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How Does Bitcoin Mining Stack Up Against the Gold and Banking Industries?

There’s no denying that Bitcoin mining uses a lot of electricity to generate a new coin every 10 minutes.

But how does it compare to other industries that create wealth?

This article takes a look at the numbers.

Bitcoin Mining Uses How Much Electricity?

The University of Cambridge in England has a center that studies altfinance, the Cambridge Centre for Alternative Finance.

The center created the Cambridge Bitcoin Electricity Consumption Index (CBECI) in July 2019 to track in real time just how much electricity Bitcoin mining uses.

According to the CBECI website, mining Bitcoin uses just under 12 terrawatt-hours of electricity per month.

One terrawatt-hour (1 TWh) is a measurement. It’s one trillion watts produced in one hour.

The total electricity consumed by Bitcoin mining comes to just over 338 TWh, as of the end of March 2022. Total consumption in March 2022 came to 11.66 TWh.

The CBECI’s estimate of annual electricity consumption stands at 148.47 TWh.

That’s just a bit less than the total annual consumption of Egypt, at 149.1 TWh, and Poland, at 149.5 TWh.

Bitcoin electricity consumption compared to country useBitcoin uses just a bit less electricity that Egypt and Poland. Image courtesy of CBECI.

Gold vs. Bitcoin

The CBECI reports that mining gold requires 131 TWh per year, although that’s an estimate for 2019 based extrapolated from numbers for 2006, from a document produced in 2009. The actual number is likely higher.

Galaxy Digital released a report in May 2021 that indicates gold’s annual consumption is 240.61 TWh. However, that’s for the entire gold industry, of which mining is one part.

Comparing the financial aspects, Bitcoin is mined at the rate of 6.25 coins per block, 6 blocks per hour. Annually, that comes to 328,500 Bitcoin.

At today’s price (late April 2022) of roughly $40,000 USD, that comes to about $13.1 billion of Bitcoin produced in a year.

According to Statista, gold miners produced 3,000 metric tons of the metal in 2021. That comes to 6,613,867.9 pounds, or 96,452,240.21 troy ounces of gold.

At the current price (late April 2022) of about $1,900 per troy ounce, that comes to $183.2 billion of gold produced in a year.

So, while gold uses almost 241 TWh of electricity annually compared to 148.5 TWh for Bitcoin, it produces almost 14X the value compared to the value of the Bitcoin created.

Banking vs. Bitcoin

The same Galaxy report also looked at the electricity consumption of the global banking industry.

Galaxy estimates that the banking system uses a total of 263.72 TWh of electricity. This total includes numbers for banking data centers, bank branches and offices, ATMs, and the card networks’ data centers.

We can’t compare the financial numbers between the banking industry and Bitcoin mining, for one reason.

Bitcoin creates wealth. Banking doesn’t.

Bitcoin generates something that didn’t exist before, just as the gold industry creates wealth by taking something that wasn’t accessible and turning it into a metal that people want.

The banking industry doesn’t create any new wealth, unless we count the interest banks earn on money they create out of nothing (due to fractional reserve banking) as creating wealth.

It generates its income by trading its services for other people’s money.

Reducing the Carbon Footprint of Bitcoin Mining

Before China banned Bitcoin mining, the country was creating well over half of all the coins mined daily.

Unfortunately, the huge amounts of electricity it used came almost exclusively from coal-fired generating plants.

It was also creating electricity shortages for other industries and China’s people.

The United States now produces the most Bitcoin. And the mining industry there is determined to reduce its carbon footprint.

Mining Instead of Flaring

Every year, oil companies burn off huge quantities of methane (natural gas) from their wells, or they release it to the atmosphere.

Methane is 25X more potent as a greenhouse gas than is carbon dioxide, so flaring (burning the methane) is the preferred option.

It’s a cost for the oil companies though. And a waste of valuable resources. World Bank estimates put the total amount of natural gas flared each year at 141.3 billion cubic meters.

Several companies have developed technology that lets oil companies burn the methane to generate electricity to run Bitcoin mining rigs.

Since the methane would have been burned (or vented) anyway, the mining rigs essentially run for free, with no net increase in greenhouse gas production.

Crusoe Energy estimates that burning the excess natural gas to run generators for mining reduces carbon emissions by over 60% compared to the emissions from flaring.

The Crusoe Energy website has some fascinating statistics that may interest you.

Mining is making financial sense for the oil companies too. Exxon Mobil’s program has been so successful that it’s expanding its program to its sites in Africa and South America.

And ConocoPhillips is selling its natural gas to a Bitcoin miner in North Dakota.

Renewable Energy Initiatives for Bitcoin Mining

Bitcoin miners know they’re on the hot seat regarding electricity consumption. So they’re going green wherever possible. Here are some examples:

  • Wind-powered mining in Texas, partially funded by billionaire Peter Thiel
  • Hydro-powered mining in a partnership between Bitfarms and Hydro-Québec
  • Geothermal-powered mining in Iceland

Green Bitcoin Mining? We’re Not There Yet

We’re definitely not there, yet. Mining is becoming greener though.

Especially when you compare the amount of carbon emissions being produced by mining today with how much Chinese miners produced not too long ago.

Is Bitcoin killing the planet? Definitely not!

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