According to the Cambridge Center for Alternative Finance, if we look at Bitcoin’s annual electricity consumption, it measures around 127.48 terawatt-hours (TWh). Comparing the consumption on a global scale, the Bitcoin network extracts approx 0.5% global electricity consumption.
Bitcoin represents a solution to the systemic problems within our legacy monetary framework, and it relies on energy consumption to function.
On the other hand, economic stability depends on the function of cash. Bitcoin is said to provide a sound monetary framework, so there isn’t an essential long-term energy use other than securing a bitcoin network. Hence, it’s a small price to pay for the world’s most robust monetary system.
Bitcoin Network: The Perfect Solution for Surplus Electricity Consumption
One of the strongest arguments for Bitcoin’s energy consumption’s justification lies in the working of the electricity grid and incentive mechanism. If you understand the mechanism or demand and supply of the electricity grid, you’re most likely to come to the conclusion that Bitcoin’s energy consumption actually helps the system.
Electricity is the world’s fastest moving and consumable goods, meaning all the electricity that is produced has to be transferred and consumed almost instantly as it cannot be stored. Hence when there isn’t much demand, the power system rests idle. There comes the Bitcoin network as a robust solution. Bitcoin mining allows us to make use of that surplus energy consumption – hence helping the whole system.
Coming on to the incentive mechanism, if you look at the geographical location of Bitcoin mining, there’s a simple pattern – miners run their operation where they can draw the cheapest source of electricity – meaning whichever area is producing excess electricity compared to the demand. Thus, the Bitcoin network in essence is offering a solution to our current electricity system, rather than being a burden.
Furthermore, most of the Bitcoin mining runs on the green energy source – thus defying the logic of environmentalists claiming Bitcoin to be bad for the climate.
Economic Stability and Bitcoin
First of all, you need to know if the foundation of all trade is energy, and if we need finances to coordinate business, the highest and best use of that energy should be to protect the monetary system.
There is an extreme concern when it comes to powering the bitcoin system with electricity. It’s not that we should sacrifice electricity that could power our homes and offices. But the simple fact that we will never have electricity to power those homes if we don’t have a reliable monetary system to coordinate economic activity or even marshal resources.
The point is, bitcoin will not practically compete for the same energy resources that fuel fundamental productive and consumptive functions of our economic system and not zero the sum.
Instead, bitcoin’s presence in the economic system would ensure that those energy needs that we hold so significant in powering our system would continue to be fulfilled.
Don’t you think it is high time we gear up and change the way we view our economic system? Or do we want to end up like the economies in Venezuela and Zimbabwe, where basic human services and healthcare services were stopped in all their entirety or couldn’t be reliably provided?
The Overall Importance of Bitcoin
When it comes to bitcoin, we shouldn’t ever fear a collapse in any way because the production and consumption of energy secure Bitcoin.
Bitcoin, for one, is relatively more stable than the physical currency, and the production of energy resources that provide basic economic necessities has been having positive reviews by experts around the world about its counterpart, the traditional monetary systems.
The more people value the long-term stability it does provide, the more energy it will consume— there’s no hidden agenda about that. But in the end, this consumption will ensure all other derivatives of energy consumption to be continuously fulfilled, which is why there isn’t an actual long-term use of energy other than securing the bitcoin network.
To summarize, place a price on economic sustenance and the financial freedom of a stable monetary system given, and that’s the actual justification for the amount of energy bitcoin should and will consume. Everything else that tries to attach to this is a distraction.
How Conservative is This?
Do you know that each time a banker takes a private jet from New York to Beijing, or each time a bank teller drives a 40-mile commute to a branch office, this is all of the energy consumed in the banking sector inclusive?
Now, you may be thinking; this doesn’t relate to the Visa transaction. Yes, but they are still the lifeblood of the banking industry. Without such expenses, the banks could never exist as they are today. Therefore, while the link to Visa isn’t as direct, it is no less essential to consider.
All of the variable and fixed cost of energy consumption is difficult to calculate when it comes to the conventional banking system. It still shows that the traditional method of banking uses and even wastes more energy than Bitcoin.
The Scare Factor in Our Economy
According to a well-known Research Professor at IIT, Comillas University, C. M. Domingo, energy and economic expert, affirms banks consume more power than bitcoin. Here are some of his reasonable but conservative assumptions.
His computations essentially boiled down to this. There are about 30,000 banks globally, each with servers, branch offices, and even ATMs. As the visa network is precisely a network, all transactions made on it need to operate back and forth via banking infrastructure.
Now, you have to know there are many middlemen in the process of doing one Visa transaction. Therefore, Domingo claims that the energy consumption of all banks is directly and wholly tied to the Visa network.
Add together all of these factors, and we get about 100 or so terawatts of power consumed by banks annually. This doesn’t reach the level of pales compared to the 25-30 terawatts bitcoin is known to consume.
Now, do you see the hint?
Bitcoin Mining is Too Costly— Wrong.
The last thing to cover when it comes to the argument on bitcoin energy consumption is the idea that it’s too energy expensive to mine. Naysayers have been declaring for years that the mining cost of bitcoin would eventually make it unprofitable in the coming years. But, according to statistics, this has so far proven to be false in all its category.
Let’s look at this for a moment, an alternative situation to this. Imagine that bitcoin mining is still as easy as it was back in 2009. Just anyone on a consumer laptop could mine bitcoin and get at least 50 BTC in just a week.
The naïve speculators among us don’t know this one thing: the price of bitcoin isn’t only due to speculation but also to its intrinsic scarcity. Bitcoin is complicated to mine. It requires an enormous capital investment to make a profit. This is known to restrict supply and keeps the price on an upward trend.
Basically, in this system, if you own or mine bitcoin, you’re the winner. Now, compare this to the conventional banking system. The only winners in such are the big banks themselves. So be truthful to yourself; which method would you like to be part of?
Bitcoin is Worth it All
With Bitcoin, we tend to rely less on capitalist consumption, and that’s predicted to indirectly drive down society’s energy use and help lessen environmental impact in all areas.
All of the economic experts presently are doing the blame game, believing that Bitcoin is the next thing to climate change, far from the truth. Bitcoin, on the contrary, is the solution to all the ills we see in our society.
Bitcoin is far better when it comes to energy than the conventional banking system. Nonetheless, bitcoin is way far from perfect due to the massive power needed to maintain its network.
And that’s considering that bitcoin is a potential ‘currency alternative’ for all economic freedom lovers; perhaps the best way to do this is to begin to mine bitcoin with green, renewable sources of energy. You know solar, wind, hydroelectric, and biomass energy. Not to mention the rumours going around that Tesla could soon integrate a Bitcoin miner with their Solar Roof division.
Written by: Narender Charan