumptions still play a role in these calculations. As the crypto industry continues to evolve, so will the methodologies used to assess its impact. It's crucial for stakeholders to stay informed and make decisions that balance both the potential of Bitcoin and its environmental implications.
FAQ
What is the Bitcoin Electricity Consumption Index (CBECI)?
The CBECI is an index developed by the University of Cambridge to estimate the global energy consumption of Bitcoin miners.
How accurate are the previous energy consumption estimates for Bitcoin?
The University of Cambridge's recent update suggests that previous estimates were considerably higher than the actual figures.
Why were the previous estimates inaccurate?
The initial methodology assumed that all "profitable" hardware models from the past five years contributed equally to the network's hashrate, leading to overestimations.
How has Bitcoin mining hardware evolved?
ASIC hardware devices, designed specifically for Bitcoin mining, have become more efficient and powerful over time.
What is the estimated energy consumption of Bitcoin in 2023?
As of now, Cambridge estimates that the Bitcoin network has consumed 70.4 TWh of energy in 2023.
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