Blogs & Articles: 3 Reasons Why We Shouldn’t Worry About The Energy Consumption Of Bitcoin (Yet) 🔗 3 years ago

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On February 8, 2021, Elon Musk and Tesla announced a $1.5 billion purchase of bitcoin as a diversification within its corporate treasury, and the crowd went absolutely wild. Bitcoin advocates, including myself, touted the move as an evolution in bitcoin adoption and a preview of a future in which every major global company must have an official and stated cryptocurrency strategy. On that day, the price of bitcoin rose $7,000 to a record $46,000. The company also announced that it would start using bitcoin transactionally, and there was no talk on the energy consumption of bitcoin.

Only three months later, Tesla released a statement saying that it was ceasing bitcoin-denominated transactions and directly cited concerns about the environmental impact of the bitcoin network. The irony of Elon Musk/Tesla’s reversal made me laugh, but the media onslaught and violent, albeit typical, price decline rendered a lot of the newer bitcoin crowd confused and concerned. The questions typically sounded like this: is bitcoin really bad for the environment, and if Tesla wants to look at other cryptocurrency networks with less energy consumption, is bitcoin’s popularity going to fade? Below are my 3 main reasons why we shouldn’t worry about the energy consumption of bitcoin.

1. Let’s start with Tesla’s sudden environmental fears.

The world consumes a lot of energy. We consume so much energy that an enormous portion of all geopolitical efforts are currently focused on reducing pollution caused by burning fossil fuels. Countries, militaries, and industries all consume energy. Singling out the energy consumption of the bitcoin network as harmful to the environment is like blaming a buzzing bumblebee for the cacophony of noise coming from a bustling New Delhi train station.

But we have to remember that we’re also talking in the context of a world where people forgo straws to save the ocean but eat sushi sourced from commercial fishing, a known destroyer of ecosystems. The bitcoin network is but a blip on the radar of global energy consumption, and the energy consumed by it is crucially valued by its participants.

2. There is a larger conversation about human empowerment.

Why is it worth protecting our right to run this revolutionary network? Bitcoin allows anybody to participate in a global financial network, and to claim bitcoin has no use is a shockingly ignorant global view considering the economically ravaged populations of Venezuela and Zimbabwe after respective currency collapses over the past decade. If you believe that bitcoin is a waste of energy, you believe that all government currencies around the world will provide a stable unit of account and store of value indefinitely.

The computational energy, or hashpower, devoured by bitcoin miners around the world help secure the network from centralization. A server farm the size of Britain would have a difficult time exerting undue influence over the bitcoin network precisely because so much decentralized hashpower is dedicated to it. The hashpower protects the network from governments themselves, and it gives even the most financially deprived a chance to earn and secure globally recognized digital property.

3. The moral argument doesn’t even consider the factual one when diagnosing bitcoin energy consumption.

As Square has recently published, bitcoin has the potential to drive renewable energy development, making the network a net benefit to the environment. Bitcoin miners are also capturing fugitive emissions, which are natural gas flares that would otherwise be contributing to our collective carbon footprint. Tesla’s statement isn’t explicitly baseless — bitcoin does consume a lot of energy — but it is a wildly unidimensional assessment of the situation.

Bitcoin derives its value because of its energy consumption. Bitcoin wields market value because it cannot be co-opted by any one entity. And bitcoin is considered the reserve asset in the digital realm because it is an incorruptible ledger of truth.

What are your thoughts? Comment below!

-Nik Bhatia, author of Layered Money: From Gold and Dollars to Bitcoin and Central Bank Digital Currencies (now available on Audible)

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