Bitcoin Is The World’s Greenest Asset.
Bitcoin uses as much energy as the Netherlands. You’ve likely heard. Here’s what they didn’t mention. Gold uses as much as Australia. Let’s not forget about the good old banks. They consume as much as 75% of the African continent. Here’s what that looks like:
How much energy is that exactly? Here is what each of these industries consume (in Terawatt Hours per year):
- Bitcoin: 110
- Gold mining: 240
- Banks and ATMs: 264
It’s also worth noting that most estimates of Bitcoin’s C02 emissions are based on assumptions on how that energy is burned. In 2019, one report suggested that 73% of Bitcoin’s energy consumption was carbon neutral, mainly because of hydro power in major mining hubs like Southwest China and Scandinavia. On the other hand, in 2020, the CCAF estimated that same figure at just 39%. But even at the lower number, that would mean Bitcoin’s carbon neutrality is twice that of the U.S. grid. This means that while Bitcoin may use a lot of energy, it doesn’t mean Bitcoin creates the equivalent “coal-powered” carbon emissions.
Here’s a comparison of the same industries based on C02 emmissions (in millions of tons per year):
- Bitcoin: 70
- Gold mining: 140
- Banks and ATMs: 400
There are also traditional mining byproducts not present with bitcoin mining. If we view Bitcoin as a store of wealth in competition with gold, then we also need to consider the waste produced in traditional mining which is not a factor with Bitcoin mining. Byproducts such as waste rock:
- Waste rock to produce 1 BTC: 0 t
- Waste rock to produce 1Kg of Gold: 1270 t
Bitcoin actually has the most “green-driven” mining industry in the world. This is because green energy reduces the cost to miners, increasing their profits. One of few scenarios where both, profits and green energy go hand in hand. Bitcoin mining will move to, one, places that value Bitcoin mining and, two, places where the cost of Bitcoin mining is lower. The recent China ban on Bitcoin mining demonstrates this well. Miners simply move. Smart, emerging economies are taking advanatge of this by rolling out the red carpet for miners. Some analysts have estimated that China’s decision on this will cost their economy $1T.
One question that has somehow been completely overlooked is: What energy savings would bitcoin bring about? If it’s total greenhouse emissions we are concerned with then we should calculate the energy savings of removing every single bank and paper currency on earth, powering the huge bank buildings, every bank employee driving to work and the number of trees cut down for paper currency. This would cut C02 emmissions by 100’s of millions of tons each year.
Bitcoin creates a much greener interaction with money. Fiat money such as dollars are deflationary. More and more are printed. That in itself is a “green” problem which Bitcoin solves but that constant printing also results in inflation. A dollar today is worth more than a dollar in a year. This creates inflationary thinking and, whether consciously or not, this causes people to part with their fiat money much more easily and quickly. They don’t believe it will be worth much going forward. This creates mass consumerism much of which is wasteful consumerism and not energy efficient. In fact, it’s terribly “ungreen.”
Bitcoin, by contrast, is deflationary. There’s a fixed amount. It won’t be printed once the cap is reached. That means there’s a strong likelihood a bitcoin today is worth less than a bitcoin in a year. This creates deflationary thinking. People really consider what they need versus what they just want. It’s harder to part with this money and that reduces mass and wasteful consumerism. Overall, this is a far more environmentally friendly relationship with money.
Here’s our mini documentary on Bitcoin:
Transportation of assets should also be considered. Transporting gold is extremely expensive and energy-intensive. Paper currency is actually very heavy in bulk. Large shipments of paper currency actually happen far more than you might expect. Transporting Bitcoin costs nothing, you can transport an infinite amount (well, up to the hard cap) on a single hardware wallet or smartphone. It may seem far fetched but this will become even more important with space travel, an industry moving at a rapid pace and where weight is paramount.
The cryptoverse harbors multiple energy-efficient solutions. Bitcoin was the world’s first ever blockchain but it doesn’t stop with bitcoin. There are many interesting, energy-saving projects in the cryptocurrency space. They’re represented by alt coins, being “alternative coins” to bitcoin. Take for example voting. Voting is traditionally done with physical stations and staff. An energy-intensive affair with, often, questionable results. By contrast, their are certain alt coins which specialize in decentralized, virtual voting. Not only is this far more energy efficient but since it’s blockchain-based, no trust is required, it is immutable.
Bitcoin’s “greenness” could also be evaluated based on transfer efficiency. There’s a lot said about slow Bitcoin transaction times but slow is a relative term. Slow compared to what? Consider that it’s seen as a store of wealth at this point. Then, is it slow compared to a transaction in gold? No, certainly not. Actually, it’s not even slow when compared to current bank transactions. Here’s a real world example. The other day, I helped someone move about $300,000 of BTC. Here’s a quick comparison.
We moved the bitcoin from one account to another:
- In under 5 minutes
- At a cost of about $50
- With no one involved
If I did the same thing with a bank, we would have moved these funds from one account to another (across a border):
- In 3 to 5 business days
- At a cost of around $3,600 in currency conversion and other fees
- With various parties involved who could stop the transaction and ask questions
Some may argue that this doesn’t fit into the energy argument but when you look closely the traditional methods are far more energy-intensive. One, you lose a lot of monetary energy through high fees (which often make little sense) and, two, the more parties involved, the more energy required. The real question is: which do you prefer?
Bitcoin is also the fastest asset to ever hit a $1T market cap. It took just 12 years. The same feat took Apple 30 years longer. So, if you were to rate assets on an energy-to-value scale, it has certainly accrued the most value in the shortest amount of time and therefore using energy for the least amount of time.
When looking at the facts, the energy argument appears to be one of the weakest attacks on the world’s first ever blockchain. Personally, I wonder about the reasoning for such an attack. Perhaps this proves the very real threat of this decentralized cryptocurrency to the traditional system.
So, what does the future hold for this disruptive asset? While volatility is certain, I feel Bitcoin’s future is bright. The ongoing development of central bank digital currencies (CBDCs) proves the genius of this technology. Imitation is the purest form of flattery. They’ll do it without the decentralization aspect, of course. I believe Bitcoin should surpass gold’s market cap within the decade. With gold’s market cap at $11.5T, that would mean 1 Bitcoin would be worth $523,809 all while making the world “greener.” In the words of Satoshi Nakamoto, the creator of Bitcoin, “It might make sense just to get some in case it catches on.”
