The more energy Bitcoin consumes, the better

(this article is a copy of the original in spanish published on Estudio Bitcoin)

The title of this article may sound deliberately provocative in order to attract readers, it may sound wrong, or it may sound obvious. I think there is a bit of everything 😉. It’s not my intention to present technical arguments or to go navigate through a sea of data and evidence to support an opinion, but rather to share some thoughts regarding Bitcoin energy consumption. A lot has been written about it, so I don’t expect this article to become anything but just one more. Either way, I’m going to write it.

Energy for what?

The process of building blocks to timely order transactions in Bitcoin, called “mining”, requires the consumption of energy to perform computational tasks and obtain a Proof of Work. Without delving into this mechanism now, the important thing to remember is that the more energy is needed to carry out the process, the more difficult it will be to reverse what has already happened (the blocks already generated). In other words, it will be more difficult to reverse history. This is very important in a value transfer system: we all want the greatest possible certainty that once a payment has been received, it won’t be reversed.

One of the first ideas that may come to mind when understanding this is that consuming more and more energy cannot be a good thing. Immediately, some may add the “environmental hazard” as yet another idea into the mix. Personally, I don’t think that this line of thought is wrong, but after reflecting on it, I do think that more elements can be added. The first one is to understand that humanity is characterized by consuming more and more energy as it evolves. Our very own progress means that we need more and more energy to sustain our civilization, and I am not referring just to some recent phenomenon in the last century. The second point to consider is that consuming energy is not the same as harming the natural environment in which we live. So this consumption does not necessarily imply contaminating, however depending on the scenario and the type of extraction, both can be closely related.

The debate on energy consumption in Bitcoin, in my opinion, is not rooted in the consumption itself but on the valuation of the result obtained, even if sometimes it is not expressed that way. We are surrounded by tools and systems that consume amounts of energy much higher than what Bitcoin consumes today, but the debate does not usually focus on them. The reason is simple, and it is that those who see the energy consumed by Bitcoin as a waste are actually stating that for them Bitcoin does not add value. Or at least, not a value that justifies that energy. And it’s a totally valid point!

What value does Bitcoin bring then? The answer to this question is completely subjective of course, but since it is me writing this piece, I will answer from my point of view. I believe that Bitcoin is money (or just a real asset, we leave that for another debate) neutral, global, with defined issuance, without requiring permission to enter or stay, and resistant to failure, confiscation or censorship. I personally believe that this is extremely valuable, and it will be more so as time goes on, but not everyone could think the same. We all know that in this universe nothing is free, neither from a physics point of view nor from an economic point of view. Nothing is free. Then…

Is Bitcoin a system that is worth its cost?

In reality, it’s up to each one of us to make the individual decision of what to do with Bitcoin, and if it’s a system that is worth what it costs. Ultimately, value is subjective. Those individual decisions, when interconnected in a coming and going of opinions, actions and commercial exchanges, result in the Market (yes, with capital M). The market is all those individual decisions put to the test, with investment and risk. Because yes, the market is all of us. Today reality shows us that this system of which we are all part (the little word with “M”) considers that Bitcoin is worth what it costs, and that includes what it consumes in energy. People using it (for whatever they want) and converging on a price tell us that they do believe it is worth existing. What authority would I have to objectively say that Bitcoin is a waste of energy? What authority would anyone have to impose that opinion on others?

Of course, between the option that the energy used by Bitcoin harms the environment or not, I’m going to choose the latter, and it is not all the same to me. Luckily I’m not the only one who thinks that way and there are people working on it, and I’m not just referring to people working on making only Bitcoin’s energy “clean”, but all the energy we consume as humanity. I also prefer systems that consume less energy to achieve the same goal, that’s called efficiency 🤓. But therein lies the key then… “achieving the same goal”. The characteristics that Bitcoin presents today are due, in large part, to energy consumption. Even if we manage to be more efficient in its use, the purpose of the system as it is designed is precisely that the energy cost increases, or at least is high enough to provide the desired security. The inescapable cost provided by energy expenditure (a natural resource impossible to falsify), and the incentive system, is what makes Bitcoin resistant to attacks by entities with great economic capacity or political influence. Currently I am not aware of any another system that consumes less energy and achieves the same goal as Bitcoin.

The problem is general since, as I said before, everything depends on the valuation we make of that object of consumption. We could then ask ourselves what things in our lives justify their energy consumption. The cars? Video game consoles? The clothes dryers? The lights that adorn the buildings or monuments on a certain festivity? Hey, the prevailing world monetary system? And in all those cases, do we question energy consumption in the same way? Because in many of them, it is greater than that of the Bitcoin system. The answer is clearly subjective.

If we don’t question energy consumption in all those cases, why would we question Bitcoin? Is it that Bitcoin is not worth it and the others are? I personally believe that global, neutral, finite, open, and censorship-confiscation resistant money is more valuable to humanity than many of the things we use in our modern day lives.
If, on the other hand, we do indeed question the other uses of energy, then we recognize that the problem is not limited to Bitcoin and that as a species we still have a long way to go in better and greater use of the energy around us.

Honesty and action

After recognizing what is the reason for our vision about it, we can ask ourselves what we do about it. It reasonable to think that we all have different values ​​and different causes that we want to “fight” for. Just as it is also logical to “choose our battles” (this phrase, in this context, was used by someone once). Hardly anyone can push their beliefs and values ​​to the limit and be perfectly honest about it. Anyone who cares about the use of energies that do not harm the natural ecosystem should then, in addition to criticizing Bitcoin, stop using all electronic devices? Since surely the energy they consume does not come from 100% clean sources, not to mention the manufacturing process. The same can apply to clothing or any other item. Even a tomato purchased at a farmers market has probably been transported at some point by a truck or vehicle that used fossil fuels and released more pollutants into the air than intended.

We could go further, but the point is that those limits are hard to live by. However, this does not imply that pursuing those values, although far from that utopian purity, is not important. Or even that those sacrifices of purity do not really represent a practicable balance to pursue the goal of the cause. It is important to be honest with oneself and with our peers about what we want from others and what we do ourselves. Why did I get to this point in my salad of ideas? Because I think that honesty is what is sometimes missing when addressing the energy consumption of Bitcoin, pointing it as the focus of the problem when it is just one more example of a bigger issue. And because I also believe, as I said before, that the motivation behind the criticism is in the low value assigned to Bitcoin by the critic.

Conclusion

The way Bitcoin works requires that exists energy consumption because it requires that the participants (miners) necessarily incur a cost. This dynamic is what keeps the incentives aligned and the security of (some aspects) of the network. And that’s not bad, on the contrary! Almost everything that represents progress for humanity consumes energy in some way or another, and Bitcoin is not special in that regard.

The market is the mechanism that allows us, as a society, to decide what we value and what we do not, without imposing one decision on all members. We do it by putting our effort and capital on the table. We decide with actions that cost us, that’s what it’s all about. There is no “voting” more honest than that, and each one does it individually. The market is deciding that Bitcoin is worth it, that its current energy consumption, no more and no less, is justified. Maybe this will change in the future, for better or worse.

I believe that Bitcoin is very valuable to humanity. I hope it continues to consume more energy. I hope that we can capture energy in more efficient ways and with fewer negative externalities.
I hope humanity continues to consume more energy.