It takes energy to operate and maintain the Bitcoin network. That’s a fact. How much it consumes, how much of it is green, and whether or not it’s worth the energy consumption are areas of contentious debate. Is Bitcoin bad for the environment? As I see it, that’s the wrong question to ask.
Bitcoin is designed the way it is for a specific reason, and it’s an extremely useful technology. Bitcoin will make the world a better place by separating money and state. By not allowing politicians to influence monetary policy, people and businesses will be able to make smarter choices about what to do with their money. Money is a kind of unspoken language, allowing humans to understand value and coordinate on a larger scale without verbal communication. When an entity manipulates money, as the central bankers are currently doing, it incentivizes poor decisions by broadcasting noise into the signal.
The utility of the exchanges made possible by Bitcoin will far exceed the cost of electricity used. Therefore, not having Bitcoin would be the net waste.Satoshi Nakamoto
The question to ask shouldn’t be if Bitcoin is bad for the environment. The question should be, “What benefits does Bitcoin give to society, and is the tradeoff of energy expenditure worth it?”
By the end of this article, I hope to help you definitively answer that question.
Below, I’m going to cover why the Bitcoin network uses energy, what detractors get wrong in their arguments, what type of energy is used to mine bitcoin, how bitcoin mining compares to other types of common energy-using activities, and how Bitcoin can play a role in the development of sustainable energy technology.
Is Bitcoin Bad For The Environment?
Why Does Bitcoin Consume Energy?
Let’s start at the beginning. Why does bitcoin consume energy?
Bitcoin consumes energy on two fronts. Bitcoin node operators run a small computer from home, and this verifies transactions on the bitcoin network. This verification process is how bitcoin achieves decentralization. Everyone running a node independently verifies transactions, making sure everyone is playing by the same rules.
The other part of the equation is where the energy debate resides: bitcoin mining. Bitcoin mining is how new bitcoins are added to the network and how transactions are added to blocks in the timechain. They ferry your transactions and add them to the queue so that the person you sent bitcoin can receive it.
Because part of the mining process includes a bitcoin “block subsidy” of freshly minted bitcoin, it can be profitable to mine bitcoin. While you can mine bitcoin at home, larger bitcoin mining operations may deploy tens of thousands of mining machines (ASICs) and mine several hundred bitcoin per month. The formula is simple:
(Block Subsidy + Transaction Fees) – (Cost of Energy + Operational Costs) = Profit
Of course, where there’s money to be made, there’s competition, and bitcoin mining companies around the globe are continually competing against each other for bitcoin. As the price of bitcoin goes up, energy use follows. More miners plug in ASICs to increase their chances of getting those bitcoin rewards. Bitcoin energy use is on the rise!
Why More Energy Consumption Means More Security For Bitcoin
If you speak to a bitcoiner, they will probably be happy that bitcoin’s energy usage is going up. That means bitcoin is stronger. The more energy bitcoin uses, the harder it is to attack. In order to do a 51% attack, you’d need to gather enough energy resources to outcompete all current miners, and sustain that energy use over a period of time.
One entity gathering a large amount of ASICs and consuming a vast amount of energy over an extended period of time would be physically difficult and extremely capital intensive. The more “good” miners there are distributed globally, the harder it would be for a “bad” miner to overtake the network. The more unrealistic this type of attack is, the more robust Bitcoin becomes as a monetary network.
Bitcoin is famous for having properly aligned incentives, and mining dynamics are no different.
Bitcoin miners are not mining for altruistic reasons, and they are not required to have any particular idealogical bent. As long as they are trying to mine bitcoin for profit, they are securing the network as a secondary benefit. Of course, it’s in their best interest to keep the network working smoothly as well, since they would have invested money into building out mining infrastructure and purchasing ASICs.
As bitcoin gets wider adoption, the price goes up. As the price goes up, more miners come online. As more miners come online, the network becomes more secure. As the network becomes more secure, bitcoin becomes more trusted. As bitcoin becomes more trusted, more people buy it to store their wealth. Then the price goes up, and the cycle repeats.
Bitcoin consuming energy is good for the network. FUDsters will shriek that this puts Bitcoin on a collision course with disaster. Bitcoin is on track to consume all of the world’s energy by 20XX! Of course, this leaves out a lot of nuance, including the obvious point that bitcoin miners want to consume cheap energy in order to be more profitable, and that cheap energy is often sourced from wasted energy resources like excess hydroelectric power.
Would anyone really care if bitcoin mining energy consumption 10x’d in the next decade, but it was all green energy sources?
What’s crazy to me, is that at the moment Bitcoin represents just 0.06% of all global energy consumption, so a 10x from here would still be less than 1% world’s energy being used to confidently secure the best monetary network ever in the history of human civilization. That would, of course, assume that bitcoin is a 20 trillion dollar asset and is being used by a lot more people globally.
In general, as a global society, we accept energy expenditure if it provides value. Why would bitcoin be any different?
What Bitcoin Energy FUD Gets Wrong
Other Monies Have Environmental Impacts Too
What’s easier to recognize is the fact that energy use does not equal carbon output or environmental damage.
Bitcoin uses energy, but critics will fail to mention exactly where that energy comes from. According to the Bitcoin Mining Council, more than 50% of North American Mining comes from renewable sources. You’ll often hear the quote from politicians that Bitcoin uses as much energy as a nation like Switzerland or Argentina, but really, Bitcoin could use as much energy as the entire world, but it wouldn’t matter if that energy was from a non-carbon-intensive source like hydro or nuclear power.
In addition to conveniently flip-flopping between the language of “carbon intensity” and “energy consumption”, nobody seems to care to bring up gold and its environmental damage. Using explosives and billions of gallons of water to find shiny rocks buried in the Earth may not “consume energy”, and it may even be less carbon-intensive than other industries, but the damage to the environment is irreparable.
Energy Per Transaction Is Consistently Incorrect
Maybe the most frustrating misconception is the idea of energy used per transaction of bitcoin. The idea that a single bitcoin transaction uses enough energy to power an average American home for two weeks. This is false, and a result of bad math on top of not understanding how the Bitcoin network works or scales.
Firstly, the number of transactions in a block is not the same every time. Depending on the type of transaction, size will vary, meaning each block has a different number of transactions in it. You could average that out over a period of time, but it doesn’t account for block efficiency upgrades like Segwit and Taproot.
More importantly, however, this calculation ignores second-layer technology and sidechains. With technology like Lightning and Liquid, users are currently transacting using bitcoin, WITHOUT TOUCHING THE MAIN CHAIN. Only when you open a channel on lighting or peg-in/peg-out using liquid would that be shown on the Bitcoin main chain.
What that means is that one transaction on Bitcoin could represent thousands of transactions that happened previously.
This is completely ignored when discussing Bitcoin’s so-called energy use per transaction and shows how little research is done before repeating this talking point.
You Can’t Ban Or Regulate Bitcoin Mining Globally
A more nuanced idea to point out is that if you ban or over-regulate miners in developed countries with greener grid energy mixes, you inadvertently push miners into less-regulated jurisdictions. It would be an incredible feat to ban bitcoin mining everywhere in the world, so if you make bitcoin mining too costly to operate in the US & Canada, it’ll just move to Iran & Kazakhstan.
That means you’d be giving up a mix of natural gas, hydro, wind, and solar as the dominant energy mix for bitcoin miners, and exchanging it for coal-heavy grids in developing countries.
You can’t ban bitcoin. You can only ban yourself from bitcoinSaifedean Ammous
Miners Are Not Stealing Electricity
Another idea that’s easy to debunk is the idea that bitcoin miners are somehow stealing electricity from your grandma’s air conditioner. The case is often made that the energy used by bitcoin miners could be directed to something more useful.
The problem with this argument is that it ignores the fact that bitcoin miners are on a super tight budget. They want to pay as little as possible for their energy costs, so they are not a fierce competitor for electricity. If it’s hot in Texas and the residents want air conditioning, they’ll pay that extra cost through the utility companies. Bitcoin miners will not. It doesn’t make sense for them to mine bitcoin at a loss, so they’ll just turn off their machines.
They may even have deals with utility companies requiring them to shut off machines during peak demand. The miners may receive some kind of compensation for doing this, meaning miners get paid, AND the residents get the power they need.
All of this is assuming that a miner is connected to grid energy. Many are not. Many miners are way off in the oil fields of Texas and North Dakota, capturing vented gas. You can’t exactly transport volcanic geothermal energy from Iceland to a retirement home in Arizona.
Bitcoin miners are energy buyers of last resort. They want the scraps. They want the cheap stuff nobody else wants.
Bitcoin & “Crypto” Are Not The Same Thing
Maybe this is nitpicking, a very frustrating part of the bitcoin energy debate that bitcoin energy critics get wrong is that they do not distinguish between Bitcoin and “crypto”, but there’s a huge difference. A lot of the crypto world is simply unregistered securities and useless tokens for trading. I’m not making the case that we should ban them or ban mining them, but it’s just harder to make a case for easy regulations on a giant global casino.
If you listen to politicians and economists talk about bitcoin, they’ll often use the words “bitcoin” and “cryptocurrency” interchangeably to make a point. They may talk about exit scams, or low-liquidity coins with pre-mines, and the dangers associated with Shadowy Super-Coders who control the financial system of the underworld.
Bitcoin is not the same. Bitcoin’s creation was a one-time event that sparked the first and only peer-to-peer digital money. Bitcoin is the foundation of a better financial system for the modern world. Bitcoin is unstoppable.
When I write about bitcoin and energy usage, I’m only talking about bitcoin.
Bitcoin vs The Current Financial System
If we’re going to discuss Bitcoin’s impact on the environment, we should compare it to the current financial system. Like a fish swimming in water, most people don’t think about how our current system works.
The first issue we run into is how to actually define our current financial system. Some would refer to it as the petrodollar system. This is a reference to the fact that in 1944 Bretton Woods struck a deal with Middle East oil producers to price their oil in dollars. This meant that if other countries wanted to buy oil, they had to buy it in dollars. It created international demand for the now reserve currency of the US dollar.
This has allowed the US to consistently run trade deficits, meaning they buy international goods at a cheap price due to the dollar having a consistently strong purchasing power compared to other currencies around the world.
When we look at our current system through the lens of the petrodollar, how much energy does that take to maintain? Count up all the jet fuel and steel of the US military, and that’s just a start to the energy consumed.
Another possible framework to define our current financial system is that of fiat currencies. In 1971, the US dollar’s tie to gold was severed, and it became a fiat currency. Its value was only derived from the fact that you expect someone else will want it in the future, and you have to pay your taxes using it. There’s no relationship to any real world commodity or limiting resource, and the Federal Reserve can create as much money as they want, as long it fits within their “dual mandate” of price stability and high employment.
How much does it cost to maintain this fiat currency system?
Firstly, you have a network of forex traders, constantly buying, selling, and speculating on the value of currency. Then, you have the cost of creating, verifying, and pursuing fraud of paper cash which requires humans to manage. On top of that, you need physical banks to store the cash, vehicles to transport it, and more people to manage those systems. That’s a lot of gas and air conditioning to maintain.
What does it cost me to verify a bitcoin transaction? I can run my own node for $150 and it’ll run for a decade without any problems. What’s the cost to store my bitcoin? I can download a mobile wallet for free or buy a hardware wallet for $80. If I need support, that can be done remotely from anywhere in the world, on-demand, with both parties working from their own home. No need for banks, vaults, or armored trucks!
I am now inclined to think that bitcoin is in fact highly EFFICIENT rather than inefficient. My thinking now is that bitcoin does not, in fact “waste” computational work at all – instead it works hard to deliver the most value possible from that computational work. Something like a government issued fiat currency may not have any obvious energy burden beyond its printing – but in fact, maintaining the value of a fiat currency requires a substantial investment in maintaining police enforcement, a legal system, and national defense. In comparison to the energy cost of hiring police officers to enforce economic honesty, the energy costs of investing CPU cycles in guaranteeing that honesty mathematically seem very small!Bitcoin Talk User, 2010
Bitcoin VS Other Energy Wasters
It seems odd to me that Bitcoin is the center of the energy debate, when we have lots of other things that “waste” energy. This is the main reason bitcoiners have come to the conclusion that, at least to a degree, the source of the energy debate is that people don’t understand Bitcoin’s value. For example, nobody really complains about the energy use of Christmas lights because it’s a tradition. Nobody is clamoring for regulation on ‘always on’ devices because they enjoy the convenience.
Bitcoin VS ‘Always On’ Devices
Many electronic devices use as much power as when they are idle as when they are being actively used, so if bitcoin mining is a waste, then not using something is much more wasteful. There are about 50 devices in the average American home which are using power all day long. This includes phones, laptops, refrigerators, TVs, e-readers, modems & routers, bluetooth speakers, and more. These types of convenience devices account for 23% of California’s home energy use.
I think if we compared the convenience of having your bluetooth speakers ready-to-go at any moment versus the freedom-enhancing capabilities of a non-state global money, it’s obvious which one would be more worthy of energy expenditure.
Bitcoin VS Tesla
One of the funniest comparisons is to look at the wasted energy from Tesla owners, who claim to be at the forefront of the green-energy revolution.
First off, the use of rare earth minerals in electric car batteries is hardly discussed or is at least accepted as a necessary tradeoff for EVs. You might not have heard of minerals like neodymium, terbium, and dysprosium, but they are key components to making electric vehicles. These minerals have to be mined, extracted, and refined using fossil fuels. Cobalt mining is notoriously damaging to the environment as well, and there have been many cases of using child labor in the mining process.
In 2020, Tesla bought a lithium mine, and I’m confident they will not be using solar-powered diggers to mine the ore and extract the lithium.
This is just in the battery creation process. Famous bitcoin trader Will Woo commented on Twitter that a parked Tesla uses 5% of its battery while being parked for 30 hours. As the top EV manufacturer experiencing exponential growth, that seems like a lot of electricity to be wasting on a parked car. Compare that to my gas vehicle, which wastes zero energy. After all, it only uses fuel while I’m driving it!
Bitcoin VS Christmas Lights
Every year millions of people around the world put up holiday decorations during the Fall and Winter holiday seasons. Even Halloween now has light up decorations and blow up lawn ornaments. Christmas lights, however are the worst offender, using as much energy as a small country! Yet, nobody blinks an eye because they’re a tradition for the holiday season.
Of course, if we were being honest in our criticism, we’d ask questions about the energy mix of specific areas lighting their seasonal decorations. Some regions may rely mostly on natural gas, while others may include a mix of wind and solar. Many regions do in fact use coal still, so it’s possible that your Christmas lights are running on coal power.
This is definitely not something we need as a society, but are powerful politicians commenting on Christmas light usage, asking for more regulation? Absolutely not.
Bitcoin VS The US Military
I’ll add some more stats here later when I update, but for now, here’s a great tweet to sum up my feelings.
Why Proof-of-Stake Doesn’t Make Sense
Inevitably, when you start talking about bitcoin’s environmental impact, a possible solution that always comes up is the move to a different consensus mechanism. Bitcoin uses proof-of-work (PoW), which means whoever works the hardest by dedicating the most computer power (most energy consumption) has the biggest chance of receiving the block reward.
In other words, more work leads to more financial reward, just like in the real world.
This proof-of-WORK is vital to bitcoin’s value proposition because it acts as a kind of bridge between the physical and digital world. You need to use real-world energy to create scarce digital money.
As it stands, to mine for bitcoin, you have to invest money into physical miners. If you’re a big miner, you have invest in infrastructure and staffing as well. Both small and large miners, of course, have energy costs as their main operational expenditure. There’s no incentive to invest all that money into bitcoin mining infrastructure just to attack the network. The incentive would be to simply mine bitcoin and profit, thus strengthening the network.
Compare that to one of the alternative consensus mechanisms like proof-of-stake which requires less energy to maintain because it removes mining from the validation process.
At first glance, you could say that yes, PoS uses less energy than PoW – but at what cost?
PoS requires that a validator “stake” a certain amount of cryptocurrency in order to participate in the validation process and earn rewards. It’s kind of like having an interest bearing account, where you keep money at the bank and earn a certain amount for keeping it there. “Staking” as it’s called, gives you the opportunity to construct blocks, a job that miners would normally do in the Bitcoin world.
What are the incentives here?
For one, it means only wealthy entities can become validators. There is a minimum amount of ether required to stake, and the hardware required is expensive and complicated to maintain. As a result, a smaller number of people are securing the network, creating the incentive to collaborate towards mutually beneficial changes in the code.
Second, it means that your money is locked up in staking, de-incentivizing securing the network. In the beginning, you may receive a high return on your staked ether, but as this grows in popularity, that interest rate will naturally go down over time. More stakers means less reward. After some time, the question will be, why lock up your money when you could have it liquid and make more money elsewhere?
Will Ethereum nodes decide to fork the code to make it more profitable, or harder to stake? It’s hard to know because Ethereum has a history of changing the protocol on a dime, such as the fork after the DAO hack, and now a change from PoW to PoS.
Overall, proof-of-stake incentives lead to centralization and corruption of the money, much like the system we have now. So, although it uses less energy, the cost of this tradeoff is that the digital money doesn’t function as intended.
As a last note on proof-of-stake doesn’t even work in the mainstream yet. The most popular cryptocurrencies using PoS are Cardano, which is not widely used as money in any capacity, and Ethereum, which has not even transitioned yet and isn’t slated to do so for at least another few years. In other words, people are talking about proof-of-stake as if it exists and works, but it does not. It’s an unproven idea that has yet to play out to its ultimate failure.
Further Reading on Proof of Stake
- Proof-of-Stake and Stablecoins: A Blockchain Centralization Dilemma
- Proof of stake is a scam and the people promoting it are scammers
- Proof-of-Stake & the Wrong Engineering Mindset (pt. 2)
- Work is Timeless, Stake is Not
- PoS is, fundamentally, a small federated system
“Renewable” Energy Resources For Bitcoin Mining
I use the word “renewable” in scare quotes because it’s a bit of a misnomer that something is renewable without consequences. For example, hydropower dams may create carbon free energy after they are constructed, but that ignores the energy required to build them. It requires digging earth, manufacturing & laying thousands of tons of concrete, and resources to maintain the facilities.
Solar panels are similar. They have a reputation for being green, but how are solar panels made? Not only does it require mining and refining rare earth minerals to make the electronic components of the panels, but the actual construction process of the panels is also often done in China with coal-powered plants. Then, when the panels need to be replaced, they will be dumped in a landfill somewhere or shipped back to China to be recycled, requiring fuel to ship them, and fuel again to recycle.
In other words, these renewable, green resources don’t exactly live up to their promise. They pay lip service to so-called green energy mandates, but still require fossil fuels during their production process and often produce waste that is not accounted for.
That being said, here are some energy resources currently used to mine bitcoin which are typically described as being renewable and green.
Hydropower is very popular because it creates so much unneeded excess energy. The water is flowing no matter what, and that extra energy must be curtailed. Bitcoin miners co-locating in hydroelectric dams is a perfect way for bitcoin miners to get cheap energy, and local municipalities can earn money by selling bitcoin, or by charging miners per kilowatt hour.
I couldn’t find the source, but I believe that Quebec, Canada alone has enough hydropower to power the entire bitcoin mining network three times over, so there’s no shortage of energy growth potential in this domain.
Geothermal energy is another example of constant energy creation that simply cannot be used up no matter how much demand there is. Iceland is famous for making use of its sulfurous, uninhabitable volcanic energy to mine bitcoin. Though there’s an unlimited amount of geothermal energy around the globe, since the center of the earth is literal hot, molten lava, these energy resources have typically been unusable because they are far away from fertile farmland and urban areas. Plus, who wants to live right next to a volcano?
These energy resources are often undeveloped because of the cost to build infrastructure. It costs money to just build the roads and dwellings for the workers who would build the power plant, then it costs money to actually build the thing, and then further investment to transport the energy to areas where it’s needed.
Bitcoin miners have a profit incentive to gain access to cheap, reliable power so it’s a win-win-win. Governments get access to private capital, bitcoin miners get access to energy to run their business, and locals get to tap into a new energy source.
Natural gas isn’t exactly “green” in the traditional meaning of the word, but the advantage of nat. gas is that it’s way cleaner than coal AND is extremely reliable and dense power. Natural gas can be turned on and off at will and also be transported long distances without losing energy potential. Contrast that with typical unreliables like solar and wind, which require the good fortune of sunny or windy weather to generate electricity, and cannot transport their energy more than 500 miles due to Ohm’s Law.
Natural gas can be used to mine bitcoin in two ways. Bitcoin miners can use flared gas, meaning gas that is actively being burned away by fracking companies. The reason they burn the gas is that the burned gas is much less harmful to the environment than vented gas.
Vented gas, on the other hand, is just naturally occurring gas that escapes from cracks in the Earth’s surface. This is difficult and expensive to capture in many cases, so it just vents into the atmosphere because it’s not economical to do anything about it. Because bitcoin miners are mobile and flexible in terms of energy consumption, they can capture this gas and turn it into electricity to power their bitcoin miners, unlike traditional oil & gas miners.
I think this is one of the best cases to show that bitcoin mining can actually help the environment by making it profitable to clean up waste. In fact, Wyoming recently signed a bill saying that bitcoin miners would be exempt from taxes on vented or flared gas because they’re providing a service.
Waste gas in the USA alone could power the bitcoin mining network 8x.
Nuclear is still pretty new, and I don’t think there are any bitcoin mining facilities currently operating exclusively on nuclear power, but there is a lot of potential here. Of course, if miners are using grid energy, then they may be using some portion of nuclear power.
In 2021, the nuclear fission technology startup Oklo announced that they will be co-locating with hosted bitcoin mining company Compass. This will be a 20-year partnership between the two companies, which says a lot about their time preference.
Oklo aims to build smaller, more versatile, and commercially viable nuclear reactors. This could completely revolutionize how nuclear energy is viewed and operates in the world, providing cheap, reliable energy to a lot of people in the future. However, building and maintaining these reactors requires money, and that’s where bitcoin comes in.
Everyone wins. Miners get cheap energy. Oklo gets a reliable income source. Locals get reliable, zero emission energy.
This is why it’s kind of ridiculous to ask the question if bitcoin is bad for the environment. If in the future, the majority of bitcoin is mined with zero-emission nuclear technology, how could that be bad for the environment? Of course, then there will be critics of nuclear power, and we’re back at square one, which is “I don’t like bitcoin so you shouldn’t use any energy at all.”
Solar is still in its infancy, but there are some projects in development, namely a partnership between Blockstream and Square to create off-grid, portable solar mining units. Typically, solar has been difficult to make profitable because of the money required to build and maintain the solar panels, but as solar technology improves and bitcoin mining companies have better access to cheap capital, solar will become a more viable option.
Plus, because bitcoin miners can be portable and can work intermittently as the sun allows (able to turn on or shut off without disturbing the bitcoin network operations), solar mining is still definitely on the table.
If a company can figure out how to make solar mining profitable, you bet that technology will proliferate. This is a perfect example of how the profit incentive of PoW mining encourages the development of green technologies that are cheap and reliable, like portable solar power.
Grid Balancing & Stranded Energy Development
A big part of the bitcoin mining energy usage debate is the two concepts of grid balancing and stranded energy use. They are pretty simple to explain, so I have a hard time understanding why anti-bitcoin politicians seem to be completely ignorant of these ideas.
The first is grid balancing. The nuclear power and geothermal examples from above are a great demonstration of how this can work.
This basically means that bitcoin miners work with energy production companies, which allows them to build out infrastructure that is bigger than necessary because they know that bitcoin miners will be a reliable source of revenue. Generating more power than necessary is normally a waste. Excess power cannot be consumed, so nobody is paying for it. Once you put bitcoin miners in the mix, suddenly there’s a buyer for that wasted power.
Having excess power on-demand for unexpected weather events like ice storms in Texas or heat waves in Oregon means that everyone gets to use as much heating or air conditioning as they need during peak demand. Power companies can charge a premium for power during those times (as they already do), then bitcoin miners simply shut off their machines and the power companies pay them a fee to do so.
Power companies have money to build infrastructure. Bitcoin miners make money. People have the life-saving energy they need. What’s not to love?
I think the main hurdle here is that so many people don’t understand what Bitcoin is, so they are skeptical that it’s a long-term solution, but that will change as time goes on. Bitcoin has been around for 12 years, and we’ve already seen a massive shift in the role Bitcoin plays in the economy and our lives. The trust factor with Bitcoin will be even better after another decade, and I think we’ll start to see more partnerships like this.
The second idea is the ability of bitcoin miners to capture stranded energy.
Energy production and transportation have limitations. As with the example of natural gas above, there are sources of energy all around the planet, but not all of them are accessible or viable. A small gas deposit on the outskirts of Texas is not going to be worth building all the infrastructure to extract that small amount, so it just sits there, unused.
The same goes for far off rivers and waterfalls, unlivable deserts receiving unlimited sunshine, and offshore wind areas. The energy exists. The limiting factor is our ability to capture that energy in an economical way. Bitcoin mining provides a revenue source for the development and maintenance of these projects.
Not only does this provide more energy for urban centers, but it also creates an industry around these rural areas. To develop these energy resources, you need human capital, which means jobs, homes, and roads, plus access to food, hospitals, and culture. Building out all these things starts with the profit incentive of bitcoin mining.
Can Bitcoin Be Carbon-Negative?
There is also a narrative forming that bitcoin can actually be carbon negative, meaning it removes more harmful particulates from the atmosphere than it produces. How can this be true? Bitcoin can become carbon negative by preventing methane from entering the atmosphere through methane capture.
The key here is for bitcoin miners to find sources of methane venting, burn the methane for electricity, and subsequently turn it into carbon dioxide and water. Though carbon dioxide entering the atmosphere isn’t ideal (according to environmentalists), it’s undisputed that CO2 is less harmful than CH4.
The benefits of methane burning process by some miners can be measured against any negative environmental impact of other miners, essentially making the bitcoin mining industry carbon-negative. Wow. Great news, right?
Some bitcoiners push back on this narrative, and for good reason.
First, if you claim bitcoin is carbon negative, you allow critics to set the framing, allowing them to decide what’s “OK” for the bitcoin network to do, or not do. When you allow your critics to control the narrative, you’ve already lost.
Second, there is no other industry which is treated in this way. When was you last heard about a push to make cruise ships carbon neutral? is there pressure to prevent the tech industry from creating “always on” devices like smart speakers that simply drain energy all day so you can do puzzles or add items to your grocery list? There are tons of ridiculous industries which are not subject to this type of intense criticism and debate, so there’s no reason bitcoin mining should be treated differently.
Third, it’s important to realize this is not going to settle the debate about bitcoin mining and energy use. Bitcoin critics simply hate bitcoin because they don’t understand why bitcoin is important. Bitcoin could turn carbon negative next year, and they’d move the goalpost. Bitcoin miners could unanimously choose 100% renewable resources, and they’d move the goalpost again. You already see this starting to form with claims that bitcoin miners are “stealing” energy from local residents, causing their bills to go up, or stressing the grid.
In my opinion, for bitcoin miners, the ideal narrative is to simply stand their ground and make the case that bitcoin mining should be treated like every other industry. Some people find it beneficial to run these specialized computers, and are willing to spend the money to do it, so there’s no reason we should allow some types of compute power versus other types of compute power.
What About Banning Bitcoin Mining?
At the end of the bitcoin energy debate is the question of whether or not you think Bitcoin is useful, and if we, as a society, want to start limiting energy consumption based on subjective morals. Are we prepared to judge who gets to use what amount of energy based on whether or not it’s “good” or “bad”? If we are, there’s a laundry list of things I’d like to see debated, including video games, Christmas lights, and my wife leaving the lights on after she leaves a room. Can I get an ESG mandate for that?
Plus, none of this really even matters because even if a nation like the US banned commercial bitcoin mining within its borders, you’d still have individuals mining bitcoin at home.
It’s unlikely that a developed country like the US could actually ban home mining because they’d have to start regulating all other types of home energy usage, but even if there’s some outside chance that did happen, mining would still thrive in other countries like Canada, Iceland, Russia, and Kazakhstan.
To ban bitcoin mining energy usage globally, you’d need a consensus of every major nation to ban mining within their borders, plus sanctions on countries that didn’t follow suit. I think something like that is pretty unlikely to happen.
I think the best compromise between bitcoin miners and government is this: Governments can make certain types of energy they don’t want used within their borders prohibitively expensive. Most likely this is going to be coal. Fine. Whatever. Bitcoin miners don’t need coal to be successful. They have a range of energy consumption options, and those options are steadily growing. So, governments can regulate energy, but leave bitcoin miners to consume the energy they need on a level playing field like any other industry.
Bitcoin miners will naturally seek out unwanted, therefore cheap, energy resources like flared/vented gas and excess hydro/nuclear/geothermal. If you’re not on board with bitcoin yet, my advice is to just let the miners fight over the energy scraps, and don’t worry so much about whether or not you think bitcoin miners deserve energy or not.
The funny thing is, I don’t know of any other industry which has had its energy usage scrutinized so heavily. I think this is a result of the lack of understanding of what Bitcoin is. In the minds of its detractors, bitcoin is just a get-rich-quick-scheme used by criminals and traders, so it doesn’t deserve to use energy.
Unfortunately, the only remedy for this is time and education. That’s why I like to distill the debate down to its most concise elements: Bitcoin is useful, and bitcoin prefers to utilize unwanted energy sources.
At the beginning of the article, I rejected the question of whether or not Bitcoin was bad for the environment, and reframed it to discuss the benefits of Bitcoin, and whether or not the tradeoff ofenergy expenditure is worth it. In my opinion, there are a huge number of benefits to Bitcoin compared to the small amount of energy used by the network. Accounting for the infinitesimally small 0.01% of the world’s energy consumption, of which a large portion is produced through renewables, mining and verifying bitcoin is absolutely worth the energy needed.
Just the basic benefit of allowing an average person to save money is incredibly useful to every single person on the planet. As it stands The West, the average person who saves money in their bank account loses a minimum of 2-3% purchasing power per year, adding up to 30-50% loss over a lifetime. That makes it impossible to retire on savings alone, so everyone is forced to become an investor in the stock market, exposing their life savings to unwanted risk. In developing countries, the fiat money situation is even worse.
Bitcoin is good for humans. Ultimately, the goal of the green energy and environmental sustainability movement is that they are concerned about the long-term consequences of destroying the planet for the sake of humanity. The point of saving the Earth is to save our home. We only have one planet to live on!
As it turns out, Bitcoiners are environmentalists too. Bitcoin not only isn’t bad for the environment, it’s actually good for the environment.
- The Frustrating, Maddening, All-Consuming Bitcoin Energy Debate
- The Last Word on Bitcoin’s Energy Consumption
- What Bloomberg Gets Wrong About Bitcoin’s Climate Footprint
- Bitcoin Net Zero
- Flexible Data Centers Can Reduce Grid Carbon Emission In Texas
- Bitcoin Mining Is America’s Most Misunderstood Industry