Will Bitcoin Destroy the Paris Agreement, The Planet, And Life As We Know It?
The Paris Agreement on climate change enjoys the support of every government on earth, with one conspicious exception. Far from being a statist / Marxist / One-world Government / Rothchild / Illuminati / Trilateral Commission / snowflake / Jesuit conspiracy, Paris has been received positively by the business community and financial sectors, by sub-national governments such as cities, and by citizens and consumers.
Based on estimations of its consumption of traditional sources of energy, a lot of people are concluding that Bitcoin threatens to blow the whole thing up. But does it?
A. Yes, It’s A Big Issue
Good work by Digiconomist has drawn attention to two issues, one wider and one specific.
The wider issue: we all have a responsibility — in our public and private capacities— to protect and promote ecological viability. The argument goes that if we despoil the ecology’s natural and human components, we mess up its regenerative processes. As a result, we wreck the chances of current and future generations to enjoy peace and prosperity.
I don’t work for the United Nations any more, so I can now freely say that you’d have to be a sandwich short of a picnic to argue otherwise.
The specific issue: Bitcoin’s consumption of energy. This should matter to the Bitcoin community, and it won’t be enough to swat the issue away with “what-about” arguments. The community cannot excuse itself any more than it can argue that it operates outside of the physical limits of nature. Not only must it act, it must be seen to act, and its actions must be transparent and measurable.
B. The back and forth
With that out of the way, let’s revisit the source of the debate and some responses, for the benefit of anyone who’s missed both (after that, I’ll present some thoughts on how the issue should be portrayed and is being addressed.)
According to data analyzed by Digiconomist, the energy consumed by Bitcoin is now approaching the aggregate usage of Denmark. At the present time, this energy consumption is reported to be largely on coal-fired production in China.
Digiconomist makes reference to more than ten previous analyses dating back to 2013 that have drawn similar conclusions. The manner in which it presents its findings is as startling as the data itself. I won’t repeat them all here; you can see for yourself below.
Digiconomist: Bitcoin Energy Consumption Index
Bitcoin's current estimated annual electricity consumption* (TWh) 32.53 Annualized global mining revenues $13,487,831…digiconomist.net
This analysis has prompted a lot of media coverage. Here’s a small selection:
Ars Technica: “Bitcoin’s Insane Energy Consumption, Explained”
The skyrocketing value of Bitcoin is leading to soaring energy consumption. According to one widely cited website that…arstechnica.com
CNN: “Bitcoin Boom May Be A Disaster For The Environment”
Once shunned as a murky domain for cranks and criminals, bitcoin has started to attract mainstream investors. Its price…money.cnn.com
Grist: “Bitcoin Could Cost Us Our Clean Energy Future” (a story tagged under ‘currency manipulation’)
The Washington Post / Contributor / Getty Images If you're like me, you've probably been ignoring the bitcoin…grist.org
Naturally, social media has erupted in response. Reactions are infused with an undercurrent of eco-pessimism from people concerned about the environment (pro-tip: we should all be) and the crypto-skepticism of others.
Confirmation bias has gone into full swing, and a lot of people have gone into hyper-retweet mode without necessarily pausing to dig deeper.
The result? “Bitcoin is destroying the environment” has become a minor meme. You know you’re in trouble when anti-elite art collectors such as James Rickards incorporate it into their critique of bitcoin.
All of this has put the bitcoin community on the defensive (or at least the part that has acknowledged it — there are still a great many people who dismiss it as a non-issue.)
The question, however, remains: Is Bitcoin really as big a threat to the environment as Donald Trump?
Some thoughtful early commentaries have sought to address Digiconomist’s work and, in doing so, bring some sobriety into the discussion that’s followed. Here are two:
Mashable: “Bitcoin Consumes A Ton Of Energy, But It’s Not As Bad As You’ve Heard”
Bitcoin mining consumes a lot of energy. Every once in a while, someone compares this to another random metric - say…mashable.com
Bloomberg: “No, Bitcoin Won’t Boil The Oceans”
While much of the world marvels at bitcoin's meteoric rise, another part is focused on an environmental byproduct: The…www.bloomberg.com
C. Ifs, Buts, and Then Whats?
First, a word on the comparisons that have helped to make Digiconomist’s work so eye-catching. The basic flaw in its approach is that it draws like-for-like comparison where one could argue there isn’t one. For instance:
- Bitcoin isn’t a country. You think? Still, it’s worth pointing out for anyone inclined to draw facile comparisons. More than that, it’s important to point this out because it affects how we then understand responsibility and accountability.
- Bitcoin doesn’t enjoy the enabling infrastructure that, for instance, the US Dollar commands. Among other things, ‘King Dollar’ is backed by a US$600 billion military machine. This has a carbon footprint so large that it would be about the 35th largest emitter in the world if was its own country.
- Bitcoin isn’t like Visa either, which is subsidized by the US Dollar’s “exorbitant privilege.” This privilege allows it to externalize all sorts of costs, including ecological. This in turn helps Visa to maximize its market position and reach.
But this is the “what-aboutism” that I said wasn’t enough. It sounds retortish. What we need instead is a positive response that lays responsibility and accountability where they belong.
So here are a few points on what that looks like.
First, each country already takes responsibility for accounting for its own current energy consumption and future trajectory. This is done under the Paris Agreement through something called a nationally-determined contribution. In UN-speak: “Parties shall pursue domestic mitigation measures, with the aim of achieving the objectives of such contributions.”
We are embarking on a root-and-branch transformation from a fossil-fuel to a renewable energy-based economy at local, national and global levels. China, on which so much ink is spilt, is already the market leader in renewable technology and infrastructure investment. It aims to spend at least US$360 billion by 2020.
Here’s what the Bitcoin-energy waste criticism is missing: Bitcoin can only use the energy systems available to it. As energy production, storage, distribution, usage and accounting become increasingly renewable in their configuration, it’s reasonable to expect that the current wasteful trajectory will change. This is not even a Bitcoin-specific narrative: it’s a commentary on all economic activity.
Second, each industry has a responsibility. Bitcoin mining hardware will almost certainly become more energy efficient over time. In fact, this is already happening, if the new DragonMint miner from Halong Mining delivers on its promise.
We can expect more competition in this niche, not just in terms of producers exploring economic efficiency, but through regulators expecting energy-efficient certification.
This is because green credentials are gradually becoming a core component of market participation and success. There is no reason to expect that Bitcoin mining will remain outside of this seachange.
Third, each individual must tune in. For people living in coastal habitats eroded by sea-level rise (like my grandparents), climate change has been real for decades. It’s real for hundreds of millions of people today. And that’s just one of the attack vectors of climate change among many.
First-world libertarian fantasists — of which there appear to be a few in and around Bitcoin — would do well to connect with the rest of us who don’t have the luxury of consequence-free behavior.
D. My conclusion
So, all said and done, will Bitcoin destroy the Paris Agreement, the planet, and life as we know it?
Simple answer: If everyone does his/her bit, there’s no reason to believe it will.
Thanks for reading. Merry Christmas, peace and love to all.
About me: I was a senior official at the Executive Office of the Secretary-General during the establishment of Sustainable Energy for All, and in the run-up to the Paris Agreement in 2015. Bitcoin kinda changed all that. See you on Twitter at @A_Hannan_Ismail.