bitcoin is wasting Energy

Bitcoin is wasteful. It uses as much energy as a small country.

Anything using that much energy is contributing to climate change and can’t be good for the world.

If your assertion is that Bitcoin is useless, therefore its use of energy is not worthwhile, you are not being reasonable and your first world privilege is showing. Please watch this video and read this thread by the Human Rights Foundation’s CSO, Alex Gladstein.

Proof of Work is Efficient

Paraphrased from Dan Held’s article.

Bitcoin’s Proof of Work (PoW) was originally invented as a measure against email spam. Only later did Satoshi adapt it to be used in digital cash. What PoW mining does under the hood, is use dedicated machines (ASICs) to convert electricity into Bitcoins (via block reward). The machine repeatedly performs hash operations (guesses/votes) until it solves a cryptographic puzzle and receives Bitcoins (block reward). The solution to the puzzle proves that the miner spent energy in the form of ASICs and electricity, a proof that a miner put in work. PoW is proof of burn, or the validation that energy was burnt. It’s the most simplistic and fair way for the physical world to validate something in the digital world. PoW is about physics, not code. 

The Bitcoin ledger can only be immutable if and only if it is costly to produce.The fact that Proof of Work (PoW) is “costly” is a feature, not a bug. Until very recently, securing something meant building a thick physical wall around whatever is deemed valuable. Bitcoin’s public ledger is secured by its collective hashing power: the sum of all energy expended to build the wall. And through its transparent costly design, it would take an equivalent amount of energy to tear it down (unforgeable costliness).

The energy spent is per block, which can have a varying number of transactions. More transactions does not mean more energy. The economic density of a Bitcoin transaction is always increasing(Batching, Segwit, Lightning, etc). As bitcoin becomes more of a settlement network, each unit of energy is securing exponentially more and more economic value.

The average cost per transaction isn’t an adequate metric for measuring the efficiency of Bitcoin’s PoW, it should be defined in terms of the security of an economic history. 

Everything requires energy (first law of thermodynamics). Claiming that one usage of energy is more or less wasteful than another is completely subjective since all users have paid market rate to utilize that electricity. In thermodynamics, the universe is the ultimate closed system. Bitcoin’s utilization of the excess electrical capacity consumes magnitudes less electricity than existing fiat systems which not only have power requirements banking infrastructure, but the military and political machina. The energy tradeoff for the utilization of that electricity to secure the financial system backbone is a “net positive” outcome.

Check out Dan Held’s stuff here. https://www.danheld.com/

Wasted Energy

Paraphrased from Nic Carter’s Coindesk Article

The first thing to understand is that energy is not globally fungible. Electricity decays as it leaves its point of origin; it’s expensive to transport. Globally, about 8 percent of electricity is lost in transit. Even high-voltage transmission lines suffer “line losses,” making it impractical to transport electricity over very long distances. This is why we talk about an energy grid — you have to produce it virtually everywhere, especially near to population centers.

When you consider Bitcoin’s energy intake, interesting patterns emerge. New data from the Cambridge Center for Alternative Finance has confirmed what we effectively already knew: China is the epicenter of Bitcoin mining. Sichuan, second only in the hashpower rankings to Xinjiang, is a province characterized by a massive overbuild of hydroelectric power in the last decade. Sichuan’s installed hydro capacity is double what its power grid can support, leading to lots of “curtailment” (or waste). It’s an open secret that this otherwise-wasted energy has been put to use mining Bitcoin. If your local energy cost is effectively zero but you cannot sell your energy anywhere, the existence of a global buyer for energy is a godsend.

My favorite way to think about it is as follows. Imagine a topographic map of the world, but with local electricity costs as the variable determining the peaks and troughs. Adding Bitcoin to the mix is like pouring a glass of water over the 3D map – it settles in the troughs, smoothing them out. As Bitcoin is a global buyer of energy at a fixed price, it makes sense for miners with very cheap energy to sell some to the protocol. This is why so many oil miners (whose business results in the production of lots of waste methane) have developed an enthusiasm for mining Bitcoin. From a climate perspective, this is actually a net positive. Bitcoin thrives on the margins, where energy is lost or curtailed.

Another common mistake energy detractors make is to naively extrapolate Bitcoin’s energy consumption to the equivalent CO2 emissions. What matters is the type of energy source being used to generate electricity, as they are not homogenous from a carbon footprint perspective. Even though lots of Bitcoin is mined in China, it’s not appropriate to map China’s generic CO2 footprint to Bitcoin mining. As discussed, Bitcoin seeks out otherwise-curtailed energy, like hydropower in Sichuan, which is relatively green. Any reliable estimate must take this into account.

Now, despite all the caveats listed above, it’s undeniable that Bitcoin not only consumes a lot of energy but produces externalities in the form of CO2 emissions. This is not under debate. What Bitcoiners are often confronted about is whether Bitcoin has a legitimate claim on any of society’s resources. This question relies on a kind of utilitarian logic about which industries should be entitled to consume energy. In practice, no one actually reasons like this. The Bitcoin-energy supplicants are mum when it comes to the energy used to illuminate Christmas lights, to power the data centers behind Netflix or to distribute untold millions of single-serve meal kits. It’s clear that because Bitcoin’s footprint is so easy to quantify — and an object of revulsion among the chattering classes — it is singled out for special treatment.

The truth is that blockspace is a service which is paid for, and that’s where its resource cost is derived. Something duly purchased cannot, by definition, be a waste. Its buyer derives benefit from its existence, regardless of anyone else’s subjective opinion of the merit of the transaction. These same arguments have been made countless times about perceived “costs” of the gold standard, and rebutted on similar grounds before. Fundamentally, millions of individuals the world over still value physical, bank-independent savings, so it still gets pulled out of the ground with regularity. As long as people value Bitcoin, so, too, will the block-space auction continue in perpetuity. Read more of Nic’s stuff at https://niccarter.info/

Bitcoin has a Positive Impact on the Environment

Paraphrased from Daniel Wingen’s Medium Article

A recent study conducted by Coinshares concludes that renewable energy makes up 78% of total Bitcoin mining energy use, while another recent study from the Cambridge Centre for Alternative Finance concludes a conservative overall ~28% use of renewable energy. The real number may be somewhere in the middle.

Energy from solar, water, wind, and terrestrial heat is freely and immediately available. However, society is just beginning to further explore the harvesting of green energy. Currently the incentives to improve and optimize free energy harvesting methods are not driven by the markets but political pressure or government subsidies. In addition, harvesting free and green energy is based on natural circumstances such as location and time. Utilizing these renewable energy resources and optimizing the methods and locations of harvesting and converting it to usable electricity is quite interesting for bitcoin mining.

The location of the Bitcoin mining hardware is not relevant to contributing to and profiting from the network. Mining hardware can literally be placed anywhere in the world. Due to this flexibility in location, energy production facilities are built around green energy sources that would have otherwise been left untapped. These mining businesses constantly need to decrease their overall costs per hash to stay competitive and survive. Besides investing in the most efficient chips, one could only invest in the most advanced and efficient energy harvesting methods. As green energy is available for free, the harvesting process itself is the only cost factor which needs to be optimized in order to build out the competitive advantage.

Facilities with an oversupply may put their excess energy into bitcoin mining as is the case for hydropower plants in Canada. In China, excess energy is used for bitcoin mining with wind and solar plants using up to 30% of the oversupply which would otherwise be refused by the grid, grounded, and wasted.

Upstreamdata provides facilities to turn stranded natural gas sources such as methane into hashrate. ExaMesh tackles the problem of terminated green energy subsidy through linking windmills with ASIC miners to uphold their profitability. For example, due to canceled subsidies, windmills in Germany will not be profitable after 2020. But with ExaMesh, windmills merely need to use 20% of their energy to mine bitcoin and inject the rest into the energy grid to be profitable.

Bitcoin incentivizes efficient energy production and therefore sets the correct incentives for the energy system as a whole. Bitcoin has the features to be a qualified, stateless, world currency since it is censorship-resistant, permissionless, and trustless and since it provides instant settlement. The network is open and censorship-resistant through proof of work. Essentially, Bitcoin is a common good from the people for the people. The correct incentivization inherent in the Bitcoin protocol and the importance of Bitcoin as an alternative to the financial system justify the massive use of energy for mining and progresses the development of renewable resources.

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Mining Info

How Bitcoin Mining Works

The Anatomy of Proof-of-Work