Recently Bitcoin (and all crypto collectively) received much heat over the intense energy usage necessary to power the network. Let’s assess the issue objectively.
Climate change is a fundamental issue that needs addressing in this generation. Countries, companies, and citizens see the importance of this matter and are working to implement change.
With Bitcoins surge in price and adoption this past year, so did its energy consumption. Critics were quick to call out the problem, with a prominent one being Elon Musk only months after his company Tesla investing and announcing acceptance of BTC. Many BTC adopters maintained that it was either hypocritical or manipulated the market as BTC crashed immediately post his recall. But essentially, his and the BTC critic’s concerns are very valid.
So how much energy does Bitcoin use?
Bitcoins blockchain network runs on a Proof-of-Work [PoW] system that demands immense computational power and energy. Different studies estimate it between 118.9TWh/year to 133.68 TWh per year. Comparatively, those are equivalent energy amounts to entire countries’ consumption ranging in size from Pakistan and Holland on the lower side of the spectrum to Argentina or Sweden. Now critics are quick to call that this amount of energy in and of itself is unacceptable, but let’s remember that this is not a new country; this is an emerging global technology with distributed energy production.
Environmental Social Governance [ESG] and where does bitcoin stand?
Bitcoins’ inherent goal is to benefit the global population in the form of Social Governance financially. So the E has come up lacking. Or has it? Profits incentivize miners, and with energy costs, there has been a significant amount of mining operations based around cheaper renewables. Differing studies estimates vary from a low of 39% to 74% of bitcoin renewable energy consumption. Is it perfect? No. Yet even with sentiments of China being a significant coal energy provider and the main base for mining operations, miners have been migrating for years to follow rainy seasons to access hydro energy.
Before we move on, let’s also, for a moment, clear the slate and recognize that many crypto projects run on other protocols such as Proof-of-Stake [PoS]. Those cryptos do not need excessive energy consumption or almost any at all; Ethereum, the second-largest cryptocurrency, is in the middle of transition towards this protocol.
Bitcoin may and probably will forever run on an energy-intensive protocol. But it also has the scalability issues that many deem less a transactional global currency but more of a store of value. With further adoption globally and with ESG along with operability, there’s a good chance we will see more utilization of sustainable crypto projects.
Energy Consumption the relativistic approach.
Suppose we look at the estimates of 39-74 per cent renewable energy used by Bitcoin and compare energy consumption to countries. In that case, it only begs that we have a look at the global percentages renewable average. The United States stands at a mere 12%, Australia 21%, China 26% and many other countries lagging. Norway, Brazil and New Zealand are in the 30-40% and only Costa Rica and Norway have reached 100% renewable with consistency.
If we take that comparison, Bitcoin is better than most, even on the lower side of its consumption estimate.
With ESG global altruism at crypto’s forefront and critics holding it accountable, one can only foresee crypto pushing the envelope towards sustainable practices in the future.
