MNP, the fifth-largest professional accountancy and business consulting firm in Canada, has released a report that investigates the energy efficiency of Bitcoin-based blockchain technology.
The report, titled ‘Blockchain technology and energy consumption: The quest for efficiency’, finds that the BSV (Bitcoin SV) blockchain is far more energy-efficient than the other two blockchain protocols included in the comparison – BTC (Bitcoin Core) and BCH (Bitcoin Cash).
Energy efficiency is a hot topic within the blockchain industry, with criticism being levelled at technologies such as BTC, which consumes an inordinate amount of electrical energy through its proof-of-work mining operations. This high energy consumption per transaction processed is not intrinsic to all proof-of-work blockchains, however, only those with artificial limitations imposed upon the size of their blocks that throttle transaction throughput.
The BSV blockchain is a prime example of this – its energy efficiency improves as transaction throughput increases. As more transactions are included in every block, the energy cost of mining per transaction declines in relation to the increased throughput. MNP asserts that this improved energy efficiency is what makes the BSV blockchain more efficient than BTC and BCH – and by extension, ‘greener’ and more environmentally friendly.
‘BSV is more efficient due to block size and number of transactions (throughput) currently available on the network and limitations of other protocols,’ the report states.
‘So long as the size or number of transactions on the BSV network exceeds the limitation of the other protocols, BSV is the most efficient in this group.’
The BSV blockchain is the protocol most aligned with the original vision of Bitcoin as defined in Satoshi Nakamoto’s white paper, and it is because of this adherence to the original Bitcoin protocol that it allows for unbounded scaling through larger block sizes. In comparison, the BTC and BCH protocols each limit the maximum size of the blocks which can be mined on their networks to varying degrees.
As part of its study, MNP crafted a model which can be used to estimate and compare the energy efficiency of blockchain protocols which use the SHA-256 proof-of-work consensus mechanism, including BTC, BCH and BSV.
‘…this study found it is possible to estimate a blockchain network’s power consumption. Moreover, we may use these estimates in assessing which implementations are more efficient,’ the report states.
‘Of the three cryptocurrencies that were sampled, our findings indicate BSV is a more efficient blockchain network when compared to the other two sampled SHA-256 proof-of-work blockchains.’
Energy efficiency improves with scalability
The key finding of MNP’s study into the energy consumption of SHA-256 proof-of-work blockchain protocols was that efficiency improves with the number of transactions that can be included in a given block added to the blockchain. When the difficulty (the complexity of the proof-of-work problem that must be solved to mine the block) remains constant, the energy used in mining a single block can be said to be roughly equal.
This is true regardless of the number of transactions or the amount of data included in the block being mined. Therefore, if more transactions and data are included within a single block, the average energy consumed to process a transaction or megabyte of data on the blockchain decreases.
BTC and BCH artificially limit the maximum block size that can be accepted by their respective protocols. BTC’s current block size limit is one megabyte, while BCH has a 32MB limit. These restrictions have the dual effect of throttling the maximum transaction throughput of these networks as well as hurting their energy efficiency. The BSV blockchain protocol places no arbitrary limit on the blockcap size, meaning that its energy efficiency increases with the number of transactions being processed on the network and it can easily scale its transaction throughput in line with demand.
‘The three Bitcoin protocols, BTC, BSV, and BCH, were compared to see which was more efficient. Given that all Bitcoin protocols are subject to the mining difficulty being affected by the computational potential of the miners on them, the metrics for efficiency were kilowatt-hours per transaction and kilowatt-hours per megabyte validated. These illuminate the major distinctions between the protocols,’ the MNP report states.
‘When looking at the throughputs for the various networks, it is possible to see the potential capacity differences having a large effect on efficiency. The power consumption per transaction, and equally, per megabyte, decreases when network utilisation is higher on more protocols with a more permissive block size than on those that are more restrictive.’
‘The arbitrary limitations of BTC and BCH may have a significant impact on the power consumption per transaction.’
MNP examined the average energy consumption per transaction (measured in kWh) and per MB (measured in MWh) for each quarter from Q2 2020 until Q2 2021. The findings of this study showed that the BSV blockchain offers the greatest energy efficiency, especially when compared to BTC.
Below is the average energy consumption in kilowatt-hours (kWh) per transaction for each of the blockchain protocols, modelled by MNP over the abovementioned period.
|Average Energy Consumption per Transaction (Q2 2020 – Q2 2021)|
|BTC||430 kWh||706 kWh|
|BCH||6.5 kWh||183 kWh|
|BSV||2.4 kWh||3.3 kWh|
Below is the average energy consumption per megabyte (MB) for BTC, BSV and BCH over the same period.
|Average Energy Consumption per MB (Q2 2020 – Q2 2021)|
|BTC||757 MWh||991 MWh|
|BCH||20.5 MWh||194 MWh|
|BSV||0.9 MWh||12.63 MWh|
It is evident from this data that BSV holds a significant advantage over the other two blockchain protocols in energy efficiency, especially when one considers that as transaction volume increases, BSV’s energy consumption per transaction continues to fall.
‘If the same BSV transaction counts are applied to our consumption estimates of BTC for the first three quarters, where the difference in transaction count per block is most clear, the consumption per transaction would be reduced to between 181 and 221 kWh/tx — as in the last three quarters of 2020. That is a reduction of 57 to 55 percent respectively for the same periods,’ MNP states.
‘With greater utilization and throughput, these reductions in consumption per transaction and increase in efficiency will only improve.’
Modelling the energy efficiency of a blockchain protocol
MNP adduced a range of data and previous studies in constructing its model for this comparison, which included an account of current mining equipment commonly used for SHA-256 proof-of-work blockchains. This equipment primarily comprises ASICs (Application-Specific Integrated Circuits) – purpose-built hardware designed to profitably mine blockchains which use a specific consensus mechanism.
The report notes that it is difficult to deduce the energy consumption of these networks due to their decentralisation, but by using real-world, publicly available data and information provided to them by Canadian cryptocurrency mining companies, the study offers a reasonably accurate estimate:
‘By leveraging real-world publicly available data, previous studies, and primary research, we have confirmed the validity of our model and assessment framework. Our model provides a reasonable estimate (accurate within 28 percent) when using Canadian cryptocurrency miner data provided to MNP,’ the report states.
‘Although it is difficult to precisely measure the consumption of a decentralized network without making major assumptions regarding many of the variables, we were able to estimate using average power and performance characteristics specified by a sample of equipment manufacturers.’
MNP notes, however, that the lack of data regarding BCH mining prevented them from conducting a full comparison using their model’s estimates.
‘Our estimations were compared to estimations based on public data and shared proprietary data for two mining protocols, BTC and BSV respectively. There was a lack of data surrounding public miners of BCH to conduct a comparison of our model’s estimates,’ the report states.
‘The estimates were within 6.7 percent of the estimation based on public data for BTC and within 28 percent of the estimation based on proprietary data for BSV.’
Using an accurate mix of Bitcoin mining equipment to facilitate energy consumption calculations is not a difficulty unique to MNP’s study – it has been a major obstacle for many other studies on the same topic. However, it is plain from the MNP report that even when accounting for these difficulties, the ability for the BSV blockchain to scale and improve energy efficiency with transaction volume places it leagues ahead of the BTC and BCH protocols in terms of energy efficiency and its subsequent environmental impact.