When people think about Bitcoin, they often think about the proof-of-work, which is often shortened to PoW. The world of Bitcoin PoW has been called many things and one of the things that it is commonly called is wasteful. The reality is that everything is energy and energy is subjective. For those who are saying that Bitcoin PoW is wasteful and expensive, these terms are relative. The amount of energy that the Bitcoin PoW spends has to be compared to other systems. After all, everything is energy, including money, and energy is subjective.
Work Takes Up Energy
The idea of people doing work has been conceptualized for centuries. A long time ago, the word that was done in the economy was entirely done by the human hand. These human hands created food. Then, humans discovered fire and they were able to use the energy in fire to increase the yield. This fire was not only able to keep people warm but could also add energy to improve people’s standards of living. Later, energy was increased further when humans were able to domesticate animals. These domesticated animals were able to provide energy that humans could use to increase tasks, provide more food, and increase people’s standard of living even further. At the same time, these animals still required food and this food has to be provided in order to meet the energy demand provided by the animals.
Finally, humans were able to develop machines. These machines produced work using sources ranging from water and wind to coal and gas. Now, people even use nuclear energy to help them do work, provide energy, and improve people’s lives. Now, the economy might be based on money; however, it is truly based on energy and work. Everything in life is closely tied to the price of energy. Nearly everyone can name the prices of gas near them to within a few cents. Transporting food takes energy. Transporting people takes energy. Running the internet also takes energy. Energy is everything.
Therefore, it should come as no surprise that the energy consumption of the world has been on the rise during the past few years. While money might be the representation of goods and services, it can also be viewed as something called stored energy. There have been great minds in the past, including Thomas Edison and Henry Ford, who have been interested in taking the gold standard and replacing it with energy instead. This was called units of energy or the energy dollar. While this concept did gain some traction, the concept was flawed because it could not be stored or transmitted easily. As a result, the economy today still uses coins and paper even though many people have taken to studying energy as a form of currency at its base.
The Development of Bitcoin
Now, Bitcoin came to the scene back in 2008. The Bitcoin PoW was originally invented as a way to guard against spam email, which everyone finds annoying. It was only later that the creator of Bitcoin took Bitcoin PoW and adapted it to the world of digital cash. While PoW mining worked well on its surface, the goal of Bitcoin PoW mining was to take electricity and turn it into Bitcoins. This is the block reward system with which many people are familiar. The goal fo this machine is to perform hash operations routinely until it finds a way to solve a puzzle of becomes a block reward Bitcoin. This is a solution to the puzzle and proves that the miner spent the required amount of electricity to make the block. In a sense, the miner did the work. This is the Bitcoin PoW concept. If the miner does the work, he or she has earned the reward of a new block and the money that goes along with it.
When the Bitcoin PoW first arrived on the scene, the goal is to change how the consensus operated among humans. Is the PoW system a proof of a burn? Or, it is a validation that the energy itself was burnt? This is one of the fairest ways possible for the physical world and digital worlds to validate each other. While there are many people who think that the Bitcoin PoW is about computers and coding, the reality is that it is about physics. Anyone who is willing to invest the energy and work into creating new Bitcoin PoW mining blocks is able to reap the rewards. In a sense, the Bitcoin PoW system has been designed to transmute electricity in the digital world into money in the real world. In this manner, Bitcoin PoW turns electricity into digital gold. If this sounds like alchemy, people are not far off.
Is the Bitcoin PoW System Wasteful?
Now, back to the original question. There are some people who are saying that the Bitcoin PoW is wasteful. The reality is that it is not true. The Bitcoin PoW is not going to destroy the world by taking up energy. First, the energy spent per block can vary based on the transaction. More transactions do not necessarily mean more energy. Next, the economic density of a transaction on the Bitcoin PoW system is always increasing. In essence, the more people mine Bitcoin, the more energy it is going to take. This will cause people to pause before investing so much time and energy. Finally, the metric of “average cost per transaction” simply isn’t good for measuring the efficiency of the Bitcoin PoW system. The energy spend secures the share of Bitcoin. This percentage is going down as the inflation of the Bitcoin PoW system continues to drop.
The Future of Bitcoin and Bitcoin PoW
In the end, the Bitcoin PoW is not wasteful and it does not consume any more energy than any other large system. There are built-in security measures in place to keep the Bitcoin PoW system in check. Therefore, the future of the Bitcoin PoW is secure.