The Environmental Cost of Bitcoin
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According to the Cambridge Bitcoin Electricity Consumption Index (https://cbeci.org/), it actually wastes about 115 TWh annually now. They even have a comparison page where you can see that the network sits between United Arab Emirates (113 TWh) and Argentina (121 TWh) in annual energy use.
Meanwhile space exploration and life extension struggle to attract funding.
Humans are merely clever, not intelligent. If we were actually intelligent we would understand the systems in which we embed ourselves instead of being at the mercy of them.
You could probably have founded and fully endowed dozens of top tier universities for what we have wasted on this.
Another good thing to look at for perspective: how many startups could we have seeded and venture funded for the money literally burned by cryptocurrency?
Cancer. Pure cancer.
Also what do you mean by "exchanges having less and less bitcoin" and what are you basing that on? Most people unfortunately don't transfer what they have out of exchanges in the first place, even less so with transaction costs being enormous.
https://ycharts.com/indicators/bitcoin_average_transaction_f...
https://bitinfocharts.com/comparison/bitcoin-transactionfees...
I also remember Satoshi saying in the white paper that people in temperate climates might would be the miners because the excess heat could be used to heat homes in the winter. Again I don't see the sort of environmental responsibility currently.
When I saw such comparisons, I always countered with two points:
- One, energy expenditure on Bitcoin network grows superlinearly;
- Two, all the expenditure for trucks, vaults, presses, etc. and management for it is considered upkeep. It takes money from the pockets of people who would prefer to keep it. So these costs are ruthlessly optimized down to minimum. If printing or transporting bills could be made free, financial institutions would jump at it. Meanwhile, in Bitcoin, burning energy is a core part of securing the network, and it's being periodically adjusted towards more waste. If mining could be made free, the network would collapse.
These points paint a quite different trajectory over time for Bitcoin's energy use vs. fiat energy use. And it seems to pan out.
fixed that for ya.
The good thing about heating your home in the winter with excess thermal energy caused by cryptomining is that in summer you can either stuff all that heat into bags and save it for winter, sell it in town to people who have a sauna at home, or send it to the opposite hemisphere where people are freezing. /s
- put carbon taxes on BTC/fiat exchanges
- outlaw mining
- outlaw BTC transactions
- put economic pressure on other countries to do the same
Basically, there is no benefit to the world that cannot be done with far more energy-efficient means, e.g centralized currency or proof-of-stake cryptocurrencies. Proof of work needs to go, sooner rather than later.
If not, then you could say that the energy consumed up til now by proof-of-work systems was essential to the development of proof-of-stake systems.
I think that OP is strawmanning Bitcoin as it exists today into being the end goal of all cryptocurrency technology when really it's just the very first stepping stone.
And no, I'm not strawmanning to get rid of all cryptocurrencies. I'm naming a concrete problem with a part of them (the older, legacy, proof-of-work ones) that needs to be corrected by changing to better ones. That your investments might suffer is tragic of course. But the same goes for all the coal miners...
And to be clear, I was referring to OP the author of the twitter thread.
Let's start with the bad things first. Then the others. Then the others. And then, finally, we can talk about Bitcoin.
</rant>
Bitcoin is the equivalent of heating your house with the body heat of cows. Yes, its possible, yes, it works, yes, it used to be done this way. But it isn't really efficient and while a few cow-merchants and fleas might object, the world is better now.
Sure, we used to do that, before we learned how to write. But holy hell does it not scale.
Almost the best solution that preserves bitcoin, which is: put a tax on BTC mining.
The Bitcoin consensus rules rely on miners proving their faith in Bitcoin up to the amount of resources they are prepared to (provably) burn. Since this is about 'wasting' resources, having it taxed 99% globally would let the faith proof stay intact while the environmental cost would go down by 100x. You do can 'burn' resources by giving it to your local government. And it would actually benefit the local population.
Caveat: it has to be global, and at about the same rate everywhere. Can it happen without a world government? I don't know. But governments could start to trace transaction compositions up to a distribution over block rewards; and back-collect a tax on them accordingly. That is if they can control transactions; but governments do have a fair amount of leverage over the average joe's daily activity.
But all this presupposes that Bitcoin has gone mainstream and is used in the daily life, and we're definitely not quite there yet.
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On another note, it is a bit sad the article does not mention halvings, which are quite relevant to that topic.
Excerpt:
>A Pigovian tax (also spelled Pigouvian tax) is a tax on any market activity that generates negative externalities (costs not included in the market price). The tax is intended to correct an undesirable or inefficient market outcome (a market failure), and does so by being set equal to the external marginal cost of the negative externalities.
If that electricity is coming from fossil energy, then that tax is already paid. If you are mining in a country that generates its energy with solar power, doesn't the argument of "bitcoin bad" become shaky?
The premise of the OP is that bitcoin is not worth the cost. I tend to agree, though I can understand the appeal of decentralized currency.
https://www.coindesk.com/microscope-true-costs-gold-producti...
Except Bitcoin also creates electronic waste, including gold, and, I would argue, is not at the scale that gold is at, as an influencing factor on the economy.
To my mind "Bitcoin is a problem" is a reductionist take on the larger environmental issue of reducing emissions, and it shortcuts the larger philosophical issue of whether and how we decide whether some particular use of energy is wrong or right
Perhaps a solution would be to make electricity for bitcoin mining alone more expensive, or by the same token, mandate subsidies for "good" uses, like food and medical production. Or would doing this cause unintended consequences worse than the original "problem" of Bitcoin?
But to my mind Bitcoin being a "waste" or bad is not yet established just by citing its admittedly massive scale of energy use
That sounds like a lot, but it's about $10 worth of electricity for the miners. Another comparison might be that that's about how much electricity it takes to smelt 4kg of aluminum. I don't think it's meaningful to think in terms of "waste" wrt energy consumption any more than gold mining is "waste". Most of the energy generating capacity would not have been turned on if it wasn't going to be used for mining bitcoin.
The only useful framing is in terms of externalities, but it turns out the cheapest forms of energy generation (underutilised hydro and solar in china) tend to be zero carbon. Using energy isn't bad, emitting carbon is bad.
Mining for Bitcoin produces something that can be sold to speculators or be used to pay for drugs and assassinations.
And most of that mining (~65%) is in China where 65% of the electricity production is with coal.
You are forgetting (among many) about the impacts of a decentralised currency for the billions of people without access to bank accounts or a stable currency.
What do you do with unused hydro output? You can waste it or you can power bitcoin. This could be arbitrary big numbers in terms of KWh, but the opportunity cost and carbon footprint would be zero.
Since bitcoin mining is so perfectly competitive, it will be done where the cost of energy is lowest, which is zero for the most places - where energy would be otherwise wasted. And since other consumers pay considerably more than zero, they'd get oil/gas/coal delivered to them instead of wasting them on bitcoin miners.
Global average 1KWh = USD ~$0.14
621KWh * $0.14KWh = ~$85
But for Ethereum transitioning to Eth 2.0, can't that be debatable? Because ETH 2.0, uses a proof of stake, rather than roof of work?
Majority of bitcoin is mined in containers. Civilians do not have access to megawatt power supplies. Civialns also can't import such containers. Electricity may be cheaper but graphic cards and ASICs certainly are not.
TDLR; people don't have access to mining equipment or power source required. Rulers do.
I think we should consider the fact that many of the biggest miners might have access to unreleased mining hardware which performs substantially better in terms of $/watt.
If they did, they would make massive profits. If they sold their more efficient mining hardware to the general public, the lost profits would far outweigh the money earned by selling more efficient mining hardware.
Or do you mean like an educational tool helping teach how/why/what is bitcoin/blockchain?
The global market for adding bitcoin blocks is as competitive as it is possible to get. No barriers to entry, no one even has to know who or where you are. As such only miners who can secure the cheapest energy survive.
Excess hydro capacity in China during rainy season; capturing flared gas from shale oil fields in the US; geothermal in Iceland; any source of stranded or wasted energy.. bitcoin mining will soak it up.
Bitcoin mining using fossil fuels is simply not cost competitive.
This "#hashes => #GWh => #tonnes CO2", is broken logic full of unsubstantiated assumptions made by bitcoin haters.
https://www.bloomberg.com/news/articles/2019-12-06/why-bitco...
Rather than venting greenhouse gases produced from the oil and gas mining process, they use it to mine Bitcoin. Sure this results in some CO2, but that's a lot better than venting straight methane.
Excess hydro capacity can be used for electrolysis to hydrogen, hydrogen can also be produced from flared gas. Which can then be used to produce low-carbon-emission steel with hydrogen as a reduction agent.
Bitcoin mining makes all that more expensive, less likely and risky, because setting up a few miners is quick and easy. Running a steel mill or electrolysis plant is expensive and longterm. Too risky if bitcoin miners might buy all the cheap intermittent power you planned with.
Your argument boils down to: why aren't people doing this uneconomically viable thing that I think is better than this other economically viable thing.
The above dynamics could more than offset Bitcoin's carbon footprint. But even if it doesn't, humans are driven by self-interest and every single individual on this planet has the financial incentive not to be left behind. You basically just have no option but to invest in bitcoin. And the longer it takes you to figure this out, the more costly it will be for you.
You could've earned +10% ROI in 2020 by holding AUD instead of USD. Every currency is backed by thin air, including Bitcoin. The average lifespan of govt-issued currency is ~100 years.
> a money transfer system so good it couldn't even power a small country's day-to-day transactions
You most likely utilize a credit card or bank card for your day-to-day transactions. Nothing would change about this with Bitcoin entering the picture.
> the solution to consumerism and world peace
I made no mention of "world peace". Just because governments couldn't conjure money out of thin air to finance war machines doesn't mean there will be peace on earth. But taking away the money tree from governments around the globe changes the game completely. It is also true that — sans inflation — absolute prices of goods and services decrease, which disincentivizes consumption.
And that would put you under the SP500 and the NASDAQ. Bitcoin in the same span did +286%.
> You most likely utilize a credit card or bank card for your day-to-day transactions. Nothing would change about this with Bitcoin entering the picture.
What’s the point of Bitcoin then? Because at the level of transactions Bitcoin can handle, we would have a bunch of central bank-like entities trading Bitcoin between themselves and a shit ton of intermediaries.
> Just because governments couldn't conjure money out of thin air to finance war machines doesn't mean there will be peace on earth. But taking away the money tree from governments around the globe changes the game completely.
That is not in any way a given. With all this intermediaries it’s not that hard to create “money out of thin air” through various schemes and leverage.
If you don’t interface with the network directly, your supposed guarantees go out the window, fast. And the global network today can’t possibly handle the daily interactions in any big city.
My point was that government-issued currency fluctuates in value, sometimes quite significantly. This underscores the fact currency is a speculative asset.
> What’s the point of Bitcoin then? Because at the level of transactions Bitcoin can handle, we would have a bunch of central bank-like entities trading Bitcoin between themselves and a shit ton of intermediaries.
Central banks wouldn't be able to debase their bitcoin via inflation, and money printing for political ends would grind to a halt. Meanwhile, the currency unit BTC would work in every country. I'd say that's a win over the status quo.
> That is not in any way a given. With all this intermediaries it’s not that hard to create “money out of thin air” through various schemes and leverage.
If those schemes inflated the BTC supply in the slightest, they'd instantly fork off the network. If banks decide to issue cash backed by BTC, it would trade at a discount compared to BTC proper given the inherent lack of assurances. And it would be competing against myriad L2 blockchain protocols designed to enhance transactional capacity.
> If you don’t interface with the network directly, your supposed guarantees go out the window, fast. And the global network today can’t possibly handle the daily interactions in any big city.
I don't have an issue with major credit card companies giving out BTC-denominated credit lines. IMO BTC is bound to become global reserve currency in any future where government issued ecurrency comes into the foray, and the private banking sector is bound to issue cash and credit lines backed by BTC.
And mine is that as speculative assets go, currency is one of the lamest. Volatility is very limited, with most of the variation being caused by the relative closeness of the different currencies.
> Central banks wouldn't be able to debase their bitcoin via inflation, and money printing for political ends would grind to a halt. Meanwhile, the currency unit BTC would work in every country. I'd say that's a win over the status quo.
If those schemes inflated the BTC supply in the slightest, they'd instantly fork off the network. If banks decide to issue cash backed by BTC, it would trade at a discount compared to BTC proper given the inherent lack of assurances. And it would be competing against myriad L2 blockchain protocols designed to enhance transactional capacity.
There’s a lot of untested and unstated assumptions there. Just to get started:
- somehow governments will not agree to perfectly available schemes, like fractional reserve lending.
Just by agreeing to save with tax money the lenders, governments can create sudden inflation by drastically reducing required reserves.
- “inflation is a monetary phenomenon” == “printing is the only cause of inflation”.
There’s more variables there, and some of them would be still in control of governments. There’s this general misunderstanding in Bitcoin believers that just because supply is limited, the price will stabilize. Picture this is scenario, governments create a tax on savings and use this to keep ever increasing reserves of BTC. As long as they have reserves, they still have monetary levers, but it’s the same for all countries, so supernational organizations will be the central-bank-like entities controlling the currency.
> IMO BTC is bound to become global reserve currency in any future where government issued ecurrency comes into the foray, and the private banking sector is bound to issue cash and credit lines backed by BTC.
Right now the whole crypto market is a self referencing speculative bubble. Most applications created deal with either creating new tokens or exchanging existing ones. I’m way too bearish on that until I see Bitcoin (or crypto in general) in the real economy.