Dec 8, 2017: Bitcoin Climate Disruption

Is Bitcoin adding to Global Warming? (Image Source:

Is Bitcoin adding to Global Warming? (Image Source:

In last week’s Newsletter I mentioned a Guardian article which claims that processing of Bitcoin transactions now requires more energy than the entire country of Ireland. My friend Kevin responded with a link to this article from Grist which makes the following predictions (emphasis mine)…

‘…at bitcoin’s current growth rate, the electricity demanded by the cryptocurrency network will start to outstrip what’s available, requiring new energy-generating plants. And with the climate conscious racing to replace fossil fuel-base plants with renewable energy sources, new stress on the grid means more facilities using dirty technologies. By July 2019, the bitcoin network will require more electricity than the entire United States currently uses. By February 2020, it will use as much electricity as the entire world does today.

This is an unsustainable trajectory. It simply can’t continue.’

Now there’s an understatement for you… to suggest that doubling the world’s energy use in the next two years is unsustainable… how dare they?

But wait, as usual it seems the issue is much more complicated than that. According to this article from Mashable

‘…things aren’t that simple. We don’t know, exactly, how power-hungry Bitcoin really is. And whatever the figure is, Bitcoin certainly doesn’t need that much energy to run. Furthermore, energy consumption issues can potentially be fixed with a future upgrade of the Bitcoin software, which is easier than, say, reducing the energy footprint of Ireland. Finally, there are other cryptocurrencies out there working on a solution to this problem.’

The article goes on the state that… ‘Bitcoin isn’t exactly doing its job the way its creator, Satoshi Nakamoto, had intended. Due to its price rise, not many owners actually use their bitcoins to purchase goods; instead, everyone is either hoarding it or speculating with it

 This means that talking about the energy cost of one Bitcoin transaction is misleading…. In fact, you could theoretically run Bitcoin’s entire network on a dozen 10-year old PCs.’

According to this article, Bitcoin will have to adapt or die as other cryptocurrencies are developed that don’t require so much energy to process transactions… ‘Ethereum, the second largest cryptocurrency right now… uses roughly three times less energy than Bitcoin; and yet there are twice as many transactions per day on Ethereum’s network.’

Another of our readers, Nick, posted the following comment… ‘Don’t confuse the mining of bitcoins with the transactions of them. Mining a bit coin is computationally expensive because it creates a new bitcoin (i.e. like making gold with a computer program) but the transactions are simple and cheap – if you think about it, no one would spend millions of dollars on a ten thousand dollar transaction’. So Nick, I guess I am confusing the two because, as I understand it, Bitcoin ‘miners’ receive Bitcoin as payment for using their vast computing power to process Bitcoin transactions, so it seems to me that the two are inseparable in terms of the energy they require. Perhaps you can explain it to me if that is incorrect.

Nevertheless, as I’m writing this I see that Bitcoin today passed US$20,000 per ‘coin’. Is it just me or does this strike anyone else as completely INSANE! Bitcoin has no use and no yield. It can’t be used to buy anything and it doesn’t pay any interest or rent or dividend. The only way to make a return on your investment is to buy it and hope that the price goes up when more people buy it. That seems like the classic definition of a Ponzi scheme to me where… ‘the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities’.

The fact is that, currently there isn’t much you can do with a Bitcoin. According to this article from The Telegraph‘Bitcoin has proven itself to be a completely useless currency’Bitcoin propoennts counter this by saying that the mainstream press, governments and big financial institutions are opposed to cryptocurrencies because of their power to disrupt the status quo. Personally I think these advocates are living in la-la land. They claim that the great benefit of ‘cryptos’ is that governments can’t control them and you can make your financial transactions in private without requiring a big bank to process them. If they seriously think banks and governments the world over are going to allow that situation to continue then they need their heads examined. Instead I predict that, as soon as the technology is developed to the point of being actually useful, the banks and bureaucrats will take it over and ban any transactions outside of a system that they control.

Meanwhile people the world over are investing huge sums of money and vast amounts of energy into something that is almost completely useless (a bit like our state government proposing to spend billions of taxpayer dollars on new sports stadia… click here if you would like to sign a petition opposing this). I suppose, in that sense, Bitcoin is the perfect sign of the times.

Image source: zero

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5 comments to Dec 8, 2017: Bitcoin Climate Disruption

  • Nick

    Well – Mashable makes a better job of describing bitcoin than I did – I was simply trying to point out that Mining a bitcoin (i.e. creating a new bitcoin) will use a lot of power because it takes large chunks of CPU time. Spending a bitcoin after is is mined should be more like when you go to the ATM or supermarket.

    Can you spend them? – Seems to me like they are only useful for scammers and drug dealers at the moment.

    Blockchain on the other hand is very important. It should provide the security behind private energy transactions and proof of origin for manufacture and production of agricultural goods among other things. It will still require the mining of the first block though so unless that is done in a smarter way than bitcoin we have come full circle on the energy issue.

    Some other points regarding energy use though
    – compared to bitcoin how much energy is used globally by people watching TV or surfing the net?
    – How would governments shut bitcoin down when the internet is effectively ungovernable?

    Don’t misunderstand me – I am not an advocate for bitcoin. It’s just another disruptor at the moment that will probably cause a lot of tears for people foolish enough to rush in blindly.

    • admin

      Thanks Nick, that confirms my thinking on Bitcoin and blockchain, i.e. Bitcoin is useless but the blockchain could be revolutionary if they can solve the energy use issue. Andy

  • Mark Hetherington

    “the banks and bureaucrats will take it over and ban any transactions outside of a system that they control.”
    This is to some people the point of crypto currencies, they can’t realistically be regulated, aside from something like China’s great firewall, to block internet access.

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