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Writer's pictureRich Lassiter, MD

The Bitcoin Energy Farce


I am so tired of the debate around energy expenditure of bitcoin. People who talk about the energy expense in maintaining the bitcoin network are not being honest with the correct usage of electricity, nor are they comparing apples to apples in terms of other energy expenditures. To be clear, I am not arguing that mining bitcoin is not an energy intensive activity. It certainly is. The farce is that this is an inappropriate use of energy. The narrative is essentially that this is not a good use of electricity. Spoken another way, the narrative is that there are better uses of electricity. Who is the arbiter of what is an appropriate use of electricity? Why is creating, encouraging, and protecting a global digital asset an inappropriate use of electricity?


One of the first things to consider is why so many individuals around the globe want to engage in spending their electricity on bitcoin. In the first place, bitcoin mining is an enterprise. This is a for-profit opportunity. Individuals or businesses have decided that they can make profit (this applies primarily to bitcoin, but in general to almost all other proof-of-work cryptos) by purchasing computers that perform a specific software function, and make money. I am not personally engaged in mining (at least not as of yet), but I am not condemning any business enterprise of the economic equation that they are engaged in. If a business wants to buy electricity, or create electricity if they have such capacity, and use that electricity to run a computer, to generate something that has value, it does not seem appropriate to judge them for what item they are creating. They could be creating stamped steel, they could be creating dolls, or they could be creating bitcoin. Creating bitcoin is also called mining bitcoin. The miners are racing, against each other, to solve the complicated math equation the fastest. So, if you have more computers on your mining team, your odds of winning that race are higher. It is an important distinction that the miners are entering into this equation of their own free volition, because they think they have an economic advantage. If I was to run my personal computer 24 hours a day in 2022, mining bitcoin, I would PROBABLY NOT earn more wealth in bitcoin than I would spend in electrical power costs to my local utility.


Back when bitcoin launched in 2009, there were fewer computers on the network, and so my personal computer probably would have won some block awards. However, over the years specialized chips (ASICs) have been created that only have one function, to run the bitcoin math. Nowadays, to be a successful miner, you need to run a computer that is full of these special ASIC (application specific integrated chips), and all that the computer does is run the bitcoin software. There is no keyboard or monitor, just a shoebox-sized computer connected to the internet with a power-supply and a fan or two, full of these chips. A modern bitcoin mining company will have a warehouse full of racks of these shoebox computers running the software. If you were a mining company, you would recognize that the most appropriate place to locate this warehouse of computers is where energy is cheap or free. Renewable energy, in the long run, is cheaper than fossil fuels. There is a higher up-front cost, but a long-term benefit. An additional benefit, with crypto specifically, is you can locate the bitcoin mining equipment at the renewable power source--like say a remote volcano/geothermal heat source, that is far from civilization. This is 'lost' energy, or sometimes energy that is wasted. I predict that just like the oil fields that were easy to get to have all been used first, the easy to get renewable energy sources are going to be capitalized on first. Nowadays we are mining in shale or deep-sea locations to get oil. Years from now, the hard-to-get-to renewable locations will be accessed.


People like to argue that the bitcoin network uses more energy than some small country. It does not matter which small country you refer to this week. The country will change, over time. When China banned bitcoin mining in 2021, the amount of total energy expenditure lowered, because they were fewer miners. Now that all of the miners that departed China have set up camp in new countries, the energy expenditure is likely just as high as it was pre-ban. I know that the hashpower of the network has returned. The unit of computing power to secure this cryptographic equation is a hash. As I type this, on Jan 8, 2022, the network has 175 ExaHash/second. There are a LOT of computers/ASIC running on this network, keeping it secure. When I say secure--the only way to invalidate a bitcoin transaction would be to re-write the block history. To do this, you would need to have 51% of the computing power all agreeing that your desired block history is the correct one. This is how the bitcoin faithful know that no one can take your bitcoin from you. The network would require over half of the participants colluding. No entity, government or otherwise, has the capacity to do purchase, deploy, and implement such an attack.


The apples to apples equivalent cannot be performed unless you compare the use of bitcoin to the energy expenditure of the banking network. It seems to me that this is the argument being made of why money should not be spent on bitcoin. So, to answer this apples-to-apples, you would need to add up the energy required to run today's banking system. I cannot even begin to consider how you could sum up all of the energy expenditures of the banks, all of their headquarters and regional branches, their ATMs, the point-of-sale cash registers, point-of-sale credit card processors, armored guard services to move the cash, the paper and coin currency manufacturing industry, the fraud prevention/counterfeiting surveillance industry, and I am sure there are some others that I have not thought to include. None of those costs are associated with bitcoin. All you need is a wallet and an internet connection. I'm going to say these costs (a phone and a wallet) are part of both systems, and therefore equal.


So...do you think that summing up the energy expenditure of all the banks, etc is greater than the expenditure of mining bitcoin? And...is it worth it?

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