Energy Transition

The electricity required for a single Bitcoin trade could power a house for a whole month

A Bitcoin (virtual currency) coin is seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, June 23, 2017. REUTERS/Benoit Tessier/Illustration - RC14EAB5E9F0

This week, bitcoin saw its value increase by almost $1,500 per coin. Image: REUTERS/Benoit Tessier

Will Martin
Markets Reporter, Business Insider UK
Share:
Our Impact
What's the World Economic Forum doing to accelerate action on Energy Transition?
The Big Picture
Explore and monitor how The Digital Economy is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

The Digital Economy

London — Bitcoin transactions use so much energy that the electricity used for a single trade could power a home for almost a whole month, according to a paper from Dutch bank ING.

Bitcoin trades use a lot of electricity as a means to make verifying trades expensive, therefore making fraudulent transactions costly and deterring those who would seek to misuse the currency.

"By making sure that verifying transactions is a costly business, the integrity of the network can be preserved as long as benevolent nodes control a majority of computing power," wrote ING senior economist Teunis Brosens.

"Together, they will dominate the verification (mining) process. To make the verification (mining) costly, the verification algorithm requires a lot of processing power and thus electricity."

Comparing the amount of energy used for a bitcoin transaction to running his home in the Netherlands, Brosens says: "This number needs some context. 200kWh is enough to run over 200 washing cycles. In fact, it's enough to run my entire home over four weeks, which consumes about 45 kWh per week costing €39 of electricity (at current Dutch consumer prices)."

Not only does Bitcoin use a vast amount of electricity to complete transactions, it uses an almost exponentially larger amount than more traditional forms of electronic payment.

"Bitcoin's energy costs stand in stark contrast to payment systems that have the luxury of working with trusted counterparties. E.g. Visa takes about 0.01kWh (10Wh) per transaction which is 20000 times less energy," Brosens notes, pointing to the chart below:

Image: ING

This week, bitcoin saw its value increase by almost $1,500 per coin with a rally that coincides with renewed interest in the currency from investment banks. The Wall Street Journal last week reported that Goldman Sachs was looking at setting up a bitcoin trading operation, and Morgan Stanley CEO James Gorman said recently that the cryptocurrency was "certainly more than just a fad."

Also this week, a team of analysts led by Gautam Chhugani and Gaurav Jangale from the research house Bernstein said that bitcoin was still just a "censorship-resistant asset class," out of the reach of state control and yet to form a part of the system of settlement and credit that defines money.

"Fiat money is still the final form of settlement — governments still collect taxes in fiat money and salaries are still paid in fiat money," the team said in a note to clients on Wednesday.

Loading...
Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Energy TransitionNature and Biodiversity
Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

What to expect at the Special Meeting on Global Cooperation, Growth and Energy for Development

Spencer Feingold and Gayle Markovitz

April 19, 2024

About Us

Events

Media

Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum