Is Bitcoin Killing the Planet?
David Gerard, the author of Attack of the 50 foot Blockchain, shared an article on Twitter comparing Bitcoin to the Oil industry. It was a Guardian article, and Gerard isn't a big fan of Bitcoin so I should have had my usual reaction to it, roll my eyes and click the next link in my feed, but like the scene from Mitchell and Webb it has me asking are we the baddies?
I love what Bitcoin has started, but my love for it doesn't blind me from its faults. There have long been concerns over Bitcoins sustainability, Bitcoin Evangelist and engineer Hass McCook created a series of posts back in September 2018, and in the series, he estimated the cost to mine one single Bitcoin at $6450.
Others have estimated the cost to vary between $5000 and $12500. The truth is the cost of mining a Bitcoin really depends on where it's being mined and more specifically the cost of the electricity. In South Korea, it would cost $26000, in Venezuela just $530.
According to Digiconomist's Bitcoin Sustainability Report and it's Bitcoin Energy Consumption Index for December 2018, mining revenues have dropped by more than 34%, transaction fees were down by 28% making the average fee just 33¢, and the average energy consumption per transaction was down by 31% as well. Yet the report states that that transaction will use 472 KWh, enough energy to power a US household for 16 days.
Economist Alex Dr Vries' study into Bitcoin Energy Consumption, while based off incomplete data and some educated guesses, has estimated that with 200,000 Bitcoin transactions per day globally Bitcoin mining is using 2.5 gigawatts, almost as much energy consumed by the whole of Ireland.
Others have claimed that Bitcoin uses as much CO2 as 1 million transatlantic flights.
That's not all that surprising when a single Antminer S9, one of last year's most popular miners, has the computational power of half a million PlayStation 3 games consoles and the power wattage equivalent of a dishwasher running 24 hours a day.
The data has been disputed by a number of people in the industry with some saying the impact is higher and others such as Marc Bevand who believe the data is overestimated by at least 2x. He has produced a detailed rebuttal of the BECI, and he makes some very good points about how the data is collected and interpreted, but it's still clear that Mining is using too much energy whether it's 472KWh or not.
As dramatic as that all sounds, should we be concerned though? Stanford University consulting Professor Johnathan Koomey much like Marc Bevand believes that a lot of these assumptions are wildly out of step with reality. Koomey believes that a lot of it is scaremongering and compares the media's clickbait articles to media attitudes to the internet and how they overhyped back then that the internet would consume half of the world's electricity.
I've also seen arguments that while Bitcoin uses a lot of electricity, it pales in significance to the environmental impact the production of fiat currencies has. This is a valid point mining of gold and other materials takes a lot of energy and resources and certainly has its own carbon footprint. The global banking industry is estimated to use 100 terawatts a year.
Bitcoin mining was estimated to use 30 terawatts in 2017, but the counterpoint would be that it has a tiny fraction of adoption rate compared to traditional banking so imagine how much more energy it would use if it had the same market size as international banks? I don't like to get into non sequitur arguments, but it's worth noting that even if Bitcoins market size was to 100x, it would only use 2% of all global energy consumption.
Tim Worstall from Forbes a while back described the whole issue as not a real-world environmental disaster. He wrote: 'This looks a little bit desperate, this story about how Bitcoin mining is, in fact, a real-world environmental disaster. The idea is that the energy being consumed to mine Bitcoins is such that it is, well, I think it's saying at least, going to lead to consumption of essential resources and thus climate change. Or some such disaster story.
The biggest mining farms are in China, and 60% of their energy is produced by 'dirty' coal stations. China is one of the world's biggest contributors to carbon emissions. This isn't Bitcoins fault.
The truth is that competition from mining companies, and the falling price of Bitcoin means that firms are now having to look for low-cost renewable energy suppliers. There is a reason Iceland is a top location for mining farms it has 100% clean, cheap energy. The doomsayers will say that Bitcoin mining is a bad fit for renewable energy, renewable energy has variable outputs dependant on weather and that the farms require 24/7 electricity so would still need to use coal, or nuclear produced power as much as 70% of the time.
The trouble is that the naysayers are all looking at this issue as if it's frozen in time. They are taking the data and the technology as it currently stands and ignoring the fact that the technology is constantly advancing.
As an example, Ethereum is right now an energy-intensive cryptocurrency, but it's moving to a proof of stake model that will significantly reduce the energy costs of running the network. Bitcoin now has the Lightning Network which has already resulted in faster, cheaper and more energy efficient transactions. Each generation of mining ASICs has been getting more energy efficient while becoming more powerful. There are even altcoins out there like Skycoin trying to encourage and promote renewable energy.
This point is supported in the research paper from the University of Cagliari’s electrical engineering and computer science departments, 'Banking on Blockchain: Costs Savings Thanks to the Blockchain Technology' where they explain that the only way for Bitcoin to optimize global financial systems is to increase its economic and operational efficiency.
Having looked at this in detail, comparing Bitcoin miners and users to the oil industry is not only unfair but in my opinion dangerous. In the article, Ethan Lou muses that the day will come when big oil shrinks or changes and that Bitcoin will become the target of environmental activists. Certainly many in the media have begun drawing the battle lines.
Before you jump on the bandwagon though consider this; Big oil had its beginnings in the 1800s and only now the world is making a real effort to move to renewable energy. It's taken 219 years for the world to get there. Bitcoin is only 10, and we are already working hard in the sector to make blockchain technology ecologically sustainable and efficient.
I think Katrina Kelly-Pitou sums it up nicely in her article on phys.org where she says people should quit criticizing Bitcoin for its energy intensity and start criticizing states and nations for still supplying new industries with dirty power supplies instead.
So, guys, do you think we are the baddies or are we doing enough as an industry to fix the problems and early enough? What do you think? Let us know in the comments below. We really like to hear your thoughts on the stories we run so, please get involved.
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Disclaimer: Cryptopig content is written by a team of blockchain passionate people. We are not registered as investment advisors. Don’t take the information in this post as investment advice and make sure you do your own research before investing. Cryptocurrencies are a very risky investment, never invest more money than you can afford to lose.