While bitcoin and a variety of digital currencies have swelled in value, a number of critics have spread fear, uncertainty, and doubt (FUD) in regard to the energy consumption proof-of-work (PoW) cryptocurrencies leverage to produce new units of currency. Just recently the software engineer Stephen Diehl expressed his dissatisfaction over the environmental cost of bitcoin. However, cryptocurrency supporters believe Diehl failed to mention the amount of renewable energy used by a great number of mining facilities, alongside the insurmountable cost to operate todayâ€™s banking system.
Bitcoinâ€™s Waste of Energy Argument Is a Foolâ€™s Errand
The latestÂ hot topicÂ within the cryptocurrency industry is the topic of Bitcoinâ€™s proof-of-work (PoW) energy consumption, and whether or not the consumption is efficient. The conversation was sparked by a number of articles published during the last year, alongside software engineer Stephen Diehlâ€™sÂ recent critiqueÂ of the networkâ€™s power consumption.
Besides the fact that Diehl considers the crypto asset to be â€œa giant smoldering Chernobyl,â€ he also said that â€œbitcoin economics [is] a pyramid-shaped investment scheme backed by the collective delusion that value can [be] created out of nothing by convincing greater fools to buy it after you do.â€
Diehlâ€™s criticism toward Bitcoinâ€™s energy consumption is filled with obvious fallacies, but he also doesnâ€™t realize how Satoshiâ€™s cryptocurrency network is more energy-efficient than most think. Diehl and many others, also fail to recognize the cost to maintain todayâ€™s banking system, which consists of a great number of terawatts dedicated to servers, branches, and automated teller machines.
Bitcoin Electricity Consumption Index Discrepancies
Most of the consumption data stemming from theÂ BTCÂ network is derived from theÂ Cambridge Bitcoin Electricity Consumption Index (CBECI). Interestingly enough analysts and mainstream media reporters also reference theÂ digiconomist.netÂ bitcoin energy consumption index as well. Unfortunately, both CBECI and digiconomist.netâ€™s annualized consumption of terawatt per hour (TWh) data has a very large discrepancy.
The digiconomist.net stats show theÂ BTCÂ network captures 77.78 TWh, while CBECI indicates the network is 111.08 TWh. That is a huge variance (44% difference) when attempting to estimate the data consumption of the crypto assetâ€™s network. Yet, these are the most leveraged sources used by bitcoin naysayers who sayÂ BTCâ€™s electrical consumption is a â€˜wasteâ€™ without any shame.
Further, we donâ€™t even know how accurate the CBECI data is because a team member from the Cambridge Centre for Alternative Finance (CCAF) recentlyÂ explainedÂ to news.Bitcoin.com that the CBECI map is not up-to-date and will be updated in 2021. This has led to numerous reports stating that China captures 65% of the Bitcoin mining hashrate, which may be entirely inaccurate. In July 2020, aÂ hashrate reportÂ written by Bitooda said China was steadily losing its concentration of bitcoin hashpower and the country dropped to 50%.
It is far more likely, that CBECIâ€™s theoretical lower bound estimate for theÂ BTCÂ networkâ€™s energy consumption is more accurate. This theoretical lower bound estimate is around 4.6 gigawatts or 39.3 TWh annualized on January 19, 2021. Moreover, there areÂ countless rebuttalsÂ andÂ data pointsÂ that show people complaining about Bitcoinâ€™s energy consumption are overreacting.
Studies Show Over 75% of Cryptocurrency Miners Leverage Renewable Energy Sources
For instance, the anti-bitcoin environmentalists do not weigh the fact that much of the PoW mining industry uses renewable energy sources like hydropower, wind, solar, and geothermal energy. There are a number of reports that show over 70% of crypto miners use a mix of renewable energy to power facilities across the world. There is also abundantÂ effortsÂ dedicated toÂ energy cogenerationÂ as well.
The 2020 thirdÂ Global Cryptoasset Benchmarking StudyÂ by the University of Cambridge also indicates that 76% of digital currency miners use renewable power sources. Backing up this data is a report from Deutsche Bank Research, the Chinese National Energy Agency, Morgan Stanley, and Coinshares. The report from these four organizationsÂ highlightsÂ that â€œ78% of Bitcoinâ€™s electricity usage is from renewables.â€
There are countless reminders and real-world examples of bitcoin miners using a far more efficient means of electric use than all of the financial systems on the planet. Two years ago, Bill Tai, an investor and board director of Bitfury, detailed that Satoshi is smiling because of the green energy use bitcoin miners use today.
â€œItâ€™s been clear to me for years now, that mining of Bitcoin and other â€˜proof-of-workâ€™ based cryptocurrencies are driving positive change in the underlying infrastructure of energy production â€” at an accelerating rate,â€ TaiÂ explainedÂ at the time. The investor is also the chairman of Hut8â€™s board and he said the company has a â€œpolicy to â€˜be greenâ€™ as we build.â€ Tai detailed that the most efficient sources of electrical power are not fossil fuel-based in order to scale, but theÂ marginal costsÂ of water, solar, and wind-based energy, Tai stressed.
Delivery Trucks, Servers, Branches, ATMs, and the Insurmountable Cost of the Modern Banking System
Then ultimately thereâ€™s the cost of the modern banking system, something that bitcoin naysayers never account for when they criticize the cryptoâ€™s energy consumption. There is a great number of articles and statistics that indicate the currentÂ banking systemÂ usesÂ well over 140 TWh a year. In oneÂ study, Katrina Kelly-Pitou, a researcher who â€œstudies clean energy technology, specifically the transition toward decarbonized energy systemsâ€ says the energy conversation surrounding bitcoin is â€œoversimplified.â€
Furthermore, the researcher stressed that â€œBitcoinâ€™s energy consumption isnâ€™t as bad as you think.â€ Then the Hacker Noon contributor, Carlos Domingo, called the comparison of bitcoinâ€™s electrical usage to Visaâ€™s a complete â€œfallacy.â€
Stop complaining about Bitcoin and start complaining about Xmas lights.
Despite the Fact That â€˜the Cost of Bitcoin Mining Has Never Really Increased,â€™ Cancel Culture Pundits Want to â€˜Criminalize Bitcoinâ€™
This past October, the researchers Yo-Der Song and Tomaso Aste, published a report which highlights that the cost of bitcoin mining â€œhas never really increased.â€ In theÂ paper,Â Aste and Song detail that the Bitcoin network consumes a lot of energy, but the researchers still manage to estimate the â€œlower bound for the global mining energy cost for a period of 10 years from 2010 to 2020.â€
â€œDespite a 10-billion-fold increase in hashing activity and a 10-million-fold increase in total energy consumption, we find the cost relative to the volume of transactions has not increased nor decreased since 2010,â€ the paper notes.
The researchers add:
This is consistent with the perspective that, in order to keep the Blockchain system secure from double-spending attacks, the proof of work must cost a sizable fraction of the value that can be transferred through the network. We estimate that in the Bitcoin network this fraction is of the order of 1%.
It is clear that the bitcoin mining industry is not as wasteful as the current banking system filled with not only servers, ATMs, and branches, but it is also free of rampant fraud and manipulation as well. Despite this, members of todayâ€™s woke crowd and cancel culture want to â€œcriminalize bitcoin,â€ because it is allegedly â€œgrotesquely damaging to the environment.â€ As usual, these critics are filled with emotional opinions and weak virtue signals, without a whole lot of facts to back them up.