I haven’t ignored anything. I’ve studied bitcoin’s energy use and it continues to move towards renewables over time. The thing about a decentralized system is anyone anywhere can use whatever energy they have available to join the network and start mining. So people blame bitcoin, but it’s really the individual miners using coal and dirty energy that should be to blame, not bitcoin itself. I don’t mean that in some high-brow, beat-around-the-bush kind of way, I mean truly what can we even do about it by blaming the bitcoin protocol? The struggle with criticizing bitcoin for its energy use is, who are you going to complain to? The CEO? There is no central authority. Bitcoin is a network of global, voluntary participation. I understand the sentiment of being averse to bitcoin due to its energy use, but bitcoin is going to keep hashing along whether any of us like it or not. That’s the power of a censorship resistant, decentralized network. The other thing to consider is that what makes bitcoin so decentralized and secure is its energy usage. Energy demand is what ensures no one can co-opt the network.
Most people who denounce bitcoin due to energy use greatly misunderstand or misconstrue it relative to the value bitcoin provides. Part of this depends on if you think bitcoin has value. If you think it’s worthless, then it probably looks wasteful. If you see it like I do, as the future global settlement network and the primary tool that every single person, company, and country on the planet can use to protect against inflation and deterioration of purchasing power, then the fact that it uses .2%-.5% of global energy is a necessary trade-off when you consider the value and financial protection that it provides to society.
Many people also misconstrue bitcoin’s current energy sources. Bitcoin currently gets more than half of its energy from renewables and the rest from fossil fuels, with renewables continuing to grow to a larger % over time. There is also a concerted effort across the mining industry, at least in the west, to focus on implementing more renewable sources for bitcoin.
Bitcoin will also help accelerate renewable energy technology and growth. I talked about this above in a prior post that Bitcoin enhances load flexibility for renewables and is already being used in wind and solar farms in many jurisdictions. Bitcoin mining helps stabilize the energy grid by flexibly adjusting energy use based on demand. It does this by using excess renewable energy when it’s abundant and turning off mining operations when energy supplies are low. Examples from Texas, Iceland, and Canada show that integrating renewable energy in Bitcoin mining can reduce costs, lower carbon footprints, and enhance grid stability.
I think overall the criticisms of bitcoin’s energy use are not without merit. It’s something that should be carefully considered as the network grows. The good news is, most of the leading mining companies in the space are already on that path towards greater bitcoin-renewable energy integration.. Again, I completely emphasize with the resentment as we slow-dance into environmental catastrophe, but how many other industries contribute far more of a carbon footprint and provide less value to society? The reason Bitcoin is such an easy target for energy FUD is that its value proposition is misunderstood.
For a more in-depth discussion about Bitcoin’s Energy FUD, Lyn Alden has another excellent long-form article on this topic.
From her paper:
Since the world uses over 176,000 TWh of energy per year, that means that the entire Bitcoin network, at its peak consumption level, uses less than 0.1% (as of 2022) of the world’s energy consumption. That’s for a network with 100+ million estimated users worth hundreds of billions of dollars. Other estimates vary slightly but they arrive at similar numbers overall.
Research Summary
Overall, the main takeaways from this long report are as follows:
-Bitcoin provides a service that people can use to store and transfer value. So far, the market of millions of participants has decided that this network has value, and like anything of value, it consumes energy.
-Bitcoin mining uses less than 0.1% of global energy (as of 2022, and by design cannot use more energy than the utility it is providing to users.
-A sizable chunk of the energy that is used by Bitcoin, is otherwise stranded and wasted energy. This is because bitcoin miners have the unique capability to go to remote locations and deal with inconsistent power that other consumers can’t make use of, as long as it’s cheap.
-The network continues to be more energy efficient each year due to pre-programmed declining block subsidies (structural disinflation). Miners must find cheaper and cheaper sources of energy, which tends to be stranded renewable energy, to remain profitable over time. Plus, additional layers like the Lightning Network dramatically expand its per-transaction energy efficiency even further as they are built-out and become increasingly operable. Like any functional financial system, Bitcoin uses a layered scaling approach.
-Blockchains that use other consensus models with lower energy requirements, like proof-of-stake,i.e. Etheruem, make trade-offs to do so. There is no free lunch, and these other forms of consensus are not “better” than Bitcoin’s proof-of-work model, since they have more attack surfaces, a lack of unforgeable costliness, and greater risks of centralization.
For those reasons, whether Bitcoin continues to be successful or fails in terms of broader adoption, there’s no risk of the network using too much energy in the grand scheme of things. By any metric, it’s a rounding error as far as global consumption energy is concerned, with a sizable chunk of its energy usage consisting of sustainable or otherwise wasted energy.
People focusing heavily on the environmental “E” side of ESG as it relates to Bitcoin often overlook the “SG” component- social and governance. At the end of the day, I consider Bitcoin to be one of the most ESG assets around, just not in the corporate-sanitized conception that the term ESG is often used in.
