19th October 2022 > > Energy usage.

tl;dr

BTC mining and energy usage.

Market Snap

Market Wrap

BTC volatility is lower than it has been for the last two years, with BTC range bound between $19k and $20k. If history is any guide, that situation will not last long. The big question – and one that no techie can ever answer, despite claims to the contrary – is whether the breakout is to the upside or the downside.

We will find out soon enough.

Curious Cryptos’ Commentary – BTC energy use

Concerns rumble on about the energy usage of BTC mining.

Reminder – BTC remains as a PoW (Proof-of-Work) consensus mechanism which requires miners to compete against one another to create the next block in the chain. ETH recently moved to a PoS (Proof-of-Stake) consensus mechanism in which validators are chosen at random in proportion to their holdings of staked coins to create the next block.

What this means in practice is that most of the energy used by PoW is essentially wasted. It has been estimated that the energy usage of ETH has reduced by over 99.99% because of moving to PoS.

I think we can be certain that BTC will never move away from PoW, so there will continue to be a debate about the environmental consequences of PoW cryptos, and we need to understand that debate.

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In the red corner, those who wish to damn BTC for its energy usage, we have a line-up of the usual suspects.

Crypto naysayers are leading the charge, egged on by environmental pressure groups.

Greenpeace is running a “change the code not the climate” campaign, whose objective is to move BTC to PoS. I got news for you baby, that aint ever gonna happen, so you are wasting your time.

Even Greenpeace supporters agree with me, for the first time ever, on that point – Greenpeace twitter account has nearly 2mm followers, but the campaign account has just over 1,000.

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In the blue corner, we have crypto supporters, egged on by facts, rather than emotions.

The BMC (Bitcoin Mining Council) represents 51 of the world’s largest BTC miners. Set up in part as a means of combating some of the hysterical reporting around the subject of mining, their most recent report makes for interesting reading:

https://bitcoinminingcouncil.com/wp-content/uploads/2022/10/2022.10.13-BMC-Presentation-Q3-22-Presentation.pdf

Here are the key takeaways:

1. Uses an inconsequential amount of global energy (0.16%) and generates negligible carbon emissions (0.10%).

2. Bitcoin mining hashrate is up 73% YoY while energy usage is up 41% YoY, due to an increase in efficiency of 23%.

3. Bitcoin is the industry leader in sustainability with a 59.4% sustainable energy mix.

That figure of 0.16%, I am reliably informed, is less than that used by computer games. I haven’t heard any calls to ban gaming, but perhaps I read the wrong newspapers.

Also note that with most of the energy usage being renewables – a proportion that will only ever increase – BTC mining is a primary driver of demand for sustainable energy.

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One of the ideas to mitigate the environmental impact of BTC mining is to utilise the waste gas from oil rigs to power banks of computers, thus moving the energy demand away from being a primary driver of fossil fuels. Technological innovations like this clearly reduce the impact of mining, but for a one-sided (negative) take on this, you might be interested in this article:

https://www.theguardian.com/environment/2021/dec/16/crypto-mining-oil-industry-waste-climate-crisis

There are several assertions in there that are clearly utter nonsense, but it’s worth trying to understand the machinations of those who seek to denigrate the crypto revolution.

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You will recall that during the process of defining and agreeing the MiCA (Markets in Crypto Assets) legislation soon to be enacted by the EU, there were several attempts to insert a proposal to “ban” PoW coins, because of environmental concerns.

Fortunately, common sense prevailed – any such “ban” would simply be virtue signalling and could never be implemented. The proposal was a sop to various factions in the EU Parliament and would deter the establishment of mining within the EU, driving away tax dollars.

So, plaudits for the EU for that decision, and plaudits for their next initiative.

The EU plans to develop energy efficient labels for blockchains.

I assume this would be similar in approach to the energy efficiency labels for white goods, houses, etc. This is a far better approach – give people the information they need, and they can make up their own mind.