In this article, we will discuss whether bitcoin is bad for the environment. If you are already familiar with bitcoin’s Proof of Work (POW) consensus mechanism, please continue to the next section. Otherwise, here is a brief overview of how the Bitcoin security model works.
ASICs are a special type of computer that performs complex mathematical problems securing the Bitcoin network. When an ASIC solves a math problem, it wins the Bitcoin block reward, which is $300,000 worth of 6.25 BTC at today’s prices.
It’s hard to know for sure, but there are about 1 million ASICs mining BTC. These ASICs use a lot of electricity, so some people are concerned about Bitcoin’s environmental impact. Is bitcoin bad for the environment?
Bitcoin’s Electricity Demand: What Do Skeptics Say?
The primary argument put forward by skeptics is that the environmental impact of Bitcoin is very high. Critics of Bitcoin argue that it makes no sense to have a million computers doing math problems to secure a digital network.
In a time of climate change and the ever-increasing threat of global warming, Bitcoin skeptics argue that it makes no sense to have a digital currency that consumes as much energy as a small country. Are they correct? Let’s dive into the data and see what it can tell us about Bitcoin’s environmental impact.
The truth about energy use in the BTC Network
Many people have asked how much electricity Bitcoin uses. The truth is that the Bitcoin network uses quite a bit of electricity. If Bitcoin had its own country, it would be the 29th largest electricity consumer in the world. However, these statistics don’t really tell the full story. To understand the Bitcoin energy consumption index, you have to look at where the electricity is coming from.
Bitcoin’s environmental impact is actually lower than it seems, as most of the electricity used to support the BTC network comes from renewable energy sources.
According to a 2020 report by Cambridge University; “A significant majority (76%) of hashes [miners] use renewable energies as part of their energy mix.” Additionally, the report found that a green energy source powers 39% of all crypto mining in the world.
Another rarely discussed aspect of the Bitcoin energy consumption index is that miners sometimes rank alongside “off energy” sources. The problem with electricity is that it is impractical to transport over long distances (the World Bank estimates that globally 8% of all energy is lost in transit).
The difficulties inherent in transporting electricity can result in power plants with more supply than demand. When supply exceeds demand, a Bitcoin miner can settle near the power plant and use the excess energy. While a Bitcoin miner may seem to have a negative environmental impact, in reality they are just using energy that would have been wasted anyway.
How BTC Promotes Renewable Energy
Warren Buffet’s right-hand man, Charlie Munger, said: “Show me the incentive and I’ll show you the result.”
In terms of the Bitcoin network, miners are encouraged to be near the cheapest source of electricity. Traditionally, this energy has been found in China, which has an abundance of cheap hydropower. However, one way Bitcoin climate change is positive is that crypto mining encourages the development of new energy generation technologies.
For example, a company developing a solar panel that makes Bitcoin mining economically viable may sell billions of dollars worth of panels to miners. Plant operators are encouraged to build new plants even if they are not sure that there will be sufficient electricity demand in the surrounding area. Bitcoin mining can absorb excess demand thus ensuring that the facility remains profitable. Ukraine provides a great example of how this can work.
What makes Bitcoin mining unique is that it is highly mobile and a small to medium mining operation can be set up in just a few weeks. Mike Colyer, CEO of blockchain finance provider Foundry, had this to say about the crypto mining and solar industry:
“Crypto mining provides a faster payback for solar projects or wind projects… because they would [otherwise] generate a lot of energy for the grid in that area”
Bitcoin’s environmental impact is decreasing as more miners switch to green energy sources each year.
The truth is, yes, Bitcoin uses energy. However, this does not mean that Bitcoin is a bad thing. Almost everything in our modern world uses energy. Global trade is provided by container ships burning tens of thousands of gallons of oil. We enjoy air conditioning, air travel and swimming pools. As a society, we can collectively agree that although these things consume energy, they are worth a trade-off. Even minting coins consumes a lot of energy.
It’s too simple to argue that Bitcoin uses energy, so it’s bad for the environment. What we really have to ask is: is it worth it? Is humanity getting a good return on its investment in the Bitcoin network?
Everyone will have their own answer to this question, but we believe the answer is yes. Bitcoin may be the only way for tens of millions or even hundreds of millions of people to escape financial pressure and preserve the purchasing power of their money.
The Bitcoin network is a way for humanity to store its wealth in an asset that is beyond the control of central banks and corrupt governments. BTC is financial freedom for people around the world, and this benefits more than the electricity needed to keep the Bitcoin network going. In this article, we discussed the issue of is bitcoin bad for the environment.
Note: The information, comments and evaluations contained here are NOT in the Scope of Investment Consultancy. Keep following the SinceCoin.