Is there anything you can do as a government to prevent bitcoin from being used? Are you able to make the world believe that it is killing our planet?
Autoritarian governments will try. The Chinese Communist Party—ever the tree-huggers—clamped down on cryptocurrency last year in part because of environmental concerns. Russia plans to tighten its controls over cryptocurrency, citing the potential threats it poses for financial stability and Mother Earth. These two countries were major centers of mining, and energy consumption is an easy way to make the government lose something good for people but not for the ruling party.
In bitcoin mining, the United States is leading the way. Many of those who fled China’s crackdown on mining were taken in by America. If the Russian government continues to make threats, we can expect Russian miners will join us.
Uncle Sam seems far away? A subcommittee of House Committee on Energy and Commerce hosted a disturbing hearing titled “Cleaning Up Cryptocurrency – The Energy Impacts of Blockchains”. According to the title, the ruling party regards bitcoin’s energy usage as a problem that must be fixed rather than an option for liberating technology.
Although the politicians didn’t know much about bitcoin mining at this hearing, most knew that they dislike it. Rep. Frank Pallone stated, “We cannot bring old fossil fuel plants online or delay retirement of some of the oldest and most efficient plants to support energy-intensive crypto mining.”
It is quite a strange statement about bitcoin mining, considering the fact that nearly two-thirds its energy sources are renewable. Half of the US boasts this figure.
However, Bitcoin mining makes up 0.12% percent of the total world’s 154620 terawatt hours. This is our greatest energy problem, but could there be other reasons?
Bitcoin facilitates peer-to-peer trading by replacing third parties like banks with a decentralized network called miners. The network is run by miners who contribute computing power using “proof of work” technology (POW). Incentives are given to them so that they can contribute the most energy possible in order to have the best chance of receiving currency units. Higher profits for miners are correlated with lower energy costs. A higher total energy or “hashrate” means less backlog and stronger networks.
How efficient is bitcoin mining? The concept of opportunity costs, which is the cost to lose the most valuable alternative, plays a key role in this decision. How much are miners willing to sacrifice to provide energy for bitcoin mining? Mining is a great way to make money. The market is very competitive and prices are transparent. Miners have made an economic calculation that this is the most valuable thing on which they can expend energy—if it wasn’t, they would be losing money by not putting their energy elsewhere. It’s also good for society.
The value of “using energy” can be attributed to nothing. Energy can be used to improve living standards and save lives. If energy is used to devastate wealth or impoverish others, it’s a problem. Because Bitcoin allows people to access a secure financial system that is not subject to inflation, confiscation or control, it improves their lives. This freedom is worth the effort.
The topic of mining, and how it affects the environment is a common theme in bitcoin discussions. It was resolved over ten years ago. Satoshi said it best in 2010. “The utility and convenience of Bitcoin-based exchanges will be far greater than the electricity costs used.” Therefore, voiding Bitcoin would amount to net waste.
However, many Bitcoin critics do not believe financial freedom to be a good thing. AnyThe amount we spend on Bitcoin is bad. It doesn’t sound like a great idea to suggest that people shouldn’t be allowed to trade freely or save money. They’ll also disingenuously refer to Bitcoin’s energy consumptions as a problem.
This isn’t surprising. It is disappointing, however, to see cryptocurrency enthusiasts promote it. bad energy rhetoricThey can tilt the policy playing field in their favor.
This unfortunate tactic has been chosen by advocates for “proof of stake”, a consensus mechanism. POS systems don’t operate in the same way as bitcoin. The network is actually maintained by those who have the largest number of coins. According to the theory, stakeholdersDo not feel compelled to destroy their networks and their net worth.
POS advocates like one witness in the hearing maintain that POS systems, which are more environmentally friendly than bitcoin, are superior. This implies that POW systems such as bitcoin need to be stopped or manipulated so that POS models can be adopted.
However, everything comes with a price. Insiders can more easily capture POS systems. While they might have the incentive not to completely destroy the network, they can make subtle improvements to their own benefit. POS systems don’t sound very different from current monetary mechanisms. A POW system protects energy consumption from insider subversion.
These weaknesses might be mitigated by POS systems. However, POS advocates shouldn’t have convinced the government that POS systems can overcome these vulnerabilities. These attacks should be condemned by all who care about freedom and cryptocurrency.
If we do, then we might see a “ban” on Bitcoin mining with American characteristics. Although the U.S. might not ban cryptocurrency networks, it could allow for their validation. It could instead promote POS systems, and participate in public campaigns against POW networks like bitcoin. It might rely on regulated entities or investors to support POS systems instead of POW. It might pass anti-bitcoin governance, environmental and social rules. Nobody is trying to ban cryptocurrency. We “nudge” the society to choose “green”.
This can’t be permitted. Bitcoin is fine and miners will move to better-hospitable places. Some would remain in America, like underground Chinese miners. The U.S. will miss an amazing opportunity to create a rapidly growing industry that benefits America and all those who wish to utilize this technology to freedom.
Bitcoin critics aren’t able to defend themselves when it is about energy and mining. It is more efficient than traditional energy sources, is much more sustainable, and allows for energy companies to reduce waste.
However, we should not allow ourselves to become lost in the argument over these weeds. Bitcoin is an excellent thing and we should spend time on it. Freedom is not something we have to regret.