Digital Currencies and Energy Consumption (IMF Fintech)

Summary

• The global payment system is estimated to consume 47.3 TWh of energy annually, accounting for roughly 0.2 percent of total global electricity consumption.p.27
• The Bitcoin network's annual electricity consumption is estimated at 144 TWh per year as of April 25, 2022, representing about 0.6 percent of total global electricity consumption.p.9
• Bitcoin mining hardware has an estimated average life span of 1.3 years, generating 30.7 metric kilotons of e-waste per year.p.9
• Modernized settlement systems like TARGET Instant Payment Settlement (TIPS) consume an estimated 4 × 10 -5 kWh per transaction.p.14
• The global digital payment system based on credit and debit cards accounts for an estimated annual energy consumption of 39 TWh.p.26
• Global annual energy consumption associated with the creation, distribution, and disposal of physical cash is estimated at 8.3 TWh.p.27

Key insights

1. Non-Proof-of-Work consensus mechanisms require orders of magnitude less energy per transaction than Proof-of-Work architectures such as Bitcoin.p.9
2. Permissioned DLT networks provide stronger control over node selection, geography, and network architecture, facilitating greater energy efficiency than permissionless networks.p.13
3. Core processing in non-PoW permissioned DLT systems exhibits lower per-transaction energy consumption estimates than legacy credit card data centers.p.14
4. Central bank digital currencies built on non-DLT modernized instant payment platforms can achieve high energy efficiency without requiring distributed ledgers.p.16
5. Incorporating features such as physical card integration, offline capabilities, or compliance infrastructure into a CBDC may increase its total energy footprint.p.18
6. User payment access via software digital wallets on smartphones consumes negligible energy compared to maintaining physical card and point-of-sale terminal networks.p.15