Is Bitcoin Bad for the Environment? Debunk it Using These Arguments

Is Bitcoin Bad for the Environment

If you’re a bit like me, unable to contain yourself in your enthusiasm about the invention called bitcoin, you will become ‘that bitcoin guy’ in the minds of your friends. Consequently, you will get messages like ‘Hey, here’s an article in such and such mainstream media, which says bitcoin is destroying our planet. Thoughts?’ Depending on the character of the sender, they may or may not explicitly ask you to reconsider your investment in this devilish, ocean-boiling, vaporware money. Let’s give you some ammo for answering the question of “Is Bitcoin bad for the environment?”

If it wasn’t so misguided, it would be funny how the rage of the likes of Greenpeace and American senator Elizabeth Warren is directed at bitcoin in particular. There seems to be something about bitcoin that enrages them more than any other industry that consumes energy, for example, the gold-mining industry, the tobacco industry, etcetera. All these industries are more harmful, not just in terms of CO2 emissions, but also in terms of ecological destruction in the case of the goldmining industry.

Bitcoin Mining Emissions Compared to Other Industries

Consider this image by the Cambridge Centre for Alternative Finance: a visual representation of the CO2 emissions of different industries. In the big scheme of things, Bitcoin isn’t so huge. It makes you wonder why organizations like Greenpeace don’t go after gold mining and the tobacco industry.

Other industries' CO2 emissions compared to Bitcoin mining
Other industries’ CO2 emissions compared to Bitcoin mining. Source: Cambridge Centre for Alternative Finance

But just the argument that Bitcoin is less bad for the environment than gold mining, the tobacco industry, or the US army protecting the dollar, will not be enough to change all critics’ minds. They will also have to let go of the idea that a digital, proof-of-work currency like Bitcoin is ‘backed by nothing’, ‘just belief’, and ‘has no intrinsic value’. Because if they don’t accept that Bitcoin has value, they will still see the bitcoin mining industry as harmful, even if and when it will become carbon neutral.

Let’s first start with the ‘other forms of money also consume energy’ part of the argument. And then tackle the ‘Bitcoin does have value’ argument.

Bitcoin CO2 emissions as percentage of total
The yearly number of Megatons CO2 emitted by mining, as a percentage of the total

Other Forms of Money are also Backed by Nothing Energy

Bitcoin has ‘no intrinsic value’? What on earth has? Does gold have ‘intrinsic value’? Sure, it has some industrial purposes. But its large use case is sitting in vaults, doing nothing productive. Still, it has been immensely useful to people over the millennia, protecting their savings against inflation.

So what about the dollar, what is it backed by? If you glance at a dollar bill, you will see: ‘backed by the full faith and credit of the American government.’ Wow. Not just the faith, but the ‘full’ faith! And credit! We are so lucky. But seriously, what does this mean? If we cut the fluff, it means: 

‘Just trust us. Just trust us that these pieces of paper or numbers on a screen have value.’

But if this foundation is so shaky – after all, trust is easily betrayed – why would anyone want dollars or other fiat currency? Well, the government creates demand for their currency by collecting taxes in their own currency. If you don’t pay taxes, you will go to jail, to put it bluntly. This enforced demand creates value.

Notice the word ‘enforced’ there. Force. What in the end gives the dollar or any other government-issued currency value, is that there is an entire enforcement apparatus that will keep citizens in line. In the case of the US dollar, it’s an entire navy that keeps other nations in line to keep paying for oil in dollars. 

Without even arguing that this state of affairs is bad – the fact still stands that this all consumes a lot of energy!

Next, consider an industry that is arguably more damaging to the environment than bitcoin mining: gold mining. If gold wasn’t so scarce and hard to mine, the metal couldn’t have a such high monetary value. Scarcity is a requirement for hard money and scarcity means: you will have to work (spend energy) for your money!

In the end, if you follow the principles that back money, you will end up at some source that consumes energy.

Money is backed by energy

Bitcoin Encourages Renewable Energy Production

Since bitcoin mining is such a hyper-competitive market, miners can only be profitable if they can buy or produce extremely cheap forms of energy. Lucky for us, because:

  1. Miners don’t compete with industries or consumers for energy. With the prices you and I pay, a miner would never be profitable. 
  2. The cheapest sources of energy are most often sustainable sources like wind, hydro, or solar.
  3. Bitcoin miners can ‘subsidize’ renewable energy facilities. Wind or solar farms are expensive to build. With bitcoin miners on the site to buy energy when households and industry are in sleep mode, renewable plants become more profitable.

The latter point is not just theoretic: In 2022, a company called Gridless began using bitcoin mining to incentivize and sustain the deployment of small river hydropower in eastern portions of Africa. 

Gold mining effects on environment versus bitcoin mining
What causes more harm to the environment?

Bitcoin mining speeds up innovation and deployment of cheaper clean energy production, unlocking clean energy sources for all purposes.

Energy is Not a Scarce Resource

While there can be temporary shortages of energy, keep in mind that energy is abundant. Technologists predict that the future price of energy will trend toward zero. Why? As only a fraction of the combined amount of solar and wind energy is enough to power our civilization, it’s just a matter of improving our technology to harvest this abundance.

Bitcoin mining helps deployment of cheaper clean energy production
Energy consumption is not a zero-sum game

Bitcoin Has a Purpose and is Easily Worth Every kWh of Energy

As long as critics will keep viewing Bitcoin as a speculative toy or money for money launderers, they will probably view any form of energy spent on it as wasted. So, let’s look at three core pillars of why Bitcoin is valuable.

It is Digital Property 

Wouldn’t it be nice to have a way to secure property in a world that is increasingly digital? But can we even possess something in a realm where everything can be copied at near-zero cost? Well, that’s the whole point of Bitcoin. A ‘time chain’ (blockchain) of who owns what in a globally available, constantly updated ledger, without a central authority that can claim the property.

But wait, can’t we also own any other digital currency, like money in a bank? Nope. Your bank deposit is legal money you lend to a bank. Sure, if the bank goes bust, the government backs your money. But that tells you at whose mercy you are.

What about a future central bank digital currency? Nope, you don’t own it. Who controls the ledger owns the property. A central bank can print more of its own currency, shrinking your part of the monetary pie. That’s not possible in Bitcoin. But even more in principle: you own the keys, you own the coins. The central bank can’t prevent you from spending, which is Pandora’s box that might open with central bank digital currencies.

Being able to own property is crucial, if we don’t want to replicate the online version of the fate of people in communist countries, where everything is state-owned. Without an online version of digital property, the future could look quite bleak.

It Could Bank 3 Billion People

An estimated 3 billion people in the world have no bank account and thus no access to the online economy. But most of these people have mobile phones. They can just install an app and start transacting in Bitcoin. 

Bitcoin gives the unbanked online money
For money launderers? Or for the unbanked?

Bonus Misconception: the ‘Costs per Transaction’ Metric

Bitcoin mining costs x crazy amount per transaction!’ 

Why is this a misconception? Because the energy is used for securing the network against transaction censoring, regardless of how many transactions are occurring. Around 2% of the total value of all bitcoins is spent on this ‘security budget’. View it as a vault of energy. 

Here’s a graph from Lyn Alden’s article about BTC energy consumption. It shows that the miner revenue as a % of Market Cap is going down with time. So securing BTC is becoming cheaper in relative terms. Roughly 2% per year currently. That’s not so crazy. If you would store 10.000 dollars worth of gold in a bank vault or other professional storage facility, would it be excessive for them to charge you 200 dollars yearly? That’s what Bitcoin miners charge these days – and that figure is dropping.

Miner revenue as percentage of btc market cap

Secondly, layers on top of Bitcoin such as Lightning make a near-infinite amount of transactions per second possible. The Bitcoin network is only the base layer. 

Conclusion: Debunking Can Work

Frens, this will no doubt be a long and hard battle. 

To win the hearts and minds of your friends, first, you should challenge their intuitions about what money is. What is the relationship between money and energy, traditionally? If you think Bitcoin uses a lot of energy or emits a lot of greenhouse gases, what do you compare it with? Does any currency have intrinsic value? This is a nice source that goes deep into the monetary rabbit hole: What is money, anyway? by Lyn Alden.

Also, considering that Bitcoin could bank billions of unbanked people, and secure everyone’s digital property in an increasingly online world, isn’t that worth a fraction of a percent of the world’s energy consumption?

We can’t win it by rational arguments only, even if rational arguments should always be the foundation. Maybe use some humor, some memes as icing on the cake. It will amplify the message and make it stick.

An ironic example of this was the Greenpeace campaign Change the code, funded by Ripple (!). The artist that was commissioned to make an artwork that would highlight the polluting effect of bitcoin mining, reconsidered his stance: ‘dumb me’. After the artwork was revealed, he was approached by bitcoin mining experts. He said:

‘I made the Skull believing that Bitcoin Mining was a simple black-and-white issue. I’ve spent my entire career trying to reduce real-world physical waste, and PoW felt intuitively wasteful. Of course, I was wrong. Few things in the world are black and white. Dumb me. ‘

And now the ironic part: Bitcoin believers now use the skull artwork as their profile picture.

Bitcoin Bad for the Environment? Debunk it.
Benjamin Von Wong’s ‘Skull of Satoshi’. After revealing his creation, the artist admitted that the issue isn’t so simple as he thought
Is Bitcoin Bad for the Environment? Debunk it Using These Arguments - - 2024

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