Bitcoin, Environmental Hazard or Blessing in Disguise?

In 1986 Alan Moore’s acclaimed graphic novel “Watchmen” the Doomsday Clock acts a symbolic representation to how close the world is to complete annihilation. The closer the clock stands to midnight, the nearer the world is to Armageddon. Quite dramatic, but for many the global environmental crisis is nothing to joke about. For others, there’s still time to move away from fossil fuels and other harmful practices as human civilization’s impact in the crisis remains vague.

Bitcoin role and accusations on its wastefulness have escalated in recent years, especially as popularity and mining operations started to flourish. Reports on Bitcoin’s excessive energy consumption surpassing entire countries are now commonplace, but how much of this is valid criticism or plain nearsightedness? And what can be done moving forward?

Like Turning Air to Gold

Detractors usually fail short to compare the true long term implications of such disruptive technology. The fact that energy consumption levels surpass more than 160 countries (and counting) already seems hard to justify at this stage, where benefits don’t appear to outweigh the downsides. Mainstream adoption has not been achieved yet, and while the industry continues to grow, it’s still far away from reaching and outpacing current established actors. The amount of energy required to execute a single transaction on Bitcoin’s blockchain to thousands in the Visa network will completely shock the average person. It’s a fact at this point that Bitcoin is far away from being energy efficient. However, taking into consideration that blockchain technology is out to disrupt, simplify and agilize entire traditional infrastructures, the ends could more than justify the means. Although impossible to quantify, one can even argue that Bitcoin’s high energy expense — a prerequisite for its unhackable, state of the art security — is much less than the expenditure of all central and private banks logistics needed to run our current financial system.

Some voices like Democracy Earth’s Santiago Siri have argued that Bitcoin can become an index, precisely measuring how much energy costs across the globe. Furthermore, with the exponential advance of clean and renewable energy sources, it’s not far fetched to imagine how Bitcoin demand could help improve and push for new, more efficient and cheaper technologies, especially when big institutions and governments start their own mining operations.

Consensus or Compromise?

Proof of Work (POW), the consensus protocol behind Bitcoin and other cryptocurrencies mining mechanism will have to eventually come to terms to alternatives options like Proof of Stake (POS) and its variations (Delegated Proof of Stake, DPOS). POS is touted to be massively cheaper and more efficient — in both hardware and consumption — than POW, but not without recurring skepticism. It still remains rather experimental compared to battle tested POW, at least until a major project like Ethereum switches to it, which could expose its flaws at a different level.

On the other hand, the success of a Proof of Stake blockchain (or even an hybrid POW/POS style) could eventually add pressure for Bitcoin to move away from POW and embrace the new.

A Clock Without a Craftsman

It’s too early to tell how this crisis will play out, not only in terms of cryptocurrencies but globally. At this point, it seems unfair that cryptocurrencies are getting the short end of the stick, as most critics appear to come from a place of not seeing the real underlying value and immense potential in them. If successful, the world at large will get huge benefits, a paradigm shift that will make most if not all known industries much more energy efficient. The cost of the experiment, while far from perfect, appears to be under control and worth fighting for.

We also have to come to terms that despite our best efforts, not even clean energy is free of consequences and impact, thinking otherwise would be naive. The move from fossil fuels to other renewable sources may solve some issues but will also come with its own.

Hopefully the pieces will fall into place at the right time (just like conflicts of the past) as current exciting breakthroughs on different technologies and the synergy between them, could wash away most urgent concerns in our hour of need. Meanwhile, the clock keeps ticking.