Will Bitcoin Find A Way To Reduce Its Footprint?

Today Jimmy Song published Why Bitcoin is Different

Can Bitcoin Keep Its Position?

The article starts by putting innovation in perspective. According to the article, many altcoins and ICOs introduce features that directly or indirectly target the weaknesses of Bitcoin. He reminds us of the fact that these are minor improvements to the colossal innovation that Bitcoin brought to our world. I second his assessment; one cannot overestimate the contribution of Bitcoin. However, I don't think that the historical aspect of Bitcoin is challenged by many. It is the practical aspects that are being addressed by the challengers. Such as scaling, confirmation time, and footprint.

What concerns me the most is Bitcoin's consumption of electricity. Of course, I would like to see environmentally friendly tech. But this is not my primary concern here as society ignores so many other opportunities to save energy that I find it close to hypocritical to criticise Bitcoin for it.

What concerns me as an investor is that the energy uptake is linked to the wrong parameter.

Electricity Consumption Increases With Price

(Image from article by Tyler Durden)

Ideally, the electricity consumption would be a function of Bitcoin's market cap. The higher the market cap, the larger the attacker's reward and the stronger the defense mechanisms need to be.

But this is not the case with Bitcoin. The mining difficulty is not reflecting the need for security but instead, the ability of the miners to operate with a profit. The price of Bitcoin and the cost of electricity are the only two factors that drive the electricity consumption.

More efficient mining hardware would fail to reduce the global consumption of electricity. It would instead lead to an increase in the mining difficulty and, as a consequence, the security of Bitcoin. Arguably, Bitcoin is already overprotected.

Nor does the lightning network or any other 2nd-level system offer a method to reduce global electricity consumption. These would only lower the electricity uptake per transaction, a metric that I find pretty artificial, anyway.

For the moment only a lower Bitcoin price would reduce its electricity uptake which is a rather sad outlook. Additionally, one can hope for the next reward halving but again, only if the price stayed constant. (Bitcoin could also change its consensus mechanism, but that could cost its identity).

So in the absence of economic factors to lower consumption, Bitcoin miners start to see political headwind. A month ago Quebec's Premier said he was more interested in allocating the electricity to the needs of the citizens than the needs of the minders article. A very logical stance for any politician and citizen.

Please leave a comment below. How could we see a USD 100k Bitcoin with less of a footprint?