The Reality of Bitcoin’s Environmental Impact
Several environmental groups have teamed up with Ripple (XRP) co-founder Chris Larsen to create the Change The Code, Not The Climate campaign. Buoyed by Larsen’s $5M contribution, the campaign claims energy consumption from Bitcoin mining is negatively impacting the environment. Citing an academic report that has since been discredited, their position is not based on facts but rather falsities and sensationalized conjecture.
Environmental claims
The campaign claims that a simple code change to Bitcoin’s consensus mechanism would reduce its energy consumption by 99.9%. Further, Change The Code alleges that Bitcoin mining consumes as much energy as Sweden every year, according to the Cambridge Center for Alternative Finance.
The organization goes on to make other allegations as well:
Carbon emissions from Bitcoin mining are harming the environment in equal measure. Further, Bitcoin mining will raise global temperature by 2˚C.
Mining enterprises are using gas flare, one of the most harmful elements to the environment.
As Bitcoin usage has grown, its energy consumption will grow as the digital currency is adopted more and more.
Refuting three popular claims
There is a lot more to be said about the context of these data and how the energy is consumed, processed and quantified.
Carbon emissions from Bitcoin mining
Energy consumption is not equal to carbon emissions.
Different energy sources have different environmental impacts even though the same amount of energy is consumed.
The same report used by Larsen and Co. from Cambridge University concluded that Bitcoin is 39% carbon neutral.
Even if Bitcoin’s energy consumption is only 39%, that is still twice as carbon neutral as the entire U.S. grid.
Bitcoin uses energy that other industries cannot
When oil is extracted it releases natural gas from the earth that is not captured and monetized. The gas flares that occur in oil extraction are a common criticism of fossil fuels.
However, companies such as Crusoe Energy have found ways to harness that otherwise wasted energy, thus reducing natural gas flare. By combusting the gas in a more controlled manner, the flared gas is captured and emissions are reduced.
Likewise, Bitcoin mining companies are also harnessing this energy to power proof-of-work operations. Since proof-of-work is not bound by geographic borders (such as hydro power) some Bitcoin mining companies have set up shop next to energy extraction operations in the field.
Runaway growth is unlikely
As to the assumption that Bitcoin mining could raise the planet’s temperature by two degrees Celcius due to an expansion of the network, there is good reason to doubt this claim.
As miners receive a percentage of each Bitcoin transaction they verify, the conclusion has been postulated that miners are incentivized to expand the mining network, thus increasing carbon emissions.
This is simply not possible. In order to expand the network to the size necessary to raise the entire planet’s temperature the price of Bitcoin would have to double every four years. This is economically impossible for any currency.
Individual perception
How a person thinks about Bitcoin informs their attitude toward Bitcoin. Nic Carter of CoinMetrics, has argued in Harvard Business Review:
“If you believe that Bitcoin offers no utility beyond serving as a ponzi scheme or a device for money laundering, then it would only be logical to conclude that consuming any amount of energy is wasteful. If you are one of the tens of millions of individuals worldwide using it as a tool to escape monetary repression, inflation, or capital controls, you most likely think that the energy is extremely well spent.”
Questionable motives
Questions arise about the real motives of Larsen and Change The Code to completely upend how Bitcoin operates and how miners make money. Larsen himself is inherently compromised on the grounds that he co-founded Ripple. The Mora et al paper, cited by the campaign, reads more like a hit piece than a results-oriented whitepaper.
The campaign offers no solution other than to say that Bitcoin should change its consensus mechanism from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
This is literally impossible and Larsen knows it; he also knows that miners would never vote for it to change to PoS. The market has stated clearly that it wants PoW consensus as Bitcoin is far and away the most valuable digital currency.
Additionally, PoS does not render the same property as PoW. The market has clearly stated that it wants PoW, as Bitcoin is the highest valued digital currency.
Bitcoin consumes 0.1% by all estimates; turning off every miner in the world would render positive environmental impact negligible.
Campaigns like Change The Code would be better off if they change the concern toward energy sources and promote cleaner energy such as nuclear and renewable, rather than crusading for a change in how a particular enterprise goes about its operations.
