Knut Svanholm

@knut.svanholm

How everyone’s wrong about the energy used in Bitcoin mining

There’s no such thing as a free lunch. There’s no such thing as a zero sum game. The 2nd law of thermodynamics tells us this. You know, the one about entropy and how everything will be really, really lame in a couple of trillion years. There’s no action without an equally big reaction somewhere. This is also true for Bitcoin mining.

Every once in awhile, some ignorant click bait hungry journalist writes an article about Bitcoin’s energy usage and how it’s connected to global warming or how widespread Bitcoin adoption would kill us all someday because of its “wasteful” production process. What they all fail to address is they alternative cost. First of all, Bitcoins are valuable precisely because they’re costly to produce. The same is true for gold or diamonds or anything else that is scarce and hard to come by. The mining algorithm can never be any more energy efficient because the electricity spent is directly linked to the value of the token.

Secondly, think about what most people use their Bitcoins for. Nothing. That’s right, nothing. Bitcoin incentivizes saving rather than spending. This is the exact opposite of what our current systems of fiat money does because Bitcoin is deflationary rather than inflationary. This means that every dollar, yen or pound spent on Bitcoin would have ended up being spent on some other energy demanding thing had it not been spent on the Bitcoin. Either that or it would have lost its value due to inflation which means that even more dollars, yen or euros would have been created and spent on frivolous things. The very idea of central banking and the philosophies of John Maynard Keynes is that fast spending and a lot of transactions in general is what drives the economy. Bitcoin is the opposite to these views. Yes it’s costly to produce but so is overproducing every product on earth because you need your business to expand as fast as possible to pay off your loans. Human well being has always and will always be linearly connected to energy consumption. You can’t get around that or bypass this fact. They’re inevitably linked. The thing Bitcoin does is taking away the need for unnecessary energy consumption by incentivizing us to save for future generations. It’s a tool for stopping our destructive tendencies. Not a threat to our planet’s health but a remedy.

So, the next time you hear about Bitcoin using as much energy as a small country, ask yourself — where would all that energy have ended up if it wasn’t funneled into the the only invention trying to save us from ourselves there is? Into a Chinese factory producing consumer goods shipped by boat, truck and car for temporary use by westerners and probably ending up in a garbage pile the size of a small country in less than a year? How is that better for the planet again? The only place solutions for humanity’s problem can stem from is from human ingenuity and human ingenuity itself stems from places where people with brains have a shot at getting somewhere in life. Thanks to the internet and Bitcoin that somewhere is everywhere. The internet connects us and Bitcoin frees up our time and emancipates us from the destructive mechanisms of our current systems. Bitcoin helps you plant a seed and watch it grow if you will. Before you criticize Bitcoin, read up on why it was invented and what inflationary, soft money does to the mechanisms of the market. Why we have a climate problem in the first place. Why we over consume. What underlying forces pull our psychological strings and makes us lend money for a new car? It takes a special kind of ignorance to criticize the solution to a without first getting to know the problem.

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