Bitcoin has many noisy and powerful critics. First, Bitcoin was a scam; now the bitcoin (BTC) currency is one of the national currencies of El Salvador. Then it facilitated illegal activity, even though cash still remains a criminal’s best friend. Now they say it’s an environmental scourge, another weak argument made by a small yet noisy minority.
Ultimately, emissions are caused by burning fossil fuels. We don’t ban cars because of their emissions, we power them with cleaner sources of energy. The same trend toward cleaner electricity production is happening with Bitcoin. Many love to hate Bitcoin, but their reasons are starting to run dry.
Bobby Lee is the founder and CEO of Ballet, a cryptocurrency wallet company, and author of the Wall Street Journal bestseller “The Promise of Bitcoin.”
Today, the most widely trafficked piece of disinformation about Bitcoin is the idea that it is contributing disproportionately to the current global environmental catastrophe. Sincere public concern about climate change and environmental protection are being exploited by those, like Bill Gates, Warren Buffett and Charlie Munger, who are deeply entrenched in the old financial system.
The Bitcoin-induced climate change hypothesis appears coherent on the surface. Computers require electricity to run. Bitcoin is a globally decentralized network of thousands of computers so it, therefore, consumes a large amount of electricity. As (BTC) becomes more valuable, the amount of electricity consumed to secure the network is expected to increase proportionally.
However, critics, like Professor Brian Lucey at Trinity College Dublin, go on to point out that “[b]itcoin alone consumes the same amount of energy as a medium-sized country. … It’s a dirty business, it’s a dirty currency.”
But these arguments are supported by cherry-picked data and misleading comparisons. Research from Digiconomist suggests the energy consumption for one Bitcoin transaction is the same as for 453,000 Visa transactions.
However, we must remember that credit card payments still rely on existing, emission-heavy infrastructures like the ACH, Fedwire and SWIFT, as well as the military and diplomatic strength of the U.S. government. The critics don’t include those emissions in their calculations comparing Bitcoin and the traditional banking system. It’s like comparing the emissions of the entire coffee industry with a single cafe.
Indeed, once we factor in these overhead emissions, a different reality emerges. Recent research from Galaxy Digital reveals that Bitcoin consumes approximately 113.89 terawatt-hours per year, whereas the banking industry consumes approximately 263.72 TWh per year, which is more than double.
We must instead consider the environmental footprint of the banking system that Bitcoin is set to replace. Modern banking consumes massive amounts of electricity to support thousands of commercial office buildings and local branches, millions of employees’ daily commute and billions of customers who have to travel to and from physical bank locations for service. Bitcoin will greatly reduce the demand for traditional banking services, thus eliminating most of that industry’s environmental impact.
Bitcoin consumes a huge amount of electricity, but we must look at the energy sources in order to fully understand the situation. A recent survey by the Bitcoin Mining Council found that 56% of Bitcoin’s electricity consumption comes from clean (zero carbon emissions) sources of such energy, which is a higher rate than any other major industry. For comparison, only 40% of electricity in the United States is generated from clean energy sources.
However, in the atmosphere of climate fatalism, environmental arguments will always hold sway over the less informed. Once people can be convinced their existence is threatened by Bitcoin, they will feel they have no choice but to stay trapped in the fiat system.
Bitcoin offers a fundamentally different vision. Its deflationary value encourages people to save for the long term instead of spending in the short. In essence, the shelf life of capital under the Bitcoin system is far, far longer.
BTC’s price has increased over 100% per year on average, and strong growth is projected to continue for many more. Bitcoin imposes a huge opportunity cost on wasteful consumption. People have less incentive to buy the latest consumer product when their capital isn’t constantly being eaten by inflation. Buying an iPhone today makes less sense when those funds will be worth more tomorrow.
Small, voluntary changes in individual behaviors such as these would be compounded across the whole of society, and the aggregate impact would be transformational. It’s not necessary to sacrifice freedom and prosperity to protect the environment.
Bitcoin’s critics will continue to scrape the bottom of the barrel for new arguments against this revolutionary technology. While stoking climate fears is the latest rhetorical tool used by crypto-phobes, we should remember that, just like their other half-baked arguments, the climate objection fails to stand up to basic scrutiny.
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