fillippone (OP)
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March 20, 2021, 09:55:09 PM
Last edit: May 16, 2023, 12:18:26 AM by fillippone Merited by vapourminer (10), Welsh (10), arulbero (5), DdmrDdmr (4), Paolo.Demidov (4), m.lov (4), mindrust (3), ABCbits (3), JayJuanGee (2), babo (2), DooMAD (2), Lucius (2), hosemary (2), Daltonik (2), NotATether (2), just_Alice (2), usque_ad_finem (2), philipma1957 (1), pooya87 (1), bitbollo (1), kryptqnick (1), Daniel91 (1), LeGaulois (1), Coin-1 (1), aoluain (1), Coyster (1), Karartma1 (1), GazetaBitcoin (1), joker_josue (1), Charles-Tim (1), dragonvslinux (1), acquafredda (1), creep_o (1), orions.belt19 (1), tadamichi (1) |
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Recently I often heard bitcoin critics telling me that "Bitcoin is too polluting", "Bitcoin wastes too much energy", or other similar arguments. Those arguments are as old as bitcoin, even Satoshi discussed those, and they had been debunked several times, but I am trying here to organise the material to counter those accusations. I will try to "answer" specific claims with a few counterarguments supported by data, websites and references. So that it will be easier to organise a "defence" of Bitcoin in the unlikely case that Bitcoin needs a defence. - Defence
- Televisions, aeroplanes, Christmas lights, plastic, all require enormous amounts of energy to be produced and used: what is the amount of energy considered excessive to produce them? Why is this calculation done for Bitcoin and not for other goods?
- According to data from the Cambridge Bitcoin Electricity Consumption Index, devices kept on standby in the United States alone could power the bitcoin network for more than a year and a half (a figure that has been constantly decreasing).
- Mining bitcoin is actually quite environmentally friendly compared to mining other Stores of Value (Gold)
Bitcoin is recognised as a store of value, making it comparable to gold. In 2020, 3,200 tonnes of gold was mined, equating to approximately 90,301,440 million tonnes of CO2 emitted.
In comparison, Bitcoin is estimated to emit around 37 million tonnes of CO2 throughout 2021, with China powering 65% of the hash rate in March 2021. China pledges to be net zero by 2050, along with most of the world, under the Paris agreement. Under the assumption this is achieved, this would indicate Bitcoin will be powered by renewable energy by 2050, making it a zero-carbon technology. In addition, gold mining is renowned for being one of the most destructive industries responsible for polluting drinking water with cyanide, mercury and other heavy metals whilst destroying pristine environments and causing damaging health effects. Removing reliance on the need for gold not only has the potential to decarbonise the gold reserve industry but also reduces these negative environmental and health impacts. However, the reliance on countries sticking to the Paris Agreement is needed in order to decarbonise Bitcoin.
Edit: Information on China's energy policy
China uses the most cost-effective renewables and could viably generate 60% of its energy with green energy by 2030. It is estimated the renewable energy implementation could save China around 11% in monetary cost. Feasibly following the laws of economics, Bitcoin miners will be more likely to use renewable energy sources if they are cheaper. Therefore, reducing Bitcoin's carbon footprint.
Reddit Source
- Other human activities produce comparable results.
According to a recent study, watching Netflix for an hour produces 100g of CO2.
Netflix has 205 millions of subscribers.
Each Netflix subscriber watches two hours daily, on average.
Hence Netflix streamed 149 billion hours last year.
If each of these hours is 100g of CO2, then to watch Netflix, 15 million metric tons of CO2 have been added to the atmosphere every year. Netflix alone is almost one-third of the whole Bitcoin industry. So guess what happens when we add other services.
- Accusation
- Miners in China ravage the environment to produce Bitcoin. A large part of electricity production in China is made from fossil sources, especially coal, and the ecological footprint of Bitcoin is unsustainable.
- Defence
- Miners, by their nature, have the incentive to search for energy at the lowest possible cost. The energy market, like any other, is governed by the laws of supply and demand. The cheap energy is typically produced in excess that otherwise would not be exploited and literally wasted.
- Many miners are concentrated in large hydroelectric plants (for example, in China) where the levels of production surplus are enormous and can thus obtain very low energy prices. Suffice it to say that in 2017, compared to 250twh produced by the Yunnan dams, 155twh were used (95twh thrown away, since they cannot be stored).
- Recent studies show that bitcoin mining uses 39% energy from renewable sources (solar, hydroelectric, wind, geothermal, etc.) and 25% from energy derived from nuclear power and, to a minimum, fossil fuels. This percentage is steadily increasing, especially in China, where the transition to low carbon footprint production is happening more rapidly.
- Bitcoin helps the efficiency of the energy industry; for example, it can help prevent "Renewable Curtailment" as well as making it profitable to capture gas otherwise destined to be burned in gas flaring which encourages producers to reduce carbon emissions. Low-carbon energy projects such as hydroelectric, nuclear or renewables can be made profitable by selling the excess energy produced to the mining of bitcoin.
- A very large part of the energy produced is not used correctly, partly because it despairs in unprofitable uses (dispersion in networks, thermal dispersion in endothermic engines etc ...) and partially because it is produced in places or moments where not necessary (e.g., power plants producing during off-peak times, nuclear power plants when price is too low, etc.). Well, in this space, Bitcoin can make a massive contribution by efficiently using resources that would otherwise be wasted.
Notice that rejected energy accounts for around two-thirds of all electricity generation. This energy is produced but ultimately does not go to practical work. The amount wasted annually is around 66.7 quadrillions of BTUs (for short: "quads") of power. For perspective, that is the energy equivalent of wasting 2.3 billion metric tons of coal every year.
The potential for Bitcoin-powered renewables is already evident in China. A 2019 report by Coinshares found that approximately 75% of Bitcoin mining comes from renewable energy sources, much of which stems from newly created hydroelectricity. These new revenue streams have brought power plants online, which otherwise would not have been economically viable given existing conditions.
- Bitcoin is a battery.
So, if we think of Bitcoin as a battery, what can we do with it? The critical properties of Bitcoin's battery are: 1) always on and permissionless (no need to find customers, just plug and go) and 2) naturally seeking low-cost electricity: it will always buy when the price is right. Given those properties, Bitcoin's battery can assist renewable builds (and electric grids more generally) in several ways: - Interconnection lines: When developing new energy resources, you must apply them to connect them to the grid. Texas alone has over 100 GW of renewables in its lines. These lines can take years to clear. In the meantime, these assets could be online and earn Bitcoin.
- Project finance: Renewable developers need capital to finance build-outs before they have customers. Bitcoin's battery is always ready to be the first customer.
- Geographic issues: Sometimes, the sunniest, windiest places are not the ones with the most customers, so it's hard to justify the development of new renewables. Bitcoin's battery solves this, becoming a "virtual transmission line" of sorts.
- Timing & grid balance: Sometimes, when the sun shines and when the wind blows is not when we need the most electricity. Yet, electric grids are marketplaces that must balance supply and demand perfectly. Therefore, grid-connected renewables often have to "curtail" (turn off) if they produce too much energy at the wrong time. Bitcoin's battery is ready to buy 24/7/365 when the price is right, turning up and down as needed and participating via direct power purchase agreements and demand response programs.
- Underperformance: Related to the timing & balance issues above, often, renewables produce more energy than is needed on their grid, leading to subpar financial performance. Bitcoin's battery is ready to buy if no one else will.
- Cleaning the grid: Even outside of renewable generation, Bitcoin's battery can help improve both emissions and the energy mix. For example, Crusoe Energy attaches efficient turbines and mining equipment to existing gas flaring sites, both improving emissions and converting energy into Bitcoin's battery. Taking this a step further, you could even then take those profits and reinvest them in on-grid renewables elsewhere, another twist on the idea of Bitcoin as a "virtual transmission line" (aka battery).
- Accusation
- The Bitcoin network is maximally inefficient. PoW leads to a considerable amount of energy consumption for each Bitcoin transaction if, for example, we compare it with Visa.
- Defence
- The energy consumed by the Bitcoin network is also used to secure it since an attacker who wants to try to destroy Bitcoin would have to use (therefore buy or produce) a higher amount of energy compared to that used by the Bitcoin network.
- PoW is efficient and mining is a highly competitive industry. Any slightest energy inefficiency is punished by lower profitability. This guides miners towards the highest possible efficiency.
- The cost of mining is not the energy cost of transactions, and specific metrics they claim to compare, e.g. the price of a single bitcoin transaction with the energy consumption of a transaction on the Visa circuit, are entirely meaningless. The mining mechanism serves precisely to make the system safe (from double-spending to other possible attacks on the network) in a trustless network, i.e. without a central authority that effectively updates the ledger. The only honest comparison would be with the overall cost of circuit security systems and banking systems. How much is spent each year globally to make banks and payment systems safe and reliable? With all the dedicated servers, data centres, network infrastructures, and procedures constantly running for authorisation, settlement, clearing, reconciliation, etc. Not to mention the costs for the construction, operation, maintenance and surveillance of ATMs, bank branches, vaults and related security systems, etc.
- In a very well-written article, Conio's Guido D.Assori (who signed the very first SegWit transaction), says this is a feature, not a bug.
Here is a courtesy translation of this specific part of the article, where he answers Paolo Attivissimo's accusation about bitcoin consuming all that energy to validate only 7 transactions per second.
All this energy for 7 transactions per second?
The third attack would be that Bitcoin would move 7 transactions per second, and that in a nutshell for a system of this kind even a few kilowatt hours would be wasted (curious, then, that Attivissimo remembers this after accepting Bitcoin donations for years, on his blog, of this big problem).
Quickly: this number unfortunately arises from a profound misunderstanding of the real decoupling between the technological infrastructure called "blockchain" and the transfer of value named in Bitcoin.
It's frequent, but that doesn't make it any less wrong.
Premise: "It's a feature!", i.e. the size of the Blockchain is deliberately small.
Being able to write on a blockchain must be a luxury, in order for it to remain decentralized, so that everyone, at any time and with relatively little effort, can autonomously verify the correctness of transactions on the network, and not just the large banking institutions.
However, now at every moment of the day, on cryptocurrency exchanges, on custodial platforms, by means of pegged tokens, on sidechains, on Lighting Network, by means of CFDs, Bitcoins are intermediated and exchanged, or contracts that are traced back to their value , with varying degrees of enforcement.
And this happens through a number of transactions that are much more than 7 per second, believe me! To expect the opposite would be like demanding that our morning coffee paid for at the bar be recorded by all the backups of all the nodes of all the interbank circuits in the Eurozone.
So how many transactions, really?
In general it is an unmeasurable number, and it will be less and less, the estimates will be more and more heuristic, also thanks to privacy preserving platforms.
We can say, to make the general idea, that every transaction that takes place on an orderbook of any platform, which represents Bitcoin, can only exist thanks to the fact that, underneath, there is the Proof Of Work which, if necessary, allows the settlement of a precise state of a chain of transactions of indefinite length (my token goes to you, who gives it to him, who gives it to the other, who breaks it in three and gives it to the other, who collects 8 ). Don't you expect all the coins you exchange to end up noted down somewhere?
Simply, people rely on intermediaries every day to exchange value in Bitcoin without using a blockchain directly.
The global concept of decentralization is maintained, relocation increases with confidence on the last mile (not always! LN!) but the connecting element always remains the last, only, true, mandatory, digital ledger in which the compensation movements.
Therefore, comparing the imaginary 7 transactions (which is a number that was good in 2013, today there are many more even on-chain) to the world's ability to transact Bitcoin, and linking it to PoW, is a bit like pretending that there are, at all times, a sufficient number of armored cars to move all the gold in all the vaults of the world that intend to exchange gold.
Of course, that's not how it works.
Bitcoin is not a payment system but a settlement system. Therefore, the comparison should not be made with payment circuits (credit cards), but with the various settlement layers (SWIFT, CHIPS) or Fedwire.
On this particular aspect, please consider reading A Closer Look at the Environmental Impact of Bitcoin Mining
Bitcoin is a settlement system, not a payments aggregator
First things first. What is Bitcoin, and what is it not?
Bitcoin is a settlement system like FedWire. It is not a payments aggregator like Visa. I constantly see Bitcoin compared to Visa, MasterCard, or PayPal. This is the primary source of mathematical atrocities whereby Bitcoin's overall electricity cost is divided by its transactions and then compared to something it's not. Energy use per settlement transaction is a nonsensical metric by which to judge Bitcoin's energy use.
Just like the 800,000 or so daily FedWire transactions are not a good measure of the total amount of daily Dollar (USD) transactions, Bitcoin's 325,000 or so daily transactions are not a good measure of the total amount of daily bitcoin (BTC/XBT) transactions. This is because most bitcoin transactions are not visible. They take place inside the payment aggregation systems of exchanges, on the Lightning network, and yes, even inside of actual aggregators like PayPal, Square, or MasterCard. Only periodically are they settled onto the Bitcoin blockchain as visible transactions.
Solutions like this are referred to as network layering. This is a tried and tested approach to separating casual retail transactions from heavier settlement transactions, and it is precisely how we already do things in the fiat monetary and payment systems. In such a system, the base layer, like FedWire (or Bitcoin), only acts as the final arbitrator of settlement transactions. Everything else, which is the vast majority of all transactions, happens in higher payment aggregation layers, which are often entirely different systems.
In other words, Bitcoin is not a competitor to Visa, MasterCard or Paypal. Instead, Bitcoin is an independent monetary system that aggregators can make use of.
Presenting Bitcoin's electricity consumption in terms of its daily number of settlement transactions is a red herring.
- Similar considerations can be made for a comparison between gold and bitcoin as "digital gold", and then in addition to the costs for the safe custody of gold, those for its mining, refining, smelting, transport etc. should also be added. I challenge anyone to argue that all these can be considered particularly "green", but strangely I have never heard anyone complain and ask to ban gold for its environmental impact.
A very Good long-form by Nic Carter debunking a Bloomberg article on mining contains a summary of all the above arguments: Noahbjectivity on Bitcoin Mining The Bloomberg columnist Noah Smith has a lot of thoughts on Bitcoin. Some of them are really solid and engage with the reality of the protocol itself, which is rare for a member of the mainstream media circuit. He also discloses that he owns Bitcoin, which is impressive for an economist and an established member. So I'm pretty happy with him overall. I don't want this piece to be interpreted as a blanket critique of Noah's stance on Bitcoin. However, Noah's recent column in Bloomberg, Bitcoin Miners are on a Path to Self-Destruction, makes a few claims that warrant a response.
Noah's basic premise is that Bitcoin miners are effectively hogging the grid in the various places where they operate and risk getting banned entirely. Not only is the notion of a global coordinated ban on mining far-fetched, but Noah relies on a few claims that are dubious at best. Let's investigate.
A few "all-rounders" long form: Other Useful Links: If you have any other suggestions, please point me in the right direction, and I will try to address every issue.
This post is eligible for my project: I am a strong believer in the utility of local boards.
I am lucky enough to be able to express myself in at least a couple of languages, but I know this is not the case for everyone.
A lot of users post only in the local boards because of a variety of reasons either language or cultural barriers, lack of interest or whatever other reason.
I personally know a lot of very good users (from the italian sections mainly, for obvious reason) who doesn't post in the international sections.
I think all those users they are missing a lot of good contents posted on the international (english) section or on other boards. If you think you can help here, just visit the thread! |
