The endless debate about Bitcoin Energy
The endless debate about Bitcoin Energy.
The mainstream media often assumes that Bitcoin is a Ponzi scheme fueling the criminal underworld, creating monetary instability and creating zero overall social value.
Among the numerous outlandish allegations leveled against Bitcoin, the energy consumption of the network’s computing power is the most prominent, with accusations that it is accelerating climate change and destroying the planet.
In open letter From more than 70 environmental agencies, advisory organizations, and business associations to the US Congress, the author of the letter urged US policymakers to “take action to reduce the crypto market’s impact on climate change” and “consider the environmental impact of proof-of.” -Work crypto mining.”
The letter cites research from Cambridge University, which estimates the average energy consumption of bitcoin mining at 129 terawatt hours/year, significantly more than the electricity consumption of Argentina or Norway.
Bitcoin Energy Consumption Comparison
At first glance, the Bitcoin network seems to be consuming too much energy, but the statistics are not put in the right context.
For example, if you compare bitcoin’s energy consumption to other dominant currencies like fiat and gold, bitcoin’s power consumption is much lower. Galaxy Digital Report 2021 shows The gold industry consumes an average of 240 terawatt hours/year, while the global financial banking system consumes an estimated 238.92 terawatt hours/year. As a result, they use 86% more energy than Bitcoin.
Compare the energy consumption of bitcoin, gold and the banking system | Source: Galaxy Digital
Also, Bitcoin not only uses less energy, but most of the network’s energy comes from clean energy sources and renewable technologies such as hydroelectric power, solar power, and wind. According to Bitcoin Mining Council 2021 research, Bitcoin mining has a relatively low carbon footprint with the highest sustainable mixed energy ratio of 56%, surpassing countries with high renewable energy capacity in the world such as China, the US, Brazil or Germany.
Sustainable Energy Mixing Ratio | Source: Bitcoin Mining Council
Bitcoin helps limit energy wastage
Environmentalists concerned about the impact of cryptocurrencies on the ecosystem might also be interested in bitcoin mining, which can actually help make the energy market more competitive.
More and more bitcoin miners are focusing on an oversupply of demanded energy sources where that energy would be wasted if not used. This is due to a common problem in the distribution of supplies in energy markets, where energy remains unused due to the high cost of transporting it or storing it elsewhere.
Gas flares are one of the typical examples where excess gas from oil production is “burned” into the atmosphere. The World Bank estimates that around 142 billion cubic meters of gas are burned annually, enough to power the entire region of sub-Saharan Africa. Solar and wind technologies also regularly remove excess energy (a phenomenon known as renewable energy clipping) due to the high cost of storing energy in batteries.
Bitcoin mining essentially creates digital goods (confirming the network’s consensus), it is a portable activity as opposed to the energy production that most people consume every day, which should be produced near the point of energy consumption. Flexible operation that can be quickly paused and resumed to meet supply, creating constant energy demand. This has led to operators moving to sites with surplus energy sources or renewable energy grids and using this surplus energy for consumption.
An article published in 2021 titled Bitcoin Clean Energy Initiative argues that Bitcoin mining acts as a “final energy buyer” in the renewable energy market, helping projects to make solar and wind energy more economically sustainable and “supply surplus energy the network for peak periods when demand increases.
Bitcoin mining also helps stimulate investment in the solar system and helps the renewable energy industry contribute more to the network without changing electricity costs.
Bitcoin Mining and Renewable Energy Technology (BCEI)
Bitcoin’s carbon emissions are lower than those of gold and the financial system
The CO2 emissions from bitcoin mining are actually lower than those of gold and the financial system. As reported by Galaxy Digital, Bitcoin mining emits 22 million tons less CO2 compared to 58 million tons for gold mining and 396.7 million tons for the global banking system.
Note that this estimate only accounts for surface-level energy use to keep the banking system running and does not account for the trillions of dollars wasted by central bank monetary policy. Centralization is not good for the economy and forces people to resort to other energy-wasting activities such as converting capital into different asset classes.
If all of the above doesn’t shake the minds of crypto environmentalists who “don’t like crypto very much,” they might at least be able to abandon their regulatory ambitions until the network moves from proof-of-work to proof-of-stake -Model that will reduce blockchain energy consumption by 99.5%.
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