> "Very inefficient" is an understatement too! I wonder how much energy Visa and Mastercard combined use to process their transactions. Mind you, they probably do orders of magnitude more transactions per second.
There's about 6 orders of magnitude difference in transaction cost. Mastercard/Visa would use ~2W.h per transaction, Bitcoin about 1MW.h.
"Very inefficient" is an understatement too! I wonder how much energy Visa and Mastercard combined use to process their transactions. Mind you, they probably do orders of magnitude more transactions per second.
I recently had a discussion with a friend about the viability of a distributed/ blockchain alternative to YouTube. Extrapolating BTC inefficiency to a distributed CDN processing TBs and PBs of traffic...
Well, Mastercard ALONE processes well over 3.5 billion transactions per day, compared to Bitcoin's 300,000. So without knowing anything at all about how energy-efficient they are, we can say it must be many, many thousands of times better, considering that otherwise there wouldn't be enough energy on the planet to power them all.
> According to VISA corporate responsibility and sustainability report in 2017, the company consumed a total amount of 680,560 GigaJoules of energy globally for all its operations (1). We also know VISA processed 111.2 billion transactions in 2017 (2). Rely on these numbers, VISA ECPT is 0.0017 kilowatt-hours and for simplification 100,000 VISA transactions consume 170 kWh.
680,000 GJ is roughly 190GWh (0.1%).
But it gets worse. In 2017 Visa executed ~111B transactions. Bitcoin peaks at about ~90M. So 1000x the energy for 1/1000 of the transaction volume. So each Bitcoin transaction uses ~1,000,000 times the energy of a Visa transaction.
Even without the exact figures it should be obvious that the inefficiency in Bitcoin is astounding. Consider e.g. that the Bitcoin network performs about 400K transactions per day while the Visa network performs about 150MM transactions per day. That works out to 375x. Coincidentally Switzerland consumes about 1/375 of the world's electricity. If the Visa network used the same amount of electricity per transaction as Bitcoin it would require all of the electricity used by the entire world.
"Comparing Bitcoin’s energy consumption to other payment systems
To put the energy consumed by the Bitcoin network into perspective we can compare it to another payment system like VISA for example. Even though the available information on VISA’s energy consumption is limited, we can establish that the data centers that process VISA’s transactions consume energy equal to that of 50,000 U.S. households. We also know VISA processed 82.3 billion transactions in 2016. With the help of these numbers, it is possible to compare both networks and show that Bitcoin is extremely more energy intensive per transaction than VISA."
1. I have read that with every VISA transaction, transactions move between no less than 5 separate institutions. What is the net energy used in all of that deliberate inefficiency? All buildings, vehicles, and energy use of people who work for VISA must also be taken into account. And for all other credit cards and payment systems.
2. Bitcoin isn't really a "payment system", so comparing it to VISA is apples to oranges. It is more of a store of value, like a bank. So it would more properly be compared to the net electricity consumption of all banks, including all buildings, armoured trucks and all vehicles used to ship people to and from banks around the world.
One bitcoin transaction uses FIVE HUNDRED THOUSAND TIMES more energy than one Visa transaction [1]. This is like lighting a cigar with a $500 bill and going "what, I have to light my cigars somehow, and inevitably it'll cost something. I spend money to meet my goals."
> Visa used 189GWh in 2017, worldwide, of which around half was data centres [1]. That handled 111.2 billion transactions, so about 1.7Wh per transaction (half for datacentres).
Bitcoin used 844670Wh per transaction.
That's about 500 000x more energy consumed per transaction by BTC than Visa. I guess it goes without saying that it's much less efficient.
For years now I encounter crypto enthusiasts have been suggesting that BTC is an improvement on the energy efficiency of traditional banking, without anything to back up this claim, and ignoring stats like the above over and over again.
According to Visa's 2018 report, they consumed about 0.1TWh while processing an average of 4000 transactions per second [1]. Bitcoin consumes 121TWh per year to process 4-7 transactions per second [2].
> using less electricity than the major credit card networks
I googled around for "Bitcoin vs. VISA energy consumption"; the only argument I found in favor of VISA using more is here [0]. This compares Bitcoin to the entire global banking system, including the cost of e.g. keeping the lights on at physical bank branches. It very approximately guesstimates that the entire global banking system requires ~100 TWh/year, compared to Bitcoin's ~30 TWh/year [1].
For comparison: all data centers worldwide combined use about ~400 TWh/year [2]. I very much doubt that the credit card networks account for 7% of all data center energy consumption.
I mean, we can compare it to mastercard: 74 billion transactions a year for mastercard vs 100 million a year for bitcoin. Mastercard revenue is 15 billion while bitcoin has 21 billion in annual mining fees. So mastercard processes 740 times as many transactions for 70% of the cost and I would argue the real cost is the revenue - operating income for their actual expenses to operate which is 7 billion so 1/3 the cost. That would make it 2,220 times as efficient.
So let's do the rough math and figure out the comparison
300k per day is around 100 million transactions per year, three orders of magnitude less than Visa.
BTC uses 110 terawatt hours per year right now[0], which is 396,000,000 gigajoules, a three order of magnitude difference in the other direction. Assuming everything scales nicely, if Bitcoin were the size of visa it would use ~6 orders of magnitude more energy.
OK, so that is way worse than I thought. I'm still not sold on the idea that it's a bad thing, but it's nice to put numbers to the situation.
It's a misleading comparison. They are comparing the cost of an on-chain Bitcoin transaction to the immediate energy cost of a Visa transaction. On average, one on-chain Bitcoin transaction corresponds to 1000s of total transactions, since most transactions occur through L2s like exchanges, the lightning network, or PayPal. This L2 activity is written to chain batchwise, and only when necessary. And the article doesn't calculate the true total cost of running the Visa network, which also involves 10s of thousands of Visa employees and facilities, not to mention the energy consumed by the Federal Reserve in minting and recycling physical money, and preventing fraud and counterfeiting.
There's about 6 orders of magnitude difference in transaction cost. Mastercard/Visa would use ~2W.h per transaction, Bitcoin about 1MW.h.
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