It is true Bitcoin consumes a lot of energy but does this make it unethical or immoral for environmental reasons. We will try to address these arguments that keep showing up from time to time.
The price of Bitcoin has been surging for years and yet the arguments never stop. Many consider Bitcoin to be a bubble or like Scottish independence or Brexit.
People have different views in favour of Bitcoins and against them. Those who see the potential in Bitcoin invest in it. While those who tend to differ have been taking it down ever since it was a dollar ten years ago.
As usual, those in favour of bitcoins will like this article, while the others will continue to find fault. The ones who are still undecided about Bitcoin will perhaps find this article helpful and informative.
Bitcoin mining consumes a lot of energy
According to Digiconomist, the annual energy consumption for Bitcoin mining is 117.11 TWh comparable to the power consumption of the Netherlands. While a power consumption for a single Bitcoin is equivalent to the power consumption of an average U.S. household over 38.45 days.
Hence it makes sense to carry out Bitcoin mining operations in locations where energy is cheap. Countries such as Iceland, France, China have renewable energy resources which make them ideal for Bitcoin mining. Iceland has abundant geothermal energy, France makes use of its unwanted land close to nuclear power stations for crypto mining activities.
While China uses Hydroelectricity in places such as Sichuan, here the electricity prices are low as anywhere in the world. Sichuan manages to generate 95% of its energy required for Bitcoin from renewables while the remaining 5% comes from nuclear and burning coal.
The by-product generated from renewables also does not go to waste, Sweden recycles the heat generated from bitcoin mining to heat greenhouses.
According to researcher Nic Carter of Coinmetrics.io, “Imagine a 3D topographic map of the world with cheap energy hotspots being lower and expensive energy being higher. I imagine Bitcoin mining being akin to a glass of water poured over the surface, settling in the nooks and crannies, and smoothing it out”
If you are wondering, can we decrease energy consumption? The answer is no, it needs power consumption for its success.
Why Does Bitcoin Need So Much Energy?
The sole purpose behind the success of Bitcoin is because it uses so much. It is this huge power consumption that makes the network so strong, it is called “proof of work.”
Adam Back, a young English computer programmer in 1997, proposed a system to limit email spam and denial-of-service(DoS) attacks. The idea was to make spam uneconomical so it will less likely to happen.
His idea was to have emails contain some kind of evidence that some kind of effort has gone into their composition ie. proof of work. Back developed a system called “Hashcash”, it added a textual stamp to the header of the email. This served as proof that the sender spent some time in writing and sending the email.
Another contribution was from Hal Finney in 2004, his idea was built on Backs proof of work theory. According to him, each proof of work can be reused, this means work that went into them would not have to be repeated. This was called “reusable proof of work”.
It was only later Satoshi Nakamoto became the inventor of Bitcoin. According to him, money should have a cost of production to it. If there are efforts involved it has value, while if there is no effort involved how will it have value?
To create a system of money whose purchasing power increased over time, Nakamoto limited the money supply to a maximum of 21 million coins. Since he could not create coins all at once, the process had to be gradual and the indigenous solution to this problem was mining.
You don’t require picks, shovels and drills to mine Bitcoin, but like gold and silver, it also costs to mine Bitcoin on computers. Once you rig up a computer you can start mining Bitcoin, but it does not guarantee a specific number of coins.
Though there is an uncertainty when to mine Bitcoin if you have a good and powerful setup the chances of hitting a jackpot improve. The risk to reward ratio is high.
There are thousands of Bitcoin mining operations across the world. Each mine a block of new Bitcoin every ten minutes, competing against each other to mine the Bitcoin block.
Why is it not easy to mine Bitcoin?
The competition in the Bitcoin mining space has increased a lot over the years, it is not easy to mine. Mining has intensified and this results in making it tough to mine Bitcoin.
Earlier it was easy to mine as simple as building a wall. The bitcoin blockchain is protected by a metaphorical digital wall protected by the energy expended securing it. According to Nick Szabo it will need an equivalent amount of energy to tear it down, this is called “unforgeable costliness”.
Energy plays a vital part in the progress of mankind, since the agricultural revolution, where animals were used as labour until the Industrial revolution started where machines took over. While in today’s digital world it’s the computer at the forefront when it comes to energy consumption. Just goes to show how energy consumption is part of progress.
Everything requires energy, so do the Bitcoin minted from energy and stored as digital energy, this makes Bitcoin’s electricity consumption a feature rather than a drawback.
However, everyone has their own views for pro-Bitcoin users. It is a monetary network that is extraordinarily robust, permissionless, censorship-free and resistant to state actors. While for haters it is simply an unethical waste.