Electricity, Bitcoin and the Bottom Line
Economics Drive Environmentalism.
As much as I hate to say it, it's true. I majored in Conservation Biology at the University of San Diego, and minored in Environmental Studies, and I have been in more than one lively debate with more business-minded folks on topics ranging from oil and gas, conservation, global warming, etc. Let me preface by saying that I am very concerned with global warming and the overall impact we are having on our planet. But I believe that one way to help protect our planet is to utilize economics. To put it plainly, economics drive environmentalism.
Here’s a quick example. By the 1850's whale populations around the world were on the verge of collapse because of the whaling industry. Can you guess what saved them? Surprisingly, it was the newly blossoming oil and gas industry. As kerosene and petroleum lamps became a cheap, readily available and reliable source of energy, the demand for whale oil to light people’s homes plummeted, taking the whaling industry down with it. As strange as it sounds, we have oil and gas to thank for saving the whales.
Conversely, do you remember when General Motors released the first electric car back in the 1990's? Exactly! That technological milestone has all been scrubbed from our collective memory banks. If you've never watched the documentary “Who Killed the Electric Car” I recommend it. By the late 1990's, GM pulled their electric vehicle line solely because they couldn’t figure out a way to profit from the cars once they were sold. Economics drove the decision.
Bitcoin has received a lot of headlines for how much electricity it uses to maintain its network. Elon Musk just tweeted that Tesla will stop receiving Bitcoin as payment for its cars because of how much energy Bitcoin consumes. It's true, the electricity needed to supply the computers that run, mine and maintain Bitcoin’s blockchain network is staggering: equal to the power needs of some small countries. Because of this narrative Elon is pushing, I have had more than one person tell me that they can't ethically invest in Bitcoin because of the huge environmental cost and contribution to global warming. Here is what the news isn’t telling you.
There are trillions of dollars being invested in new Bitcoin mining operations around the globe. And when big money gets involved, there is usually one singular focus: the bottom line. Big money wants to cut costs as much as possible and the easiest way to do this is by finding cheap and reliable sources of electricity. Electricity derived from coal-fired power plants is expensive simply because the energy (coal) costs money to mine and deliver to the power plant. Wind, solar, hydro and geothermal are cheap because after the upfront cost of building the power plant, the energy takes care of itself, i.e. it is renewable. The locations for Bitcoin mining operations are dynamic, meaning they aren't tied to a specific location and power grid like our cities. They can easily move and set up shop wherever energy is the cheapest.
Bitcoin mining operations are springing up across Iceland and Canada because of their cool climates and readily available access to renewable energies like geothermal and hydroelectric. Also, it is much easier to cool computers with naturally cold air from outside rather than running expensive air conditioning. There isn't much news about billionaire investor Peter Thiel putting $50 million of his own capital into a wind powered Bitcoin mining outfit in Texas, but it’s true.
Even before all this new investment capital, a large Bitcoin mining operation has been up and running high in the Himalayas for years, relying on hydroelectric because it’s the cheapest option to get the power they need. Other energy producers have reported that they are leveraging their electrical overcapacity to Bitcoin miners so no electricity they produce is wasted.
In fact, the University of Cambridge School of Business has recently reported that some 76% of all cryptocurrency miners use some mix of renewable energy. When analyzed further, they found that 39% of all cryptocurrency that is mined comes solely from clean renewable energy sources.
Believe me, Bitcoin is breaking the status quo and will continue to get attacked. Never mind that the banking industry uses more power than Bitcoin on a daily basis. Or the gold mining industry pumps out more global warming gases by orders of magnitude greater than Bitcoin mining. Do we stop to consider how much energy it takes to power the huge data centers of Google and Facebook? Chances are you are using their free products right now. Heck, you might even own stock in these companies.
The question we need to ask is who is benefiting from badmouthing Bitcoin’s carbon footprint? Wall Street and Big Banks are positioning their uber wealthy clients to start investing in Bitcoin and other cryptocurrencies. Make no mistake, they love this story because they are all getting Bitcoin on sale. As of the time of this writing they can purchase 1 BTC for almost a 50% discount off its all-time high of $64k just a few months ago. I’m preaching to the choir when I say that Wall Street and Big Banks do not have our well-being and financial security in mind. They will continue to bad mouth Bitcoin because they make more money by scaring us out of our crypto investments; or by keeping us as far away from Bitcoin as they can. Once they have sucked out most of the profits, they will change their tune and say, “Bitcoin is safe, it's green, it's not really used for significant amounts of criminal activity.” But by then it will be too late.
Once they have taken most of the profits for themselves and their wealthy clients, they will turn to us and promise the same thing. But they will charge insanely high fees to "get in on a deal of a lifetime”. Many will gladly fork over the cash or allocate a portion of our retirement accounts, because our collective memory is short and everyone wants a chance to make a quick buck.
My challenge to you is to do the research yourself, don’t take mine or anyone else’s word for it. Start here: this is the link to the report from the University of Cambridge and the Cambridge Centre for Alternative Finance detailing cryptocurrency mining energy usage.
Second, read a Dad Guide, it’s a great time to start your journey investing in Bitcoin and crypto.
If I can do it, then so can you!
-BJ
