Some say the energy consumption used to mine bitcoin surpasses that of a small country in Europe, others say this statistic could be incredibly misleading.
Like so many of the other great luxuries in life: SUVs, air travel, having children… Bitcoin has been under fire after being described as unsustainable by some major media outlets of late. It has got masses of people who strongly believe that bitcoin is the way forward for finance chomping for a clapback, hoping that fully decentralized currency and blockchain ledger technologies can improve the global fiscal situation, and improve the energy needs of the financial world at the same time.
Recently, bitcoin has shown itself to be a boon to investors, as the currency seems to be weathering the current economic storm far better than traditional markets. Finally creating a space for the average person to gain some cash through speculation. Alongside trading platforms that can be accessed from pretty much anywhere on planet earth, like Bitvavo for example, this borderless currency system is needed now more than ever. It’s not much of a leap to be able to see why so many people have avoided this incredibly inconvenient truth for so long.
But, the sad fact of the matter is- bitcoin uses more energy to function than that of the Czech Republic. While this statistic is sound, it does little to show the entire picture. Especially when one takes into consideration the energy demands of just one fiat system, let alone the thousands that must exist to create a network capable of global trade.
Where is All This Energy Going?
To understand why these statistics aren’t necessarily wrong- but perhaps misleading, you have to understand why bitcoin is energy-intensive. It all boils down to how bitcoin is transacted and stored in the public ledger. In order for any bitcoin transaction to be properly logged and verified within the blockchain (the public ledger system used by the bitcoin network), each transaction must be “mined”.
Mining involves setting up any computer system to essentially sit there, unmanned, and process data- these are called nodes. The computer itself then sets upon solving difficult mathematical algorithms. Depending on what type of computing power you have, this can take days, if not weeks to achieve.
To circumvent this massive time lag between a transaction occurring and it being verified, the processing chips that computers run have been continually upgraded. First, these tasks were solved by simple CPUs, then given to burlier GPUs, and finally, the community has created ASICs. These application-specific integrated circuits are designed specifically to solve complex bitcoin algorithms.
If these things sound expensive to you as a layperson- that’s because they are, really expensive. So with the rollout of ASICs, fewer people were able to become miners anyway- putting greater demand on far fewer nodes. So, even if the ASICs reduced the energy needed to solve these problems, they didn’t reduce it for long.
As the cryptography gets more difficult to solve, which happens roughly every four years, the energy demands will continue to climb slightly. This means that some have set bitcoin’s doomsday clock to strike twelve in 2030, despite the introduction of better mining software. While others prefer to take a look at alternative mining processes that do exist and can be implemented, the fiat and traditional currency demands have no exit ramp.
It’s All Relative
The staunch defenders of bitcoin aren’t asking how to solve this particular energy crisis- but instead asking for a frame of reference. Many are asking what exactly it is that bitcoins’ “high” carbon output is being compared to.
Stand-alone- the facts and figures that are being rolled out about how much energy it takes to mine bitcoin are indeed staggering- that is until you compare them to the mass amount of energy used by broad financial systems and fiat security measures. Where any one system is largely dependent on the functionality of similar systems across the globe, meaning that while just one fiat system may not be pumping out loads of carbon on its own- each associated system and business required to secure and run the original structure amounts to something much more damaging than bitcoin could ever be.
Such as securing the American dollar, the carbon footprint of credit card mega giants like American Express or MasterCard, or even the carbon footprint of a single bank. Comparatively, bitcoin really isn’t consuming that much more, and in some cases, it consumes far less.
Imagine the American fiat system. Multiple institutions must run in order to supply, secure, collate, and transact just the American dollar. This is just at a federal level. Tacked on top of that superficial layer, there are hundreds of thousands of associated banking branches- each with their own energy needs. Credit card companies, mortgage lenders… the entire system is interdependent on a number of other entities that all require large amounts of energy and have their own associated carbon outputs.
So, does bitcoin protocol suck a massive amount of power? Undoubtedly. Are there people dedicated to fixing this issue? Of course. Which may be what sets bitcoin’s sustainability apart from fiat. As the bitcoin protocol is at least attempting to reduce its energy costs. Whereas with fiat, they just seem to be content pointing the finger at crypto.
What Can Bitcoin Do About It?
There have been many proposals on what should be done to address the large-ish amount of energy that’s being used to maintain the bitcoin network. Specifically, as headlines and governments shine a too bright light on the system as it is. These proposals range from the practical to the fantastical.
Efforts seemed to be pretty firmly centered on bitcoin. Why? Because a number of other cryptocurrencies have figured out how to log their transactions without the use of mining. In fact, some of bitcoin’s top competitors, like Ethereum and Ripple use other types of validation. Showing that amendments can be made and better, more efficient systems do exist. Moreover- many of these systems are forks of bitcoin to begin with. So imagining soft forks in Bitcoins protocol to address any issues becomes much easier.
Some have suggested moving these mining nodes into spaces that need to be heated for the winter- keeping a space warm while serving to cool off the node at the same time- reducing its energy consumption and stamping out the need for indoor heating. Viable? Not really, but full points for creativity.
The bitcoin network itself has put out a “lightning network”. While this was originally introduced solely to speed up transaction rates, they found that far less energy was being used. This is because the lightning network essentially bundles all of the transactions, and only logs them once the payment channel needs to be closed. Similar to settling a bar tab. Preventing the need for each transaction to be mined separately.
So while the spotlight does indeed fall on bitcoin, it’s always wise to discover where that light is actually coming from- and how much energy it’s using.