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Wasteful, how Bitcoin defends its legitimacy in the face of criticism over its energy consumption.


There are those terms which, from the observer's point of view, seem to flow so much from each other that it would even become a pleonasm to have to formulate them jointly. Thus, "bitcoin" and "unecological" have, in the course of current narratives on crypto-currency mining, unfortunately quickly attained this status. But despite a degree of truth in the criticisms attributed to them, there would be much to gain by finally reconciling proof-of-work with environmental philosophy.

 

But to realize this, we need to step back and put the overall impact of bitcoin into perspective, namely by showing that its costs are reasonable in relation to its benefits, and that these same costs are not excessive in relation to global consumption.


It is estimated that the annual energy consumption in the world is about 170,000 Twh, and Bitcoin represents about 0.1% of this total with 140 Twh, this for a service used by over 100 million users. It is indeed more than some countries, but this also applies to services like Google, Amazon or even the use of home dryers, so it doesn't seem too surprising that it applies to the leader of a whole secure and decentralized financial model. Most things that can claim to be more efficient at making payments and holding funds are inherently centralized, and it's the flaws in that model that have driven the hype and adoption of Bitcoin. The rest of the options represent crypto-alternatives using other consensus models. However, it is the simplicity and security assurance offered by proof-of-work that has launched the momentum of innovation in this area, with many of these projects even being funded through bitcoin. This assurance is one of the reasons why it remains one of the market leaders despite the emergence of ever more innovative projects, making it still the backbone of a rapidly changing industry.


But also against the dollar, Bitcoin has its advantages. A certain Alex Gladstein, affiliated with the Human Rights Foundations, addresses this issue in an article entitled "The Hidden Cost of the Dollar". In other words, if policymakers consider bitcoin irredeemably dirty and wasteful, they should not be allowed to discriminate against energy use patterns when the petro-dollar supports authoritarian regimes, leading to military aggression, which in turn increases fossil fuel consumption in the process. Or, if they do, they should at least include the financial industry, which is 25 times more carbon intensive, and the military-industrial complex, which is about 50 times more carbon intensive.


Energy is the critical resource that mining needs, and it is therefore particularly interesting for miners to look for the cheapest energy. In addition, there is a huge surplus of clean energy wasted due to storage problems, creating a surplus automatically affecting its price.

Proof-of-work miners, as greedy consumers who are constantly looking for the lowest marginal cost of available kWh, have found in making use of this situation a perfect synergy by running on the extra energy produced. It is this dynamic that has led other investment funds to refer to bitcoin as a "battery of money", such as Nick Grossman and Ark Invest. While this formulation sounds quite convenient, it is interesting to see what money battery looks like. One example is natural gas venting, such as methane leaks and flaring, where methane is burned to turn it into carbon dioxide. The US, for example, burns the equivalent of 150 TWh per day, which is more natural gas than the annual energy consumption of Bitcoins, even at its peak. Again, Lyn Adlen points out that "Cambridge University has estimated that the global potential for flare recovery is 8% greater than the energy consumption of the Bitcoin network in 2021". In other words, the entire Bitcoin network at its peak could, in theory, get powered on of the natural gas lost in the US. The carbon commodities of flaring that are wasted could thus support Bitcoin and the mining of proof of work. As convenient as this sounds, it's not new and some players are already implementing it, like Crusoe. This dynamic is not only interesting for bitcoin but also for creating value in otherwise remote areas. Take North Dakota as an example and imagine that 20% of stranded natural gas could be collected through flaring and venting. Proof-of-work miners would have the unique ability to capture value in these remote areas that are also primarily powered by clean energy.


If one follows the logic that miners are those greedy energy consumers chasing the lowest cost per KWH, proof-of-work mining could use the remaining energy that would have been wasted to make something tangible out of it. Of course, this is not as attractive to countries or groups with large capital capacity, but the situation is reversed for communities where mining investment would improve clean capes budgets or even communities with large renewable resource capacity but little demand. In this sense, proof-of-work miners are unique in their nature, where competition increases the incentive to maximise the lowest KWh and miners can be an energy buyer of last resort. Particularly for low-income countries where energy is cheap, miners may be an interested party to invest and finance capital expenditures for cheap energy rights. In the process of relocating miners to these rural areas to take advantage of and invest in the energy produced by its ecosystem, it could represent an opportunity to develop these two sectors together and in harmony in these countries.

In this way, proof-of-work mining could actually help develop clean energy infrastructure in areas with little demand for energy and where many of these renewable resources are left untouched as in sub-Saharan countries, and ultimately wasted, creating social welfare and economic prosperity. Ironically, this bad reputation is becoming increasingly anecdotal for clean energy investments. As mentioned above with flaring or for example, an old coal-fired power plant that has been rehabilitated into a hydro-powered coating plant.

With all these innovations, it would be possible for mining to converge with the energy sector quite quickly.


In conclusion, although proof of work is not the consensus mechanism that best suits modern environmental philosophy, its use certainly can be. This is by supporting the innovation of new alternatives to the existing financial system with solutions that are both decentralized and more efficient, or by innovating in the approach to energy consumption and production.