On May 31, 1999, just as the Internet economy was beginning to take off, Forbes magazine published an article claiming that “it’s perfectly reasonable to predict that within the next 10 years, half of all electricity will be used to power the digital Internet economy.” The article blamed Internet companies, especially hardware companies, for the massive use of fossil fuels and the increasing harm caused by the world’s energy use.
The topic entered the mainstream in 2000 when an energy crisis erupted in California, sparking a national debate about energy use. Dozens of other prominent publications cited the Mills report, claiming that Internet companies were eating into the nation’s energy supply. They were also cited in internal reports by JP Morgan, Bank of America and Deutsche Bank, as there was little indication that the report’s data was in dispute. The level of consensus on such an inflammatory statement is astounding.
But the problem is that this is the wrong forecast. The calculations in the report are riddled with errors, and the resulting estimates of Internet electricity use are inflated by at least a factor of eight. Today, 20 years after that Forbes article was published, the data clearly shows that these were pessimistic predictions that were dead wrong. Even according to today’s most aggressive forecast data, the Internet industry will consume only 20% of its electricity by 2025, and many tech giants are switching to renewable energy across the board.
In other words, the industry’s early energy projections caught on despite relying on outrageous assumptions and highly inaccurate results.
It seems to me that there is also now a debate, if it counts, around BTC’s energy use today that bears a striking resemblance to early Internet criticism. While there are compelling headlines, including recent statements from Tesla, that are quick to dismiss cryptocurrencies as exacerbating into climate change, this is a deep issue, and one that involves some nuances that many people misunderstand.
Achieving a sustainable future is an important topic for the survival of humanity. So anyone who makes accusations against governments, companies or technologies that diminish our ability to address climate change should be taken seriously. But we should not make accusations at will. If we make the kind of statements we did at the beginning of the 21st century, it will have serious consequences, diverting attention from the real barriers to long-term sustainability and slowing the process of overcoming them.
This article cannot be exhaustive, nor is it meant to be conclusive on the topic. However, as a cryptocurrency supporter and someone who cares deeply about climate change, this article outlines my framework for thinking about the issue of BTC energy consumption.
Causes of BTC Energy Consumption
While digital currencies existed before BTC, they ran into a number of technical issues that forced them to remain centralized and limited their potential. Most notably, Satoshi Nakamoto solved the most intractable double-spend problem. This problem would lead to an infinite replication of the value of the previous digital abstraction, much like copying and pasting an image. In short, BTC is the first decentralized digital currency to have scarcity.
In order for the blockchain to remain secure, consensus algorithms are required for transaction validation. When Satoshi Nakamoto designed the system, he could have simply built a majority voting algorithm. In other words, each node would be able to vote once and if a majority of network participants, i.e., greater than 50%, confirmed that the transaction was valid, then the transaction was confirmed. The problem, however, is that malicious participants may create countless nodes that allow more votes than honest nodes, and since there is no cost to create an additional node, there is an incentive to create witch nodes. This is known as a witch attack.
The great thing about Satoshi Nakamoto is that if there is a cost to run a node, the blockchain can resist the witch attack. Based on this idea, BTC uses a consensus algorithm called “proof-of-work”, where BTC miners, or verifying transaction nodes, have to solve difficult mathematical problems through arithmetic, usually with specialized hardware. Since this process consumes energy, which is very high, it is difficult for an attacker to exceed the computing power of the entire network.
Importantly, the energy is not “wasted” as it is sometimes portrayed in the popular press. Once you understand why proof-of-work was chosen, it becomes clear that BTC’s energy consumption is a feature, not a flaw.
BTC, Litecoin, Monroe and other well-known cryptocurrencies are also using proof of work, but new consensus algorithms are being used that consume less energy. For example, Ether is currently transitioning to proof-of-stake PoS, an algorithm that does not consume the same amount of energy as the PoW mechanism. As a result, the scope of the debate over energy consumption is more narrowly defined than many people think. This is not a topic that is broadly opposed to cryptocurrencies or decentralization, sometimes for specific issues. It is actually a criticism of a specific type of consensus algorithm, namely proof of work.
Quantifying BTC Energy Consumption Emissions
Calculating the energy consumption of BTC is not difficult; you can just look at publicly available statistics on hash count, network difficulty, and mining equipment efficiency to come up with an estimate with a high degree of confidence.
However, energy consumption and carbon emissions are two different things. While they may be linked, emissions are determined by the type of energy used, not the amount. It is extremely difficult for us to confidently make a statement about BTC energy emissions due to the lack of important information about BTC miners, such as the hardware and energy used.
Despite the difficulties, some academics have attempted to quantify the carbon footprint of BTC. Camilo Mora and others at the University of Hawaii published a paper on this topic in which they came up with the following distressing prediction.
This report predicts that BTC’s energy use, if it were to be used at the same rate as other mainstream technologies, could push global warming up by more than 2 degrees Celsius in less than 30 years from the CO2 emissions it produces alone.
Despite this being one of the most exaggerated predictions, Camilo Mora’s paper is arguably the most influential study when it comes to the workload proof debate. After careful investigation, media reports on BTC energy use can often be traced back to the numbers in Camilo Mora’s paper. And the report’s compelling title, “BTC energy emissions alone could push global warming by more than 2 degrees Celsius,” has become an entrenched assumption, albeit a false one. Given the importance of Camilo Mora’s report, BTC’s energy emissions deserve further study.
The measurement method applied in the report is relatively simple. The researchers estimated the efficiency of mining equipment, using the average carbon emissions of the sites in question, and combined it with BTC growth projections to estimate future emissions.
However, several papers have recently been published that directly challenge Mora’s findings, pointing out a series of errors that are responsible for the gross overestimation of BTC emissions. A brief summary of the objections raised by these papers is presented below.
Mora’s study does not take into account advances in energy technology
Mora’s study assumes that the efficiency of miners and the intensity of carbon emissions from the grid will remain the same over the next century. In other words, the report assumes that miner and grid emissions will remain the same over the next 100 years. That’s a pretty incredible assumption. One criticism points out:Â “The assumption ignores the dynamic nature of and grid technologies and violates the widely followed practice that assessments for future energy technologies take technological changes into account.”
Mora’s study estimates unprecedented BTC usage
To predict BTC usage, the report used the growth rate of usage of technology products such as phones, computers and vacuums over the past 40 years. While the methodology seems to have merit, the resulting usage projections are highly implausible.
Specifically, Mora et al. argue that in 2017, BTC transactions reached 104 million, or 0.03% of global cashless transactions, and that if the volume of transactions grows rapidly, in 2019 that number will suddenly grow to 78 billion, a 750-fold increase in just two years, followed by 11 billion by 2020, a 108-fold increase, if the growth rate is at a median If the growth rate slows down, it will reach 8 billion by 2023, a 76-fold increase. All three growth scenarios are based on steep logarithmic growth trajectories that are clearly inconsistent with historical trends, which, when analyzed at a mathematical level, can only lead to a significant increase in short-term emissions.
Based on such high growth rates, researchers such as Mora estimated inflated energy emissions. However, they would have arrived at a more reasonable prediction if they had compared BTC to the growth rates of other preservation assets, all of which had lower growth rates.
Mora’s study combines trading volume with energy consumption
In addition to predicting the future trading volume of BTC, Mora’s study also simply multiplies the future trading volume by current emissions in order to estimate the “total emissions” value. This has the central error that energy consumption is determined by the difficulty of the block, not the number of transactions. In fact, in the past three years since Mora’s study, miners’ energy consumption has remained relatively flat despite new peaks in trading volume. Even if Mora’s trading predictions are correct, there is no evidence that trading volume leads to a proportional increase in energy consumption. In fact, most experts believe that BTC’s energy consumption will decrease over time as the number of coins minted decreases.
Based on the above inaccuracies in Mora’s study, Masanet, et al. provide the following spot-on conclusions.
The results suggest that even if Mora’s report avoided the above key errors, the study design would have produced very different projections of future BTC carbon emissions that would not have caused as much concern. In other words, we find many flaws in the study design itself, such as using transaction volumes as a basis for comparing 40 unrelated tech products, ignoring miner iterations, and even with corrections, the report uses incorrect research methods. On this basis, we believe that fundamentally Mora et al.’s study design is flawed and should not be taken seriously by researchers, policy makers, or the public.
Mora’s study would have predicted much flatter emission levels if it had not been affected by these errors. If one compares Mora’s original projections (Figure A) with those after correcting for the study’s flawed assumptions (Figure D), one comes to the diametrically opposed conclusion that emissions look relatively flat and cause little alarm over the next few decades.
Based on the graph above, we can conclude that it is quite difficult to quantify BTC carbon emissions, and many of the most worrisome predictions are based on seriously flawed methodologies. While we picked Mora’s study in large part because of its sensational reception in the news, other researchers often make similar mistakes.
There is no doubt that it is important to understand the carbon footprint of BTC. However, it is equally important to identify, review and correct inflammatory predictions, as they add no value to the discussion. The next time you see new statistics related to BTC energy consumption, it is necessary to understand the initial research. Chances are you will find something surprising.
Energy consumption compared to similar technology products
Two factors in particular frustrate me about the discussion of BTC energy consumption. First, using energy consumption to evaluate technology products seems to be an arbitrary choice and not a universal standard. We rarely use energy consumption to make value judgments about other technology products, so why start with BTC? I’m surprised that no one has done this before. Yes, BTC consumes energy. That’s obvious. The more important question, in my opinion, is how BTC compares to other tech products, especially those that people believe can replace BTC.
According to the Cambridge University Centre for Alternative Finance, BTC currently consumes about 110 terawatt hours of energy per year, or 0.55% of global electricity use.
While we know that estimates of BTC energy consumption may be inaccurate based on Mora’s research, I have tried to aggregate some reasonable predictions for other related technology products. Personally, I think it helps to understand where BTC fits into the overall picture.
When compared to BTC, the most prominent area is centralized finance, which is often implicated in energy consumption. Each year brick-and-mortar bank branches, back-end servers and ATMs around the world use 100 TWh of electricity, comparable to BTC. This does not include other high-emissions practices in the banking sector, such as long-distance trucking and corporate private jet travel.
BTC is labeled as “digital gold” so it can also be compared to physically mined metals. It is estimated that mining $1 worth of aluminum uses almost 10 times as much energy as mining the same value of BTC. However, BTC currently consumes more energy than gold and copper when measured in dollar energy prices, and as the BTC pool slowly transitions to renewable energy, a change that is much more difficult for the location-dependent metals mining industry, BTC may become “cleaner” than gold.
Other comparisons illustrate the absurdity of BTC’s high-emissions rhetoric, which is alarmist. Global YouTube video energy consumption is about 600 TWh per year, six times that of BTC. The game alone consumes 104.7 TWh of energy per year, roughly equivalent to BTC, and it consumes far less renewable energy. Clothes dryers in the US consume 93.6 TWh per year, and that’s just for one country. In the U.S. alone, the energy consumed by idle household devices or plugged-in but inactive electronic devices could power the BTC network for 1.5 years each year.
I could go on and on with comparisons, but I’ve made my point that everything consumes energy, usually more than you’d expect. Therefore, energy consumption is not a bad thing in itself, and it is not a particularly useful framework in terms of judging the moral value of a technology or activity.
The relationship between BTC and renewable energy
Discussing energy consumption can give us a lot of help, but the Taiwas statistics leave out a certain type of energy consumed that is critical to measuring the carbon footprint of BTC.
The unique thing about BTC mining is that it can occur anywhere. In fact, miners look for cheap sources of electricity out of financial incentive, no matter where they appear. Therefore, BTC mining naturally favors renewable energy because it is cheaper, does not have a fixed arbitrage model, and often leads to surpluses. Estimating the percentage of BTC renewable energy use is difficult, but one report claims that 73% of BTC mining pools are carbon neutral, while another report’s figure is closer to 39%. Regardless, the percentage of renewable energy is still higher than average compared to the composition of other technologies, countries and organizations.
To visualize the type of energy consumed by Bitcoin, let’s take a look at two places where miners are concentrated. Sichuan, China’s second largest mining province, has a large government hydroelectric power plant that provides almost twice as much power as the grid. As another example, Washington has one of the highest concentrations of miners in the United States because of the low price of hydroelectric power in Colombia. It is notoriously difficult to transmit electricity over more than 100 miles, so under normal circumstances, these power sources would not be used. However, BTC mining offers an easy way to profit from these excess resources.
The world is reducing the use of renewable energy, which can create big problems. in 2017, China reduced solar power by 7.3 terawatt hours and the UK reduced wind power by 1.49 terawatt hours. In California alone, more than 346 GWh of solar and wind power was reduced in 2018 and is only expected to increase in the future. While renewables are now cheaper than many other energy sources, reduced use can discourage the construction of new clean energy projects. We need to find an effective way to minimize greenhouse gas emissions, which is the key to achieving a carbon-neutral future.
BTC mining will play an important role as the last area of consumption of clean energy. Some renewable energy sources are geographically constrained and far from population centers, and now these sources have a revenue-generating use, which is to protect the BTC network.
In conclusion, BTC mining could have a major impact on the future of energy as the last area of clean energy consumption, making it cleaner, more reliable and cheaper. It will take time, but in my opinion, if you look back at BTC, its likely to be part of the solution to climate change, not the problem.
The real question: Is BTC worth consuming that much energy?
So far, we’ve talked about many aspects, analyzed BTC’s estimated energy consumption data, compared the data to other technologies, and examined BTC’s potential to drive the transition to renewable energy.
And while the initial topic we discussed was BTC energy consumption, a question that may seem like a scientific question, but is actually a moral one, Nic Carter recently hit the nail on the head in his Harvard Business Review article with the following conclusion
But how much energy should a monetary system consume? The answer to this question may depend on your view of BTC. If you think BTC has no use other than as a Ponzi scheme or money laundering tool, then the reasonable conclusion is that any energy consumed is wasted. If you use it as a tool to counter inhibiting monetary policy, inflation or capital controls, like tens of millions of other people around the world, you will likely consider it well worth it. the question of whether it is reasonable for BTC to consume society’s resources comes down to how you view how much value BTC creates for society.
Every technology, idea or institution has advantages and disadvantages. Your position on the BTC climate issue, then, is not actually determined by the amount of energy it consumes. It is more likely a reflection of whether you see BTC as a positive contribution to society. From my experience, it is much more difficult to change people’s perceptions on this. It’s certainly possible, but it’s difficult.
Become a climate issue conscious BTC holder.
With retail and institutional investors increasingly incorporating environmental, social and corporate governance factors into their investment themes, there are many who will ask if buying BTC would be unethical. Based on the previous article, my personal views on BTC energy consumption are as follows:
- There is no denying that BTC consumes a lot of energy and will add carbon emissions to the atmosphere in the short term. However, the carbon footprint it creates will be much smaller than most estimates.
- Energy is not being “wasted”, it is being used to power the most secure blockchain on the planet, driving Layer2 and Layer3 innovation and expanding financial access for billions of people. In my opinion, this will bring enough social benefits to make it worth spending that much energy.
- The debate over the amount of energy consumed by BTC won’t help us much. Instead, we should focus on the type of energy consumed by BTC. btc already uses a lot of renewable energy and can help us move towards a carbon neutral future as the last area of renewable energy consumption.
Even if you disagree with me, one way to avoid the energy consumption debate altogether is to buy products that offset carbon emissions. In this way, you can ensure that buying BTC achieves carbon neutrality, or even negative emissions. As mentioned earlier, it’s quite difficult to accurately calculate the carbon emissions of an individual’s BTC use, and you can’t simply use hash arithmetic to trade volume, but you can use 10% of your BTC position to make some environmentally beneficial contribution that brings long-lasting benefits. This month Canada-based Bitcoin ETF Ninepoint announced that they are buying carbon offset products for their BTC positions. I recommend using Nori if you’re interested, but there are other easy ways to buy small carbon offset products.
Finally, I would like to shift the discussion slightly. We should focus on clean energy production rather than judging energy consumption, because the criteria for assessing consumption are stringent and not widely available. We can buy carbon offset products, support renewable energy projects, vote for carbon taxes. The list goes on and on. But let’s not make BTC the enemy, because it will only distract us from the hard work of getting the hard work done and achieving sustainable development.
The content of this article is from VeradiVerdict
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/how-bad-is-btc-energy-consumption/
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