Dispelling the Energy FUD

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Can we just drop it already...

When considering Bitcoin’s energy footprint, the narrative surrounding it has largely been negative and unfound. In this piece, we talk about some of the undisclosed facts and debunk myths.


Dispelling the Energy FUD


In the discussion surrounding energy consumption with Bitcoin, there are dozens of theories that float around and discussed daily. Bitcoin mining using the equivalence of a small country's energy output, or that one bitcoin transaction wastes the equivalent of 24 homes electricity, there is no shortage of negative narrative surrounding Bitcoin, but is any of it true? The notion of taking energy from someone somewhere else to mine for Bitcoin is just not true. In fact, Bitcoin’s presence does not affect energy consumption in the traditional sense. The decades-old formula used to estimate electricity usage by things such as credit cards, dishwashers, etc. does not follow the same curve. Bitcoin’s general growth is much more moderate over time comparatively speaking. Bitcoin transactions are not one for one, just because a transaction is occurring does not mean a Bitcoin block is being mined. In fact, upwards of 3,000 transactions can be executed on a single Bitcoin block, and it's important to remember that Bitcoin maxes out at around 100,000 transactions a day.


If you're arguing efficiency, it is also a murky debate rooted with untrue statements and comparisons. Imagine the energy needed to power a global financial power such as Visa. The amount of towering office buildings needing to be powered, computing power executed, thousands of credit card transactions running through their systems, the carbon footprint Visa stomps in absolutely dwarfs the amount of energy used to mine Bitcoin. Bitcoin is also not centralized in the same sense, Bitcoin miners are all over the world, whose only real input is their own computers and using their own, spread out power. Bitcoin doesn't have glowing skyscrapers to power all day, ATM’s all over the world to support, employees commuting to and from their office buildings. Visa does though. It's easy to compare the two but in no way is there a fair and just equation to compare a financial juggernaut such as Visa opposed to computers mining bitcoin. In reality, it is not even close, Bitcoin’s presence does little to disrupt energy usage and the overall carbon footprint.


The truth is energy is not globally fungible, and in fact energy indeed does decay as it leaves its point of origin. About 8 percent of electricity is lost globally when in transit. When considering Bitcoin’s energy consumption, there has often been the question of where does it come from? Where is the leading source of Bitcoin mining? According to data provided by the Cambridge Center for Alternative Finance, there are leading areas where Bitcoin is mined. China is the global leader of Bitcoin mining, with regions like Sichuan, Xinjiang and Mongolia being the dominant areas. The amount of complete overhauling of their energy system also helps. Sichuan and Xinjiang have had massive upgrades to their use of hydroelectric power in the previous decade. Their hydro capacity produces more than enough energy and often there is an excess of potential energy left, much of which will go to waste if not used or sold. Truth be told, dams can only hold a finite amount of potential energy, and Bitcoin mining has been seen as a perfect solution. If a country is unable to sell this energy, having Bitcoin mining utilize the local energy grid to offset the lost energy is actually a perfect storm. Bitcoin thrives on energy that may be lost or curtailed, making it a net positive overall.


Another leader in Bitcoin mining is Iceland, where they take advantage of an abundance of energy including hydro, geothermal, smelting bauxite ore among others. With there being an abundance of energy available and bitcoin miners capitalizing when the resource is cheap and plentiful, Bitcoin is on pace to be one of the most lucrative and green financial endeavors with a market cap well above $1 trillion USD.


There is no way around that mining Bitcoin does use large amounts of energy. But it has been widely researched and known that Bitcoin’s mining efforts are largely achieved through renewable energy. With a vast majority of miners located in China and Iceland, respectively, the amount of thermal energy and renewable energy accessible to those regions that are used to mine Bitcoin, there is little to debate when it comes to Bitcoin’s energy sustainability. According to a study done by the University of Cambridge, 76% of cryptocurrency mining is done using electricity from renewable energy, but you won’t hear this from mainstream media who has its claws in cryptocurrency’s side and often argues if Bitcoin and cryptocurrency should even use a precious resource such as electricity in the first place.


In conclusion, the energy consumption of bitcoin is undeniable, but when coming to a conclusion it's imperative to have correct information and in the end, bitcoin’s energy expenditure may end up being one of the cheapest and greenest in history. Numerous transactions on one block, coins only needing to be issued once, the reliability and usage of renewable energy makes bitcoin mining to be much more profitable than any green endeavor to date. Bitcoin block space is paid for and in high demand, and cannot be considered a waste. With Bitcoin’s value skyrocketing, and the proof-of-stake model soon becoming more of an everyday reality, it is only a matter of time before it goes away. Sure it is profitable now, but what about decades from now? There is no concrete prediction but in the interim, rest assured knowing Bitcoin mining seeks out spare energy and welcomes energy adaption in the future.

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