Five Myths About Bitcoin Mining: Is Bitcoin Clean or Not?

As Bitcoin becomes increasingly mainstream, investors and the public alike naturally have questions about how it works.

Five Myths About Bitcoin Mining: Is Bitcoin Clean or Not?

Original Article: Coinbase Blog

As Bitcoin becomes increasingly mainstream, investors and the public alike are naturally asking questions about how it works. One of these questions is about the potential environmental impact caused by bitcoin mining.

First, we want to cover a basic fact: Bitcoin mining is an energy-intensive process. There is little dispute about this. As the price of bitcoin rises, new miners are incentivized to participate, thus increasing the energy consumption of the mining industry as a whole.

However, figuring out the actual environmental impact of this energy consumption is complicated by the many aspects involved. In this article, we will explore some of the main misconceptions that are often debated and learn what is true about them.

Myth #1: Bitcoin is a significant contributor to climate change
According to the best available scientific explanation, this is simply not true. While Bitcoin’s energy consumption is significant, this does not automatically equate to it being a significant driver of climate change. To understand why, then it would be helpful to understand how mining works.

Mining is the process that Bitcoin and some other cryptocurrencies use to generate new coins and validate new transactions. Huge networks of decentralized computers around the world can protect blockchains (virtual ledgers that record cryptocurrency transactions). In return for contributing their processing power, miners receive new coins as a reward. It’s a virtuous cycle: miners maintain and protect the blockchain, the blockchain grants them new coins, and these rewards provide the incentive for miners to maintain the blockchain.

In April, a flurry of headlines warned that carbon emissions from China’s bitcoin mining industry could be contributing to runaway global warming. But the reports on which these articles were based were seriously flawed. The numbers come from the overall mix of fuels used in China, not the actual energy used by miners. Since most of the power grid is powered by coal, these researchers assume that Bitcoin must be equally dependent on coal. This is incorrect for the following reasons.

Facts.
Miners are incentivized to find the cheapest sources of energy. This usually means that this energy comes from excess power (power that would be wasted if not used) and/or sustainable energy sources, the prices of which are plummeting.

Half of the world’s bitcoin mining happens in Sichuan, China, where excess hydroelectric power can make 95% of the energy consumed for mining renewable.

75% of miners already use renewable energy as part of their energy mix.

Most importantly, the researchers behind the Cambridge Bitcoin Electricity Consumption Index concluded that “for now, Bitcoin’s environmental impact remains negligible.”

Myth #2: Bitcoin is incompatible with a healthy environment
As cryptocurrency technology and green energy technology mature, the opposite seems more likely to occur. Bitcoin miners are incentivized to go where electricity is cheapest. While this may imply some sort of fossil fuel use, the best way for miners to get the most profit is to look for places where there is an excess supply. In fact, Bitcoin has the unique advantage of making renewable energy cheaper and more readily available to everyone:.

Facts.
Renewable energy is often in oversupply. When the grid can’t support the energy supply, that power goes to waste.

Natural gas producers use a process called “flaring” to simply burn excess product, harming the environment and benefiting no one. Bitcoin converts this excess energy into value with no increase in net emissions.

By placing mining operations as a source of green energy, utilities can monetize their excess energy supply. In fact, at least one publicly traded electric utility has explored direct participation in mining to capture value from excess supply that could be used to build sustainable energy operations.

By ensuring a viable market for renewable energy, Bitcoin incentivizes companies to build more green infrastructure, which further reduces the price of clean energy. This virtuous cycle can actually contribute to the fight against climate change.

Myth #3: Bitcoin is inherently less efficient than the traditional financial system
Many of the most shocking headlines come from a fundamental lack of understanding of how Bitcoin works. You may hear surprising statements such as “There are 1 billion credit card transactions per day, and it takes Bitcoin 14 times the world’s total electricity to process that one day’s worth of transactions.” These numbers often come from conflating the energy cost of bitcoin mining with the cost of transactions.

Facts.
Bitcoin energy consumption comes primarily from mining blocks on the blockchain, not transactions. (The “mining” process accomplishes multiple goals, including generating new bitcoins and validating new transactions. But, as the name implies, the primary function of mining is to generate new bitcoins.)

Thanks to “halving”, the amount of energy required to mine a block is expected to decrease every four years, and the amount of new bitcoins issued is reduced by half.

It is each block, not each transaction, that consumes energy. As various tools (such as batch processing, isolated witnesses, and lightning networks) allow parties to aggregate more transactions on each block, the energy cost per transaction will decrease.

Myth #4: Bitcoin consumes “too much” energy
Because Bitcoin is relatively new, it may seem shocking to hear that it consumes the same amount of energy as a country like Norway. But consider this: Norway’s GDP is about $400 billion. Bitcoin ensures a total economic value (its market cap) of $1 trillion. A direct comparison is not easy, but the important point to remember is that everything that exists in the world consumes energy. Whether or not energy is used wisely depends heavily on the value derived from the use of the resource. By this method, Bitcoin is a much more efficient use of resources than many industries. Here are some points.

Facts.
In the U.S. alone, the annual energy wasted by inactive household devices alone could power bitcoin mining for 1.5 years.

Bitcoin has been found to consume far less energy than other financial systems: only half the energy used by the gold mining industry, and less than a fifth of the energy used by bank branches and ATMs.

Myth #5: The Cryptocurrency Sector Cannot Address Environmental Impacts
As the largest cryptocurrency, Bitcoin is often seen as synonymous with the entire crypto space. This ignores the current upgrades being made to the second largest cryptocurrency, Ether. The Ether 2.0 upgrade aims to make a wider range of economic activities (from loans and savings to minting NFTs) greener, cheaper and faster.

Similarly, newer cryptocurrencies like Cardano are designed from the bottom up and with an eye towards sustainability.

In terms of mining, key stakeholders in the space are actively incentivizing sustainable procurement of energy in a variety of ways, including the Crypto Climate Accord launched earlier this year, which aims to achieve 100% sustainable energy production by 2025 through

Facts.
Elon Musk, who recently tweeted that Tesla will suspend accepting bitcoin as payment due to fossil fuel concerns, met with North America’s largest mining companies (including Argo Blockchain, Hive Blockchain and Riot Blockchain) on May 23. These mining companies announced the formation of the Bitcoin Mining Council (BMC), a coalition aimed at accelerating the adoption of sustainable energy for mining worldwide.

Ether is currently undergoing an upgrade to move the second largest cryptocurrency by market capitalization from a mining-based system (PoW) to a more energy-efficient, proof-of-stake (PoS) system. PoS is already used by many cryptocurrencies.

Square recently announced a $10 million Bitcoin Clean Energy Investment Program to promote the use of clean energy in Bitcoin mining.

Just in the past week or so, several large mining companies have announced green initiatives: Greenidge Generation Holdings said its New York bitcoin mining operation will be carbon neutral on June 1. Argo Blockchain announced a new operation in Canada that will primarily use hydroelectric power.

Argo also recently joined the Cryptocurrency Climate Accord (CCA) with mining company DMG Blockchain. The CCA is a private sector initiative that promises to help the mining industry achieve 100% sustainable energy production by 2025 and zero net carbon emissions by 2040.

Coinbase Ventures recently invested in Crusoe Energy, a company that uses excess “flared” energy from natural gas producers for crypto mining and other production purposes.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/five-myths-about-bitcoin-mining-is-bitcoin-clean-or-not/
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