The Fake Environmentalist Attack on Bitcoin
By now, you’ve probably heard the environmentalist knock on bitcoin, including apocalyptic claims that it will use up all of the world’s energy and will single-handedly increase global temperatures until the planet is uninhabitable.
“Cryptocurrencies like bitcoin are terrible for the environment,” declares Sen. Elizabeth Warren (D–Mass.). “It’s an extremely inefficient way of conducting transactions,” pronounces former Federal Reserve Chair and current Treasury Secretary Janet Yellen. “It’s a way to both hide dirty money and destroy the environment at the same time,” says Daily Show host Trevor Noah.
Such environmentalist attacks on bitcoin are best understood as a strategy by economic, media, and political elites to undermine a powerful new form of money that they can’t control. Critics distort the basic facts about what’s known as bitcoin “mining,” the process through which a global network of computers maintain the bitcoin network through computation. Though energy intensive, this process is what makes bitcoin a truly decentralized monetary system.
One of the starkest arguments against bitcoin is based on a logically flawed argument that its energy use will increase in a linear fashion as it becomes more widely used. Critics take the total amount of energy usage by bitcoin miners and divide that into the current number of transactions to arrive at a per-transaction cost. They then project that per transaction cost into the future. “A single bitcoin transaction,” warns Warren, “uses the same amount of electricity as the typical U.S. household uses in more than a month.”
But this analysis is fundamentally wrong, says Nic Carter, a partner at Castle Island Ventures who has written a series of influential articles about bitcoin and energy. “They devise this per transaction energy cost figure. And then they extrapolate bitcoin’s transactional load to hundreds of billions per year.”
In fact, as the bitcoin network grows to support more transactions, it doesn’t require additional energy, just as the Federal Reserve Building’s electricity bill doesn’t increase with every ATM withdrawal. The electricity consumed by mining isn’t used to power individual transactions; it’s used to power the foundation layer of bitcoin’s monetary network, which can then be extended almost infinitely. “Bitcoin transactions and bitcoin’s energy use are not really correlated,” says Carter. “An additional marginal transaction doesn’t really add much energy outlay to the bitcoin system.”
The energy used by bitcoin miners has increased significantly since the cryptocurrency first launched in 2009, and it will continue to grow as more people use it (earlier this year, Deutsche Bank announced that bitcoin was the “third largest currency on the planet, after the dollar and the euro).
But the media’s claims are simply outlandish and provably false. In 2017, Newsweek boldly predicted that bitcoin was on track to “consume all of the world’s energy by 2020!” One of the most commonly cited figures—that the energy used to power bitcoin will generate enough greenhouse gases to raise global temperatures by more than 2 percent Celsius—comes from a 2018 two-page analysis published in Nature Climate Change and trumpeted by The New York Times and other outlets.
Nature Climate Change went on to publish three rebuttals (read here, here, and here) pointing out the implausible assumptions used to generate those figures, including the same fallacy of calculating an energy cost per bitcoin transaction and then assuming a linear increase as the network grows.
So how much energy does bitcoin mining actually consume? C
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