It coincided with the launch of a lobbying campaign by Greenpeace, which directly linked bitcoin’s proof-of-work mining system to climate change.
For anyone not intimately familiar with the design and purpose of the bitcoin network, it’s becoming increasingly difficult to support the cryptocurrency without muzzling your environmental conscience.
What the newspaper should have told its readers is the following: the energy required to keep bitcoin running is so vast that – when measured against the currently low levels of user engagement – individual transactions appear to reflect a high capital cost.
But if the airline didn’t run the return leg, its plane would be stranded in New York and it couldn’t carry any of the Boxing Day passengers.
And bitcoin – which is a peer-to-peer monetary network designed to protect the interests of billions of global citizens – cannot be judged after a few million prescient individuals cotton onto its benefits.
The best approach to take – but the one that most people seem unwilling to do – is to invest your time in better understanding novel concepts, and in humbly contemplating how they may, hypothetically, impact on your world of tomorrow.
With that in mind, let’s begin with a refresher on how bitcoin functions as a monetary network and why it’s deliberately been designed in this way.
That means it relies not on a central authority like a bank to move money around, but on multiple identical copies of one ledger – distributed all over the world – which are updated about every 10 minutes with a new “block” of data.
Mere mortals like you and I can safely assume that these algorithmic functions are mathematically pure, and that they form a sound basis for distributed ledgers.
None of which, you’ll notice, answers the question in my subheading: “Why does bitcoin use so much electricity?”.
If it were easy to mine and validate fraudulent blocks, then it would be easy for hackers to launch a “51% attack” – a scenario in which more than half of the network is controlled by nefarious actors.
That’s why it matters who the network is, and that’s why only a costly and arduous process like proof-of-work mining can ensure that the wide interests of society trump the narrow interests of thieves and aggressors.
Estimates of the network’s total energy consumption vary – due in large part to the anonymous nature of mining – but the most rigorous analysis by the University of Cambridge currently pegs it at about 138 terawatt-hours per year.
The “thing” being costed is the very ability of the State and its people to function, and that’s got to be worth a few emissions.
And yet bitcoin’s potential, if fulfilled, could not be more worthy of attention: the minting of a new form of money that society – not government – imbues with value and fungibility; one that’s more secure than any physical asset that’s ever existed; that’s easier to transact between people and across borders than any other medium of exchange; and that has such a puritanically classical approach to monetary policy that it banishes the threat of inflation by fixing supply for all eternity.
It’s a lot to take in, especially considering that none of it’s actually happened yet.
But the point is universal: if bitcoin is a force for good in the world – if it moves humanity away from an epoch in which governments control and manipulate the money supply; towards an epoch in which money is a personal, incorruptible asset – then the justifiable cost of running the network is immeasurably higher than the environmentalists suggest.
Attempts have been made to quantify bitcoin’s utility – for example, by comparing its market cap – but none is able to capture its abstract benefits or future potential.
Those who defend bitcoin mining solely on the basis of renewable-energy consumption gloss over the fact that little is known about the make-up of fuel sources powering the network.
The researchers said they broke down their data into more detailed channels that would give a more accurate picture – the use of company offices and vehicles; the use of leased assets; commuting and business traveling by employees, and so on – but no specifics appeared in their report.
Combine these efficiency gains with the societal advantages of financial sovereignty, and you can see why some people argue that the environmental cost of bitcoin mining is justified.
If only there were a way to build those renewable plants in those developing countries; to serve communities to the maximum extent that infrastructure and local demand permits; and to convert all the surplus energy into a guaranteed financial return, 24 hours a day, 365 days a year.
In the developed world, gas flaring at oil fields is tolerated as a necessary evil due to the logistical and commercial impracticality of transporting the fossil fuel for processing.
This unique ability to harness stranded and wasted energy adds weight to the argument that bitcoin may indeed – for all its emissions, and as absurd as it sounds – be a green technology.
Bitcoin is often criticized for the relatively small number of transactions that its blockchain is able to process by design: the network’s primary layer currently handles about 4.6 transactions per second, versus 1,700 by payment processor Visa.
Critics claim that this inherent limitation is the Achilles’ heel of bitcoin – guaranteeing that the network will never be scalable; transactions will never be truly efficient; and the environmental costs will always be disproportionate.
Bitcoin is more secure, more egalitarian and more efficient than any other form of money; it incentivizes renewable-energy harvesting and optimizes non-renewable plants; and it’s already the most scalable payment system ever developed.