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In this article, we are going to dive into Bitcoin’s impact on the environment.
The media has relentlessly attacked Bitcoin since its inception, basing their attacks on its energy consumption. One popular argument is that Bitcoin is too energy-intensive. The Guardian, “A single bitcoin transaction uses the same amount of power that the average American household consumes in a month.” Columbia University writes, “One Study warned that Bitcoin could push global warming beyond 2°C.” And one Newsweek article even says, “Bitcoin mining is on track to consume all of the world’s energy by 2020.”
Considering that we are past 2020 and bitcoin mining has not burned up all of our resources, we have to ask ourselves, what is causing this false narrative about Bitcoin’s energy consumption? It is rooted in a misinterpretation of how Bitcoin uses energy, and where it comes from.
First, let’s debunk the myth that Bitcoin is less efficient than our current financial system. This popular misconception is illustrated by Forbes, “A single bitcoin transaction is equivalent to roughly 750,000 Visa swipes.” The issue with this statement is that it is not measuring the same thing. To see how this is deceptive, let’s dive into this further.
There are three layers to the fiat system currently in use. The first layer is the “high retail performance” layer, which is incredibly efficient. This is where electronic transactions and credit cards take place. However, this layer operates above the “banking and fintech” layer, which is less efficient. This second layer consists of banks and financial technology firms. They ensure the security of our money, track how much each person has, and manage the activity in high retail performance. This layer also operates above another layer, the “government regulatory” layer, which is incredibly inefficient. This layer includes government institutions, such as the Federal Reserve or the military. They enforce the dollar’s value and use, transport the money, print the money, engage in military conflicts to promote the dollar and so much more.
(Design/Siby Suriyan)
These operations are extremely energy-intensive, and it is obvious that Bitcoin is more efficient than all three layers.
Bitcoin currently only has two layers: Lightning Network and base layer. The Lightning Network is like the “high retail performance” layer of the fiat system, but better. It can process millions of electronic transactions per minute, which is a lot more than Visa. It does this quickly and cheaply. The base layer of the blockchain is the same as the last two layers within the fiat currency system. It records the amount of bitcoin each address has, finalizes all transactions on the Lightning Network and provides security. Because of blockchain’s decentralized nature, Bitcoin does not need a central institution like the government or a bank to manage it.
(Design/Siby Suriyan)
Since the blockchain doesn’t need a government apparatus, has fewer layers and has the Lightning Network, which is the most efficient payment system in the world? What is more efficient? What is more efficient: Bitcoin or our current fiat system?
Let’s address where the energy to mine bitcoin comes from.
Bitcoin mining has very low profit margins. Miners can only afford $0.02-$0.05/kilowatt so they need to find cheap energy sources. These sources are usually located far from major cities and often use solar, wind, or hydroelectric energy. These sources are cheap because most of the energy is being discarded. These power plants are also a good place for miners to set up shop. They don’t steal any energy. You probably noticed that most of the listed energy sources are green.
(Collage/Siby Suriyan)
Three-quarters of Bitcoin’s energy use is green, making it one of the most renewable-driven industries. Bitcoin mining is actually encouraging the growth of green energy industries and helping to reduce carbon emissions.
(Collage/Siby Suriyan)
The media claims about bitcoin’s energy use and efficiency are completely illogical. When you realize how much more efficient Bitcoin’s network is compared to our current financial system, our concerns about its energy use are completely unfounded. The blockchain and the Lightning Network work together to create an amazingly efficient system, and Bitcoin’s use of green energy encourages the growth of the renewables industry. Bitcoin is a net environmental benefit.
This is Siby’s guest post. BTC Inc. does not necessarily endorse the opinions expressed. Bitcoin Magazine.
