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I feel :
“The environmental concerns should not be only circling around bitcoin, we should stop blaming bitcoin mining for all the problems associated with Carbon emission and focus on rehabilitating plants and rivers if we really want to solve global warming and water crisis issue which have been largely the making of us humans .”
Elon Musk, a few weeks back very strongly brought up the carbon emission issue and blamed bitcoin to be one of the contributors. He abruptly decided to stop accepting bitcoin for tesla car purchases, quoting he is worried about carbon emission environmental issues associated with BitCoin mining, thanks to him, as this brought this issue to the center stage of the world forum.
The Crypto community, investors, big banks, and financial institutions started debating this issue on multiple media platforms. Michal Saylor a well-read Bitcoin bull and popularly touted to be the Jesus of Bitcoin came very strongly in support of Bitcoin and shared his opinion that all the energy & environmental concerns associated with bitcoin are much media hype and least based on the facts & figures.
So today we will look into some of the stats & reports published around Bitcoin energy usage and emission which may present a different story than what has been written and said by Elon & other prominent leaders who have been publicly raising their voice against Bitcoin’s ESG concerns.
Let’s Do Some Facts & Stats Checking :
Hass Mccook wrote in one of his recent article published on Bitcoinmagazine.com
Here is the link :
Bitcoin Emits Less Than 2% Of The World's Military-Industrial Complex Carbon Emissions
Firstly, thank you kindly for clicking on my click-bait title - it's trench warfare out here on the environmental…bitcoinmagazine.com
Where he clearly laid down the fact that :
- Bitcoin Emits Less Than 2% Of The World’s Military-Industrial Complex Carbon Emissions
He also wrote in one of his another piece on Bitcoin energy concerns, stating that
- Bitcoin emits less than 5 % of what the legacy financial sector emits in the form of Carbon emission.
What Cambridge Center for Alternative Finance (CCAF) Has To Say?
CCAF, in one of the report clearly quotes that :
- Bitcoin energy emission is roughly around 110 Terawatt Hours per year, which is a meager 0.55% of global electricity production, or roughly equivalent to the annual energy draw of small countries like Malaysia or Sweden.
How Much Energy Does Bitcoin Actually Consume?
How much energy does an industry deserve to consume? Right now, organizations around the world are facing pressure to…hbr.org
What Galaxy Digital Has To Say About Bitcoin Energy Issue?
The prominent digital asset management firm, Galaxy digital in his report has claimed that:
Bitcoin is more than twice as green as the international banking system.
They have reported few key points which I would like to lay down in bullet points for you all
- The annual electricity consumption of the bitcoin network stands at 113.89 terawatts per hour per year (TWh/year)
- While our traditional banking systems consumes 263.72 TWh/yr
- Also, our gold mining market consumes around 240.61 TWh/yr of energy.
One caveat to their report is that:
In case of bitcoin they have covered everything from bitcoin mining operations and transactions also, but while comparing the same with traditional banking they have excluded central bank and covered banks ,data centers, ATM’s, branches & card networks.
It will also be interesting to know what percentage of renewable energy does bitcoin’s network consume as compared to other industries
What Cambridge University, Coinshare Report Has To Say?
- In Dec 2019, Coinshare said in his report, that 73% of Bitcoin energy is clean energy powered by renewable energy sources.
- The University Of Cambridge has a different opinion. In one of the reports published in 2020, they estimated the renewable energy consumption of the Bitcoin networks to be closer to 39%.
Let’s assume that Cambridge reports are accurate, but still, this is much better than the entire world consuming energy in the form of an electricity grid.
The problem is not with how much energy is consumed in renewable energy by what industrial sector, the problem lies in what value these products & services offer to the people in return to what they consume as an input.
So Let’s Discuss the value proposition and see if it is really worth adopting Bitcoin & fuel its network expansion going forward.
Value Proposition Of BitCoin As A Product :
I Truly Feel That;
“The real value of any product can be decided by how it has changes the life of the common people at large”
So let’s understand:
The Role of Traditional Bank:
Banks have transformed a lot & had come a long way from the temples of the ancient world which used to act as a bank for many rich bankers(Kings )of ancient times, but fundamentals still remain the same.
- Bank offers loans & issue credit cards to the people who are not sitting on cash piles to meet their needs. Unlike rich people average & poor people can’t buy a home in cash, they need credit to do so and eventually are bonded for a large period of time to pay back the same in the form of interest(EMI)
- Now with online banking people can transact their hard-earned money to some other person within the country or globally, but that too comes with some extra cost . Physical banks do exist and still has a widespread network, but it is going to be a thing of the past in the coming few years as people are very reluctant to visit the branch, for all their banking needs
So yes banks do caters to the needs of the people when it comes to safeguarding their currency and helping them earn some nominal cash, out of their money sitting idle with their bank. Apart from this, they circulate the same currency that you have kept in their custody, in the form of loans & credit cards to help people in the need of the same earning hefty interest.
Why I am discussing thing stuff? Well because it is important to understand that when you decide to keep your money in the bank to earn some fixed income or saving income, you also should realize that it is the same money that comes back to you in the form of loans. Banks pay a very small pie of what they earn by lending, back to you.
Where Is The Problem?
The problem lies in the value which you currently hold in the form of physical or digital fiat money, with every year or a decade passing by the purchasing power of your fiat money is going to rock bottom. What’s the point? well, the point is that as inflation is rising the value of your fiat currency is falling.
Also, the central banks & political lobby of the world have been using the instrument of printing and flooding the market with more fiat currency, without actually enhancing the earning power of humanity. People are getting some easy money as a stimulus, which is further augmenting the inflation issue.
Banks act a the centralized custodian of your own money and control the economy and market at large, without you having much say. You are being pushed to large debts in the form of the credits you take, which is the core objective of the BFSI to keep amassing more money.
Your debt is their key to success.
Now let’s discuss the bitcoin and the crypto market, to further understand where the actual problem lies.
BitCoin & Its Value Proposition:
Bitcoin project was the first important use case of blockchain technology which was solely crafted to alleviate the issue associated with traditional and modern age banking systems and to give the power into the hands of the user itself
Low Transaction Fee & Decentralized Payment
- Unlike the online banking system, bitcoins promises to offer a money transfer facility with a lower transaction fee, and the transaction is completely decentralized with no central authority like it Central bank in the case of the traditional financial system.
But what’s the real value? well, the real value lies in the concept of having full authority over your digital money, which can be transferred with a few clicks using your smartphone, without asking you to go through a cumbersome bank account creation process, not requiring any approval from controlling intermediary. Also having a system that is highly decentralized and secure gives you peace of mind.
Unlike Fiat currency, It's Scarce & Deflationary :
Unlike fiat money which our Central banks can print out of thin air any time they want, Bitcoin has been coded to have a total market supply of only 21 million. Out of this 18 million+ are already in circulation, which makes it a scarce asset to preserve for a longer period of time. The more bitcoin you will hold, the more value in terms of purchasing power you will hold in the long term.
It’s similar to Gold, which is rare , has limited supply to be mined & which has been the largest asset to hedge against inflation.
You Can Earn More Out Of Sitting Bitcoin In Your Wallet
With fiat money with increasing inflation your ability to buy goods is decreasing and when you do a fixed deposit with this currency in the bank, it hardly earns you enough to really make a decent income, Contrary to this Bitcoin behaves like an asset, which can be used as collateral to raise the fund which can be further invested to earn more passive income. You don’t require to sell this asset and attract capital gains, instead, you can use it to enhance your investment strategy, without losing the purchasing power it.
“Its like borrowing a fiat money against the gold ”
Bitcoin Energy Usage Is More Environmental Friendly & Scalable:
Unlike other industries where the energy being produced is desired to be relatively close to the end-user, bitcoin has no such limitation when it comes to mining. Bitcoin miners can set up their infra to the remotest of the energy source without any restriction, this enables miners to utilize power sources that are inaccessible for most other industries.
Bitcoin may require more energy with time: It is a wrong narrative
There is a widespread rumor that with increasing bitcoin mining & transaction needs, energy consumption will also increase, which is not true. The maximum amount of energy being used by bitcoin goes into the mining process, but once the coin is mined, the energy required to validate the coin in the transaction is extremely minimal
Which negates the narrative that the energy costs associated with mining Bitcoin will continue to grow exponentially as bitcoin networks grow.
Bitcoin Scarcity Will Eventually Decrease The Energy Demand:
As discussed earlier that with the Bitcoin halving cycle, the reward for miners is also halved by two. Now with this decreasing incentive for mining which may come down to zero eventually maybe by the year 2140, not many miners will be active. Even though to keep the network alive and firing, miners would continue supporting, as they will still be earning the incentive for every transaction which passes through the network.
Is Bitcoin A Real Devil When It comes To Environmental Concerns?
Now that we have discussed on length & breadth about the facts & figures, related to energy issues, and also understood how it can change the life of common people when it comes to financial freedom from ailing fiat economy, its time to ponder upon this bigger question
Is bitcoin a real devil when it comes to the environment?
It is very clear from the reports & researchers that not many people are truly aware of how bitcoin protocol actually works and have been making a hell, lot of assumptions when it comes to the harm it can cause to our green environment. Elon is one such genius tech billionaire for sure, who in spite of being a curious soul has not done much of the homework before raising energy fud.
In fact, it's not right to single out Elon, there are many knowledgeable people and billionaires who have not understood the fabric of underlying blockchain tech( i must admit it is not easy.) So if it is hard more in-depth research needs to be done before making remarks publicly.
Most of the statement against bitcoin’s energy concerns has been based on flawed assumptions with no to zero, factual groundwork when it comes to decoding the protocol working has been done.
So next time when you or someone asks this question & make a blatant statement, you need to step back and introspect. You should educate yourself, before coming to conclusion.
Yes, it is true that Bitcoin like any other industry does have the need for energy to support their mining needs, but what you can harness out of Bitcoin as a value proposition should be given more weightage. Bitcoin has given a new kind of hope to all crypto enthusiasts when it comes to financial freedom.
The blockchain as a tech needs to be explored & understood, as it has the power to change the way our current financial system works. The advent of Defi, DEX’s & DApps has already set the right tone to change the way banks will function in the future, Bitcoin being the leader in the crypto space and with widespread market acceptance, can see multiple utilities apart from being a store of value.
Let’s Sum It Up :
So I would like to conclude this piece with this food for thought:
If you get the power to live a decent life with all the bliss & happiness, from Bitcoin like instrument and if you are willing to sail through the volatility and risk associated with it , you are in the right place & should be least concerned. Yes being a beneficiary you do have the right to question the system, if it is harming the life of the humanity at large, this will help you to maintain the checks & balances required to keep system active and value driven. But do it with more accountability and have the right education to support the same
Disclaimer!
Opinions expressed here at CryptoWise are not investment advice and are only for educational purposes. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency, or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility
NOTE!
This article was first published on Medium, Here is the link:
https://medium.com/crypto-wisdom/retrospective-tale-of-bitcoin-energy-elon-240921e75dfd
