Is Bitcoin’s energy consumption a problem for the world?

Is Bitcoin’s energy consumption a problem for the world?

Those who panic about crypto commit three fundamental mistakes. First, they do not understand how Bitcoin works, secondly, they do not understand what the massive adoption would look like, and third, they do not understand the problem that Bitcoin is supposed to solve. Regardless of your opinion on the danger of global warming, Bitcoin does not use as much energy as it claims. It will become more and more effective as it grows and, more importantly, it will solve one of the main causes of resource inefficiency, corruption and human suffering. Since the cost of operating Bitcoin comes mainly from electricity consumption, the exploitation of Bitcoin is concentrated in places where energy is cheap or surplus. Industrial-scale mining facilities are located in remote areas with hydroelectric, nuclear, geothermal or underdeveloped and undeveloped industrial regions with excess production. The extraction of cryptocurrency is a way to exploit underutilized energy resources for valuable purposes, maintaining a monetary system. No other industry can quickly move into an industrial ghost town and create value as Bitcoin mining companies do. The total energy consumption of Bitcoin is limited by economic considerations: crypto-miners will continue mining only when their profits are greater than the cost of electricity. The Bitcoin network automatically adjusts the difficulty of extracting new blocks based on the “hash rate” or the net capacity of the network. This means that Bitcoin has a ceiling on energy consumption and can dynamically adapt to energy prices and innovations in hardware. The claims that “by February 2020, [Bitcoin] will use as much electricity as the world today” assume that growth energy consumption will be proportional to the adoption of cryptocurrency. However, mining is only a small part of the blockchain economy and its adoption does not mean that more people are undermining bitcoin. The purpose of cryptocurrency is to provide a fraud-resistant, market-based platform for establishing Bitcoin ownership. Once the property is secure, an almost infinite number of transactions can be made with Bitcoins without any additional extraction. Cryptocurrency mining is just the tip of the blockchain iceberg. Second-layer transaction networks such as Lightning Network and other off-line transactions do not involve mining and consume much less power. Although total energy use by Bitcoin increases with adoption, it is quite possible that mining never exceeds 1% of global energy consumption. Consider this in relation to gold for your fraud-resistant global monetary system. extracting soil requires a lot of energy. Once mined and turned into coins, the use of gold requires less additional energy. As a digital entity, Bitcoin transactions themselves need far less energy than gold or fiat transactions. Here is the most important point missing from Bitcoin reviews: crypto-currencies are not a zero-sum game, they were created to solve a real problem. By eliminating the need for middlemen in financial transactions, Bitcoin and other blockchains can free up billions of people around the world and free up much of the economy for more productive purposes. If you live in a western country where inflation is low, access to a bank account and credit cards, you may not see the need for Bitcoin. However, 1.7 billion people in the world do not have access to a bank account and billions more can not trust paper money because of high inflation. These people need access to a financial system that allows them to accumulate savings and participate in the global economy. Similarly, 5.3 billion people have no clear title to their property and “remain trapped by the tragedy of the commons”, where their unregistered assets can be stolen by powerful interests, harming individuals and economic development in general. Bitcoin was invented to solve the inefficiencies of traditional financial systems. By eliminating governments and businesses as intermediaries, it can use unused resources and eliminate the economic waste and destruction caused by unreliable monetary systems. The economic inefficiency of unreliable financial intermediaries is not limited to developing countries. The 2008 financial crisis was caused by both unclear real estate documents and interest rate manipulation by the Federal Reserve – what was its energy cost? What about the energy consumption of the banking and financial sector, which has grown significantly as a result of new regulations adopted after the financial crisis, and robs the brightest minds of more productive and constructive activities? Bitcoin will not solve all the problems of the world, but our financial system is an obsolete and corrupt mess that generates huge inefficiencies and waste. Yes, Bitcoin mining uses energy and resources, but far less than traditional financial systems. By separating money from politics, Bitcoin achieves much more efficiency than the cost of production.

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