Environmentalists have recently become concerned about the impact Bitcoin mining has on global warming. Headlines such as “Bitcoin Will Burn the Planet Down. The Question: How Fast?” and “Bitcoin Mining Alone Could Raise Global Temperatures Above Critical Limit By 2033” suggest that Bitcoin is an unfolding environmental disaster.
However, those panicking about crypto make three fundamental errors. First, they do not understand how Bitcoin works, second, they do not understand what mass adoption would look like, and third, they do not understand the problem Bitcoin is intended to solve.
Regardless of your opinion on the danger of global warming, Bitcoin does not use nearly as much energy as claimed, will become far more efficient as it grows, and most importantly, solves one of the greatest causes of resource inefficiency, corruption, and human suffering.
Bitcoin mining is a market-based process that taps underutilized energy sources
When Bitcoin critics focus on the raw energy usage of Bitcoin mining, they miss the bigger picture: cryptocurrency production is a competitive market process.
Because the cost of Bitcoin mining comes mostly from electricity consumption, Bitcoin mining is concentrated in places with cheap or surplus energy. Industrial-scale mining facilities are located in far-flung locations with cheap hydro-electric, nuclear, geothermal power, or undeveloped industrial regions with excess production. Energy costs money, and miners will always look for the world’s best sources of cheap and efficient energy. Cryptocurrency mining is a means to tap underutilized energy resources for a valuable purpose—the maintenance of a monetary system. No other industry can rapidly move into an industrial ghost town and create value the way Bitcoin mining firms do.
Furthermore, the total energy usage of Bitcoin is limited by economics: crypto-miners will only keep mining when their profit is higher than the cost of electricity. The Bitcoin network automatically adjusts the difficulty of mining new blocks in response to the “hash rate” or the net mining capacity of the network. This means that Bitcoin has a built-in cap on energy use, and can dynamically adjust in response to energy prices and innovation in computational hardware. Currently, humanity consumes around 17.7 Terawatts per year. The Economist estimates that Bitcoin uses 2.55 gigawatts or .014% of that. Some estimate the total use of cryptocurrencies at 7.7 gigawatts, but it’s likely that a single cryptocurrency will dominate after the current shakeout period.