It is safe to say that the more popular something gets, the more critics come up to challenge and share concerns. Just like the growth of bitcoin mining has attracted crypto critics and environmentalists to talk about the amount of electricity Bitcoin mining consumes. Some have exaggerated that the activity “uses more electricity than Ireland.” This is leading towards an environmental disaster. But is it?
Unlike the fiat currencies that are produced by a financial institution, Bitcoin is usually mined by solving mathematical puzzles with fast computers that consume huge amounts of energy which is considered wasteful and bad for the environment.
It is true that Bitcoin mining consumes a lot of energy but this is majorly due to the fact the energy is used for network security as the Proof of Work Algorithm makes it difficult for people to participate and mine the Bitcoin. This makes it hard for hackers to access the algorithm hence keeping its authenticity on a high.
The argument above justifies the energy usage in Bitcoin mining. However, environmentalists still claim that Bitcoin could cost us our renewable energy future because it is slowing the effort to achieve a rapid transition away from fossil fuels. However, the stats and metrics say otherwise when compared to the energy banks use.
Understanding the Proof of Work Algorithm
We are not properly assessing the efficiency of Bitcoin and PoW and these are the reasons why.
- The way we create energy is wasteful.
Energy can be derived from natural sources such as water, but we choose to obtain 80% of the world’s energy from non-renewable resources such as fossil fuels.
The argument is that any energy derived from fossil fuels is wasteful, and we should shift the conversation away from “wastefulness” and toward more practical topics like “how can we employ renewable energy to lessen Bitcoin’s environmental footprint?”
- We are comparing Bitcoin’s energy use to the wrong industries.
When compared to these other money sources like banks, bitcoin mining is a fraction of the cost, but it’s also worth noting that its cost-to-market-cap ratio is far greater.
According to one analysis, the bitcoin network consumes 30 terawatt hours of electricity every year, which is enough to power an entire country like Ireland for a year. Without a doubt, that’s a lot of energy, but it’s only a third of what banks use annually. Banks utilize roughly 100 terawatt hours each year, which “pales in comparison to the 25-30 terawatts consumed by Bitcoin.”
In that light, Bitcoin isn’t as appealing, but it’s still an improvement; due to the intricacy of Bitcoin’s difficulty adjustment, it’s doubtful that the expenses of securing Bitcoin will increase as quickly as gold mining.
- Critics are using the wrong metrics
According to some critics, climate change will force China to build more coal-fired power facilities to augment certain hydro-power stations in order to meet Bitcoin’s growing need… For starters, forecasting the future is quite the adventure. Bitcoin consumes energy per block rather than per transaction, and due to batching, the number of transactions in a block is growing all the time.
- Everything requires energy
Critics can argue that Bitcoin is a waste of time at this moment because it has yet to replace any other industry. It is undeniably a net contribution to the world’s total energy production at the moment, and as such, if it serves no useful function, its detractors are correct in their assessment that it is wasteful.