1. One of the most common criticisms about Bitcoin is that it consumes a significant amount of electricity. Bitcoin mining indeed uses a lot of power. This critique is uninformed, however, and mostly amounts to ‘big power number bad’.
There is a three-step progression in understanding Bitcoin’s power consumption.
1. First, it must be stated, simply consuming electricity is not the same thing as wasting electricity. Nobody would consider turning on a lamp in the dark to be a waste of electricity or the use of a fan in the summer to help keep us cool. These are not wastes of electricity at all, they are uses of it. The electricity used to mine Bitcoin is being used to secure the only neutral and apolitical digital money in existence. In my opinion (not widely shared I knowledge), there are few uses for electricity more humane and noble than mining Bitcoin.
2. Looking further into its electricity usage brings around the next important point: What makes up Bitcoin’s energy consumption? Is it dirty coal and gas?
Overwhelmingly, the answer is no. There have only been a handful of data-driven studies on the subject, with the most thorough being a 2019 study which concluded that over 74% of Bitcoin mining is powered by renewable energy, a number that makes Bitcoin more driven by renewables than almost every other large-scale industry in the world.
Why is Bitcoin so renewable driven?
3. Today, energy is generally a local business. Stored energy does not travel over long distances. Thanks to Bitcoin however, energy generation does not have to remain within a few hundred miles of civilization anymore. This changes the economics of energy completely. While fossil fuels are more efficient than renewables at providing cheap energy to consumers, renewables are the more efficient option when energy can be generated from anywhere.
Energy companies can put renewable energy sources in the locations where they are the most efficient (like solar panels in deserts) and put the energy to use mining Bitcoin, which can then be sold for dollars if desired. This significantly expands the potential market for renewables and makes using renewable energy far more profitable than it ever has been. The resulting investment in the industry will drive the cost of renewable energy down far beyond what has happened to date and make it so clean energy is even more cost-efficient than fossil fuels.
Instead of relying on politicians to take action in a hyper-partisan world, Bitcoin mining provides an economic incentive to adopt clean energy that has not existed in the industry to this point. Both the left and the right should embrace it.
They probably won’t though. Instead, we’ll just hear more of the same. ‘Big power number bad’…