Ban Bitcoin

Three years ago I wrote “Happy 10th Birthday, Bitcoin. Now Go Away Before You Fry Us All,” saying “let’s hope it doesn’t make it to its bar mitzvah.” Well here we are, Bitcoin is 13 years old, that happy bar mitzvah age. And my how it’s grown, as has the energy consumption that the cryptocurrency requires; according to Digiconomist, to an estimated 77.78 terawatt-hours per year (about the same as the entire nation of Chile) and pumping out 36.5 megatonnes of CO2 (about as much as New Zealand). The Cambridge Bitcoin Electricity Consumption index says consumption is even higher, at 106.92 terawatt-hours (TWh), but doesn’t calculate the carbon footprint, which is a function of how the power is generated. The electrical use is a feature, not a bug, as explained by Alex Hern in the Guardian:

“The reason for the mining requirement, which is essentially asking a computer to continue rolling dice until it rolls a few thousand sixes in a row, is that it ensures that no single person can dictate what happens on the network. …Because the problem is so processor-intensive and so randomly rewarded, it’s prohibitively expensive – in electricity and computing power – to attempt to fake it. But it’s also a vast use of electricity, worldwide.”

The problem is that in much of the world, electricity generation is carbon-intensive – and as we keep saying, we have to reduce our carbon emissions by 29 gigatonnes by 2030 to stay below 1.5 degrees of warming. That means emissions of less than half of what we are pushing out now, and looking carefully at everything that emits CO2, and questioning whether it is worth it. That’s why we keep bothering about Bitcoin; its emissions have to go away too.

The Bitcoin fans suggest that this isn’t a problem, claiming that Bitcoin miners use renewable or wasted energy, and all point to a recent article by Haley Zaremba with the title “This Russian Energy Giant Is Mining Bitcoin With Virtually Free Energy“. But what they are doing is using natural gas that would have otherwise been flared off. So it is using a wasted asset, but it does nothing to reduce CO2 emissions. If anything, it provides a perverse incentive to increase them because they don’t have to worry about the emissions anymore, which were previously a problem. “The CO2 that gets freed during the oil drilling is normally a liability for oil companies as they have to burn it into the atmosphere, which results in fines,” Yahoo! Finance reports, according to Zaremba, who adds:

“The location of the new Russian Bitcoin farm also means that the costs of the operation will be relatively low. Instead of paying a premium to use energy from the grid, locating the cryptocurrency mining on-site at an oil field means that a steady supply of natural gas is virtually free.”

In fact, according to Marketwatch, the rising value of the Bitcoin “has made it more profitable to use less-efficient equipment.” And 2/3 of that Bitcoin mining is taking place in China, where half of the electricity is generated using coal. Many Bitcoin fans will say that they are mining with the renewable half, but as Digiconomist points out:

“It is important to realize that, while renewables are an intermittent source of energy, Bitcoin miners have a constant energy requirement. A Bitcoin miner will, once turned on, not be switched off until it either breaks down or becomes unable to mine Bitcoin at a profit. Because of this, Bitcoin miners increase the baseload demand on a grid. They don’t just consume energy when there is an excess of renewables, but still require power during production shortages. In the latter case, Bitcoin miners have historically ended up using fossil fuel-based power (which is generally a more steady source of energy).”

Right now, Bitcoin is on a roll, and many believe it is going to roll a lot higher. Our favorite green company JPMorgan Chase predicts that “Bitcoin has the potential to reach $146,000 in the long term as it competes with gold as an asset class.”

Even though I have been reading and writing about Bitcoin for years, I must confess that I still don’t really understand what it is for and what good it does. I reached out to Caleb Silver, the Editor in Chief of Investopedia for comment and explanation and he responded:

“While Bitcoin mining and storage both require a lot of electricity and a constant source of energy, that energy can come from renewable or less carbon-reliant sources like hydroelectricity or solar. That doesn’t mean most miners aren’t using old-fashioned electricity to run their machines – most are. There is no comparison, however, to the amount of energy or carbon production required to produce one ounce of gold versus one Bitcoin, although Bitcoin miner energy usage is growing at a much faster rate than gold production given the demand for the cryptocurrency. That demand is only going to grow as multi-trillion dollar financial institutions are embracing some forms of cryptocurrency and allowing their customers the ability to include it in their portfolios, and central banks around the world are experimenting with digital currencies and blockchain technology. Like a lot of new technology advancements, the growing adoption of cryptocurrencies will be inefficient and wasteful – especially wasteful in energy consumption, until someone smart comes up with a better mouse-trap, or energy source, in this case.”

I still do not really get it but then I do not understand why we need gold as an asset class either. Another Bitcoin fan says they imagine that “clean-energy climate campaigners will soon have BTC in their sights. BTC has saved a lot of coal miners in China from hitting the wall in 2020. One should have to buy carbon credits when buying BTC.”

I think that is a fine idea; let the clean-energy climate campaigners pile on now. Make Bitcoin carbon neutral with renewables or credits, or ban them.