The Bitcoin energy debate rumbles on, seemingly without end. Bitcoiners are rightfully frustrated at having to defend Bitcoin’s share of global energy production, given the lack of equivalent scrutiny applied to other apparently wasteful applications which consume similar amounts of energy. In a sense, arguing over minutiae like the energy mix of bitcoin miners, as I have done in the past, is to miss the point. The question ultimately boils down not to the particulars of mining but rather the societal merit of non-state money.
CoinDesk columnist Nic Carter is partner at Castle Island Ventures, a public blockchain-focused venture fund based in Cambridge, Mass. He is also the co-founder of Coin Metrics, a blockchain analytics startup.
You could say the energy debate has a normative and an objective track. The normative debate focuses on whether it’s legitimate to spend any of society’s energy resources on the production and maintenance of a non-state monetary system. This is the more important question, and it involves weighing the relative cost of energy externalities against the relative benefits of sound money and freeing individuals globally from tyrannical monetary regimes.
Then you have the objective debate, which focuses on how much energy bitcoin consumes, which sources it draws from, and what the picture is likely to look like in the future. Getting trapped on this turf is unfortunate, as bitcoiners are forced to defend the costs of this industry while the critics enjoy an apparently conscience-free right to selectively question the energy uses of specific industries. How often do you hear about the societal merit of game consoles, clothes dryers or Christmas lights?
Sometimes, however, an argument comes along that is so clearly built on mistaken assumptions that it’s worth straying from the normative debate and back into the world of facts. Indeed, arguments of this form have become disturbingly common:
- Bitcoin consumes a lot of energy
- Bitcoin settles~300,000 transactions per day
- If you combine 1. and 2., you can derive an eye-popping “energy cost per transaction”
- If you linearly extrapolate that analysis such that bitcoin satisfies the world’s transactions, bitcoin will use more energy than exists on Earth.
This line of reasoning might sound persuasive to the uninitiated, but it is in fact completely flawed in an impressive number of ways. Yet, we see it all the time. Here’s a recent example, courtesy of Eric Holthaus, one of the top climate journalists in the U.S. and a published author on the topic:
At its current consumption rates, Bitcoin could never replace the global financial system. Right now, with its high transaction fees, Bitcoin only can handle about 350,000 transactions a day. At that rate, Bitcoin would require 14x the world’s total electricity just to process the 1 billion credit card transactions that take place every day. Bitcoin is not just inefficient, it’s actively anti-efficient. It makes the world worse…