With Bitcoin’s price ticking up and making it to breaking news on a daily basis, misconceptions and myths about the energy consumption of the world's first cryptocurrency fly around.
That being said, we will take on the mission to debunk misconceptions that are perpetuated among environment conscious people separating reality from myth - without ignoring environmental responsibility towards our blue planet.
Many misconceptions around the energy hazard of Bitcoin stem from ill-informed people who forget to compare BTC energy usage to existing monetary governance systems. It seems preposterous to say if one use of energy is more or less wasteful than another because all consumers have paid market rates to use that electricity. With no further ado, let's get to it!
Myth #1: Bitcoin is bad for the environment
While it’s true that Bitcoin consumes a lot of electricity. Nonetheless, calculating the environmental impact is considered quite difficult. For one thing, when the so-called environmentalists look at bitcoin’s consumption of energy, they tend to ignore the numbers of the current global banking system which doesn’t only use energy to handle bank transactions, put also to power office buildings, ATMs, local branches, other facilities as well the transportation of the actual fiat from one place to another.
While the energy-intensive process is deemed a necessity to the digital economy, the current banking system requires more and wastes more energy on old-fashioned and slow processes. "Bitcoin is much more efficient than traditional banking and gold mining on a global scale," according to recent analysis by New York-based fund Ark Investment Management.
Myth #2: Proof of Work is not Necessary and wasteful
Everything in our life, from cooking our daily meals to printing money, is inextricably related to the cost of electricity. At the end of the day, it all comes down to a subjective assessment of how much energy is "worth” as the energy usage itself is subjective.
Critics like to claim that Bitcoin’s proof of work is rather unnecessary, however, Micheal Saylor argues that because energy is readily available and valued on the market, miners' ability to use it efficiently indicates that the energy in this process is not wasted.
Satoshi designed the Bitcoin’s consensus Proof of Work (PoW) to be expensive on purpose, as he considered energy to be the universe’s super basic commodity. Proof of Work is the proof of burn, or proof that energy was consumed to achieve the mining, validation and securing the network.
In a capitalistic world, it is by far the most straightforward and equitable method for the actual world to verify something in the digital realm. PoW is not a bug, the mining process is meant to be a costly feature that allows the conversion of electricity into digital gold, rendering it very necessary and essential to Bitcoin.
#Bitcoin's Proof of Work architecture creates Seven Layers of Security and serves as the foundation for the world's first & greatest digital monetary network. There is no more efficient technology for converting energy into prosperity. https://t.co/RfIDhxUS4j— Michael Saylor⚡️ (@saylor) May 16, 2021
Myth #3: Bitcoin energy use is measured per transaction
This calculator is so wrong on so many levels, and it all goes back to Alex De Vries is the founder of the website Digiconomist and a "financial economist and blockchain specialist" at PWC Netherlands.
His estimate has already gotten a lot of flak for its inaccurate energy consumption calculations. However, the KPI he chose was purposefully deceptive: "energy consumption per transaction" for various reasons:
- The amount of energy spent is each block, which can contain a variety of transactions. Increased transactions do not imply more energy consumption.
- The average cost per transaction isn't a good statistic for assessing Bitcoin's PoW efficiency; instead, it should be defined in terms of the security of an economic history.
Myth #4: Bitcoin mining energy use will Keep expanding at the current rate
An argument can be made that as Bitcoin's popularity grows and matures, so will its energy usage. This one has raised many red flags around sustainability and the environment of the bitcoin ecosystem, but fortunately, it’s not true as it ignores structural and market limits. Firstly, Bitcoin's "Layer 1" functionality as a payment network is limited by its tiny number of transactions per second. While "Layer 2" applications created on top of Bitcoin, such as Lightning network, can manage a far higher volume of transactions while using less energy because they only "settle" once for an unlimited number of tranches.
Myth #5: Bitcoin energy use equals carbon emissions
Bitcoin enthusiasts insist that most critics are very ill-informed when it comes to the cryptocurrency's carbon footprint and environmental impact of bitcoin’s mining as some argue that 75% of miners use renewable energy.
The Cambridge researchers concluded that: “Bitcoin’s environmental footprint currently remains marginal at best.” It could even be argued that the economic incentives inherent in Bitcoin mining are driving sustainable energy innovation, since miners are continuously seeking to boost profits by lowering their electricity costs – in a world where renewable energy is rapidly becoming the most cost-effective alternative.
Renewable energy sources are used to power a substantial amount of Bitcoin mining (including wind, hydro, and solar). According to the Cambridge Bitcoin Electricity Consumption Index, the actual number fluctuates from 20% to more than 70%.
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