We’re continuing our Green Tech Week with a look at bitcoin today.More on that shortly.Having trouble viewing this email? View in browser
Sam Volkering | 06 Apr 2021
Green Tech Week: bitcoin’s energy controversy In today’s Exponential Investor …Don’t forget your free report The best takedown I’ve read Green crypto
We’re continuing our Green Tech Week with a look at bitcoin today.
More on that shortly.First, I just wanted to remind you that we’ve recently uploaded a new free report to the Exponential Investor site that you can get access to now if you haven’t already.
Just head here now to access your free Green Tech Week report .
Also, make sure to check out tomorrow’s Exponential Investor – we’ve brought in energy investing expert James Allen to write to you about an area of “green tech” that he sees huge potential in.
And on Friday, we’ll be doing a special Green Tech Week podcast where I’ll be speaking with both Kit Winder and James Allen about their work and specialisation in the green energy markets.
Don’t miss it!
Now on to the furore and controversy that has people wanting to tear down bitcoin for all its dirty energy credentials…
Dirty bitcoin or dirty on bitcoin? There’s a growing number of people who claim that bitcoin is an “environmental disaster”.
That bitcoin consumes the energy of small countries and will be the downfall of the human race.
They couldn’t be further from the truth.
But I don’t necessarily blame someone for thinking this way.They’re using pretty poor information to start with in their assumptions.
And we all know that bad data in equals bad data out.
That’s why it’s important to clear a few things up.
For a start, how does bitcoin work?
Well, in confirming and adding blocks to the blockchain, bitcoin has “miners”.
Miners use application-specific integrated circuit (ASIC) machines to solve an algorithm to add (secure) blocks to bitcoin’s blockchain.These ASICs use a fair bit of energy.
It would be like running your PC 24/7 at full capacity – except having a whole warehouse of them.
Having mined bitcoin myself previously with an ASIC, I know the energy cost based on a normal energy grid.It’s a lot.My energy bill spiked (in the summer) as though it was winter.
That was an expensive year.
The thing is, to be economically viable, miners need to run lots of these ASICs to mine enough bitcoin to cover the costs.It can be a profitable exercise.
Nonetheless, it is true there’s a great energy requirement for this.
And as the value of bitcoin goes up and more and more mine in order to maintain profitability and to get more bitcoin, then there is growth in the energy consumption of miners.
However, what most people forget is that bitcoin miners are one of the greenest users of energy there is.
One of the best articles I’ve read, with proof of bitcoin’s mining use of green energy, can be found in an article by Nic Carter, which you can read here .
As he correctly points out a huge chunk of bitcoin mining is done in China.Much of it uses underutilised energy, which is predominately wind/solar and hydroelectric power.
In fact, if you want to really get into the detail, Carter did another piece a bit earlier in March, again outlining the ridiculous nature of the argument that bitcoin is an energy disaster.
I also suggest that you read this other article here to get a real overall view of how it works.
I point you to these articles because they are probably the two best articles I’ve ever read explaining the energy debate in bitcoin.
The other aspect of bitcoin’s great energy debate is also around the fact that in isolation, bitcoin is quite a “green” technology.So people naturally then say, well the whole crypto ecosystem must be “dirty” even if bitcoin is “green”.
Again, that would indicate a gross misunderstanding of how other cryptocurrency networks operate.
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PoW, PoS and DAG For example, because of bitcoin’s proof-of-work (PoW) consensus (how the miners keep bitcoin’s blockchain functioning) it requires this energy consumption.
But others like Tezos, IOTA, Stellar and Cosmos are all blockchains that don’t require PoW, but instead rely on a very green, very non-intensive consensus called proof-of-stake (PoS).
Instead of grinding away with massive hardware installations, the blockchain is secured by the participants who “stake” their holdings within the network.
It is a very innovative way of securing and sustaining a blockchain.It’s also why the other massive crypto project, Ethereum, is in the process of moving to a PoS consensus for its blockchain too.
Then some networks, like IOTA’s “Tangle”, which is a directed acyclic graph (DAG) network, isn’t even a blockchain at all.It has next to no energy requirement or carbon footprint at all.
What we’re seeing is that different crypto networks and blockchains have novel “green” ways of ensuring they can function long into the future.Add to that an awareness that utilising “green” energy is the best, and perhaps the only way forward is in the crypto space.
It means that no, bitcoin doesn’t have an energy problem.
It’s not “dirty” and it’s not going to cause an environmental Armageddon.In fact, compared to the fiat money that circulates the world now, bitcoin and the wider crypto ecosystem is the greenest money and financial system we’ve ever seen.
Regards,
Sam Volkering
Editor, Exponential Investor
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