Galaxy Digital Claims Banks Use More Than Double The Energy of Bitcoin

By Scott Chipolina

According to a report published this month by digital assets firm Galaxy Digital, the world's banking system uses more energy than Bitcoin. 

“Given Bitcoin’s transparency, it is easy to estimate Bitcoin’s energy usage,” the report reads, adding, “This results in frequent criticism of Bitcoin, but these critiques are rarely levied against other traditional industries.” 

To that end, the report compares Bitcoin’s energy consumption to traditional payments, savings and settlements, as well as gold’s identity as a non-sovereign store of value.

Led by CEO Mike Novogratz, Galaxy Digital is an asset management firm operating in the digital assets, cryptocurrency, and blockchain industries. Amidst ongoing debate about Bitcoin’s energy consumption—spurred on by Elon Musk’s recent u-turn on Bitcoin—Galaxy Digital has come to Bitcoin’s defense. 

Bitcoin's energy use in context

The report makes some preliminary estimations on Bitcoin’s energy consumption. 

It claims that on publication date—May 13, 2021—the Bitcoin network consumed an estimated total of 113 terawatt-hours (TWh) per year. TWh is a unit of energy equal to an output of one trillion watts per hour, and it’s used to track the annual energy consumption of entire countries.

These figures aren’t enough, however, to make a direct comparison between the two systems.

Unlike the Bitcoin network—which covers everything from mining operations to processing transactions—the banking industry consists of banking data centers, bank branches, ATMs, and card networks. Galaxy Digital has also excluded central banks from its analysis. 

While the banking system does not directly report electricity consumption data, Galaxy Digital claims the banking system uses approximately 263 TWh of energy each year—more than double the amount of energy the Bitcoin network consumes. 

Similarly, the report claims BTC is not as energy-intensive as gold, which according to Galaxy Digital's estimation consumes about 240 TWh per year. The report arrived at this figure by converting estimated greenhouse gas emissions from the gold industry and converting it to a TWh figure using a converter provided by the International Energy Agency (IEA). 

Fact-checking Galaxy Digital’s stance 

According to Cambridge University’s Bitcoin Electricity Consumption Index, Galaxy Digital has significantly understated Bitcoin’s energy consumption. 

Today, the Bitcoin network is estimated to consume about 144 TWh per year, well over the 113 TWh figure cited by the digital assets firm. This figure comfortably places BTC among the world’s top 30 countries by energy consumption. 

The report also claims that Bitcoin can benefit the energy sector by creating “perfect use cases” for intermittent and excess energy. While that is true in theory, the data shows BTC is not actually incentivizing the use of intermittent and excess energy. 

According to Cambridge University, only 39% of the Bitcoin network is powered by renewable energy. This figure is contested, often by appeal to Coinshares’ estimate that over 75% of the network uses renewable energy. 

However, last month, a coal mine in China flooded and was forced to close. This caused a drop in Bitcoin’s hash rate to levels not seen since November 2020, serving as a clear indication that the Bitcoin mining industry is still heavily reliant on fossil fuels. 

“China’s current obsession with coal plants—despite greenhouse emission promises—means that certain miners can take advantage of cheap ‘dirty’ power in some regions,” Jason Deane, Bitcoin analyst at Quantum Economics, told Decrypt at the time.

Even Galaxy Digital’s primary claim—that BTC is less energy-intensive than international banking—is up for debate.

In a 2017 Hacker Noon post, Carlos Domingo, CEO of crypto compliance company Securitize, suggested that all bank data servers, bank branches, and ATMs combined amounted to about 100 TWh per year—a far cry from the 263 TWh figure cited by the digital assets company. 

But as Galaxy Digital says, the answer to whether or not BTC is worth its energy costs is subjective. The report concludes: 

“So, if we return one last time to the original question: Is the Bitcoin network’s electricity consumption an acceptable use of energy? Our answer is definitive: yes.” 

The fact remains that Bitcoin consumes an immense amount of energy—well over most of the world’s countries—and based on Cambridge University’s index, demand looks like it’s only going up. 

Decrypt has asked Galaxy Digital for the source it used to claim Bitcoin consumes 113 TWh of energy per year,  and will update the article if we hear back.

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