In brief
- Wealth management firm Bessemer Trust has described Bitcoin as less efficient than other cryptocurrencies.
- In a report, the firm also suggests Bitcoin will never replace the US dollar.
New York wealth management firm Bessemer Trust has warned that Bitcoin is energy-inefficient, while noting that Ethereum is more efficient.
In its latest Quarterly Investment Perspective report titled "The Future of Money," Bessemer Trust discusses Bitcoin in three contexts—as a store of value, a mode of transaction, and as a ledger of accounts. As a mode of transaction, the report tells clients that Bitcoin "remains highly inefficient from an energy-usage perspective,” adding, “Other cryptocurrencies, such as Ethereum, are more efficient in this regard.”
Cryptocurrencies’ energy consumption is measured in terawatt-hours, a measurement that tracks a unit of energy equal to outputting one trillion watts for one hour. It is usually used to track the annual energy consumption of entire countries.
Based on the available data, Bessemer’s assessment of Bitcoin is correct. Per Digiconomist, a website dedicated to unearthing the unintended consequences of technology, Bitcoin consumes approximately 103 terawatt hours (TWh) of energy per year. In contrast, Cambridge University puts Bitcoin’s annual energy consumption at 113 TWh.
The Hard Truth About Bitcoin's Energy Consumption
Bitcoin recently broke $60,000 for the first time, cementing its perch as the “big dog” of cryptocurrencies. It has been embraced by groups as disparate as politicians, NFL stars, and Tesla CEO Elon Musk. And the fact that cryptocurrency is entirely digital makes it sound, in theory, as though it would be the greenest currency the world has ever seen. After all, unlike paper money, no trees have to be cut down to create Bitcoin. But people and press have become increasingly concerned about whe...
In comparison, Digiconomist estimates that Ethereum only consumes 38 TWh of energy per year. However, like Bitcoin, Ethereum’s energy consumption is rising, and is now up 100% from 14 TWh at the start of the year.
Bitcoin 'offers security'
The wealth management firm had more to say about Bitcoin beyond its energy struggles.
Assessing the cryptocurrency’s role as a ledger for settling accounts, Bessemer Trust’s report praised blockchain technology, describing it as an “incomparable ledger,” while adding that the anonymity behind the Bitcoin blockchain is both a “compelling” and “detracting” characteristic.
“It offers security amid potential government and social instability, yet it simultaneously offers refuge for those engaged in illicit finance,” the report said.
Flooded Coal Mine Highlights Chinese Bitcoin Miners’ Reliance on Dirty Power
A coal mine located in China’s Xinjiang region flooded and shut down last weekend. The resulting effect on China’s Bitcoin mining industry has highlighted how the practice is still heavily reliant on coal. The mine’s shutdown coincided with a significant drop in Bitcoin’s hash rate—the measuring unit of the Bitcoin network’s processing power. In fact, the Bitcoin hash rate dropped to its lowest level since November 2020 during the mine blackout, per Coin Metrics figures. Coin Metrics data. Im...
However, the report also had some praise for Bitcoin. As a store of value, the flagship cryptocurrency is appealing as an investment asset because of its limited supply, the report said.
“The finite supply of Bitcoin, in contrast to dollars or other government-produced currencies, is its greatest draw in terms of its ability to retain its value long term,” the report said. Ultimately, the report suggests that because of Bitcoin’s price volatility, it will not replace the U.S. dollar—or even become a crucial part of a current traditional asset allocation.
But Bessemer zooms out to conclude, "There is no denying the appeal and size of addressable market of digital payments. Bitcoin and cryptocurrencies are part of this trend."
