The Bitcoin Energy Consumption Debate Becomes Obsolete When You Look at the Wealth It Secures
Don't Trust, Verify.
Bitcoin is an environmental disaster. Bitcoin consumes far too much energy. It's an eyesore, and it's necessary to drop its decentralization with its Proof-Of-Work (PoW) and switch to Proof-of-Stake (PoS).
These phrases are not mine, of course, but I suppose you have heard or read this frequently. This is one of the clichés that is constantly repeated in the mouths of Bitcoin opponents.
These people repeat the same lies over and over again without even trying to back them up with facts. The problem is that the general public is not used to checking what the powerful in the current system tell them. In general, you trust politicians, economists, bankers, or the media.
This trust has been eroded more and more over the last fifteen years, but it is still important. Too much so when you think of all the betrayals and lies that these powerful people are making the people suffer. But that's how it is.
Bitcoin gives the people power over money
By creating Bitcoin, Satoshi Nakamoto wanted to give the people a tool to regain power over money. Bitcoin is the first step in separating money from the hands of the state. As Friedrich Hayek put it so well in the mid-1980s, we cannot have hard money again if money remains in the hands of governments and central bankers.
Since Richard Nixon set up the current monetary and financial system in August 1971, central bankers have never stopped abusing the excessive power they have been given: the power to print as much fiat money out of thin air as necessary.
As Spider-Man's uncle said, "with great power comes great responsibility". Central bankers have taken great power, but have never been responsible for this power.
The world has been facing a relentless currency devaluation since 1971. The increase in the money supply has even become parabolic since the beginning of the COVID-19 pandemic with more than 30% of all US dollars in circulation being printed during this period.
Whatever the ills of the economy, central bankers now know only one answer: print more and more fiat money out of thin air to inject it into the financial markets. The latter ones are now used to this easy money and cannot do without it. The slightest attempt by the Fed or the ECB to turn off the tap causes the financial markets to panic and a major stock market crash looms.
The current monetary and financial system is therefore a vicious circle of impoverishment for the majority of the world's inhabitants.
The energy consumed by the Bitcoin system gives value to the units issued
Bitcoin offers a way out with an open and decentralized system that belongs to all its users. Bitcoin's monetary policy is in contrast to the quantitative easing that central banks are constantly practicing. This is quantitative hardening, which allows the value of BTC units already in circulation to be increased.
For this, Bitcoin has a hard-capped supply of 21 million units no matter what. Its programmatic monetary policy protects us from the corruption and arbitrariness of human beings.
Bitcoin is simply better money.
What makes Bitcoin valuable is the energy needed to produce new units via the way transactions are validated on the network. If it were possible to create as many BTCs with the snap of a finger as there are USDs, Bitcoin would obviously not be so valuable.
The energy consumed by the Bitcoin system is, therefore, a necessity to secure it.
The energy consumption figure for Bitcoin is meaningless if it is not put into perspective
This figure is high when taken out of context as it currently stands at 97.2 TWh per year according to the Cambridge Bitcoin Electricity Consumption Index (CBECI) which is an estimate made by the University of Cambridge for several years. The site, which gives an estimated value in real-time, also provides two bounds for this index.
A lower and an upper bound:
Finally, you can also have an evolution of the energy consumption of the Bitcoin network since the creation of the index at the beginning of 2017:
This raw number is used by Bitcoin opponents frequently, but in fact, taken in isolation, it means nothing to me.
You have to put the energy consumed by Bitcoin into perspective with the wealth it secures to understand that this figure is not extravagant
You have to put it in perspective with the wealth that Bitcoin secures. That is much more relevant. At the time of writing, Bitcoin has a market cap of $900 billion. This market cap had passed the trillion-dollar mark in April 2021 when the Bitcoin price reached an ATH of $64.8K, but for what follows we will use the current market cap.
So the Bitcoin network is currently securing $900 billion of wealth in a totally decentralized way by allowing each user to manage their money as they wish without any risk of censorship. This is already an incredible advantage.
The even more important advantage of Bitcoin is that its price keeps increasing over time as shown by the evolution of its price since 2010. Bitcoin doesn't just protect your savings, it grows them.
Now we need to look at where that $900 billion wealth figure would put Bitcoin in 2021 if it were a country:
Bitcoin would be the 40th richest country today.
The estimated annual energy consumption of Bitcoin would place it around 34th according to Cambridge University:
In short, if Bitcoin were a country, it would be 34th in terms of energy consumed annually, while being 40th in wealth worldwide.
Putting these two figures in perspective, you can see that Bitcoin is not the disaster its opponents claim it to be. Bitcoin is a revolutionary monetary system that gives power back to the people. To do this, it has to work in a decentralized way, which requires electricity.
This is neither huge nor small but is justified by the wealth that Bitcoin guarantees.
As the latest estimates from the Bitcoin Mining Council show, more than 50% of the electricity consumed comes from renewable energy. The ESG score of Bitcoin is therefore already very high. Improvements will still be made in the future, but things are clearly moving in the right direction.
The next time you doubt Bitcoin, do as all Bitcoiners do: "Don't Trust, Verify". This will allow you to find out the truth for yourself.
In Bitcoin We Trust
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