The FUDBusters are back and
this time we're addressing a major elephant in the room. Today, we're taking on a
biggy, a real hot potato, the age-old, hotly-contested
energy consumption debate. Let's make something clear from the start. The Bitcoin network uses
a lot of electricity. This isn't really in dispute. Bitcoin is created through
a process known as mining. This is done using a consensus mechanism known as proof-of-work. Proof-of-work basically involves
using brute computing power to solve complex mathematical problems to verify transactions on the blockchain. This used to be done on home computers, but it now requires specialist equipment that can handle the
intense processing power. Brute computing power? Special equipment? Sounds like these involve
a lot of electricity? Correct, they very much do. So, what do we mean
when we say this is FUD? Well, a large part of it
lies in how it compares to other related fields.
Let's start with its carbon
footprint relative to banks. According to recent research
done by Yassine Elmandjra, an analyst at ARKInvest, Bitcoin is actually much more efficient than traditional banking and
gold mining on a global scale. Elmandjra found that traditional banking consumes 2.34 billion gigajoules per year and gold mining 500 million gigajoules. Bitcoin, on the other hand,
consumes 184 million gigajoules, less than 10% and 40%
of traditional banking and gold mining, respectively. If you compare it to Visa, a single transaction of Bitcoin has the same carbon footprint
as 680,000 Visa transactions.
But this isn't comparing like for like. They're fundamentally different systems. Bitcoin is a complete, self-contained monetary settlement system, while Visa transactions are
non-final credit transactions that rely on external
underlying settlement rails. The other important thing to look at is where the electricity
Bitcoin uses comes from. A recent study by the Cambridge Center for Alternative Finance found that 39% of Bitcoin's energy outlay derives from renewables, with 76% of miners using
renewables in some capacity. Miners' main motivation is profit. This means that they will usually look for the cheapest sources of electricity, which increasingly leads
them to use electricity from renewable sources. The bulk of bitcoin mining operations happens in places like
China, Sweden, and Iceland to name a few.
Most of the areas are rich in renewable, low-cost energy sources. Another argument in favor
of Bitcoin's energy use is that of transparency. CoinShares Chief of
Strategy Meltem De Mirors raised an interesting counterargument, suggesting that mining bitcoin
is a good use of energy. She notes that Bitcoin
is incredibly transparent in its energy use while other industries
are much more opaque. This means it's going to be far
easier to solve the problem, although it also means it's far easier to use its energy usage as a weapon. Again, it's important to remember that any new technology
that threatens to disrupt billion-dollar for-profit industries will face a lot of criticism. It's easy to dish out alarming statistics to further an agenda, but it's important to do your own research and uncover the hidden
truths in any argument. Or, you could just watch
an episode of FUDbusters and let us do some of the
heavy-lifting for you.
So guys, what do you wanna see
the FUDBusters tackle next? Leave us a note in the comments below. And don't forget like, subscribe, follow, and as always.
