Cambridge Centre for Alternative Finance has significantly revised its Bitcoin Electricity Consumption Index, lowering its estimates of the cryptocurrency’s energy use after finding its previous model greatly overstated power consumption.
Cambridge Centre Revises Bitcoin Energy Estimates Downward: Corrected Index Reflects More Accurate Power Consumption
In a report published this week, the research center said its prior methodology, in place since 2019, worked well during periods of low mining profitability but exhibited “shortcomings” when profits surged, particularly in 2021. The previous index equally weighted all profitable mining machines in use, which led to an overrepresentation of older, less efficient models when mining was highly lucrative.
“Evidence suggests this bottleneck resulted in even next-generation hardware being stored in warehouses due to a lack of space in data centers,” the report stated. “Given that even new machines were being stored, it is reasonable to infer that mining operators would have already replaced all old machines with newer models, exploiting all possible means to enhance the overall efficiency of their mining operations.”
Cambridge said it has now integrated a weighting factor into its calculations to better account for the disproportionate impact of new, more powerful mining rigs on Bitcoin’s total computing power and energy draw. It also added a two-month lag between the release and operation of new equipment.
The changes cut Cambridge’s 2021 estimate by 15 TWh, from 104 TWh down to 89 TWh. Its 2022 calculation fell by 9.8 TWh, from 105.3 TWh to 95.5 TWh.
“We are confident about our estimates and regard each update as a progressive step toward enhancing their reliability,” the report stated. “As transparency is a cornerstone of our work, we will showcase how this update has altered past estimates.”
Cambridge noted its index provides only a rough approximation of Bitcoin’s actual electricity use due to the decentralized nature of the network. It said further enhancements to its methodology are needed, along with greater consideration of mining’s climate risks and opportunities to mitigate these issues.
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