Why I think Bitcoin could be a key to saving the environment

Thursday 26 January 2023 3:43 pm

by Susie Violet Ward

Most people have heard about Bitcoin but they are unsure about what it is. Its magic internet money, only used by criminals and has no intrinsic value are some of the common misconceptions. Even governments, traditional fund managers and journalists do not yet understand this new technology.  The FUD (fear, uncertainty and doubt) in the media is often misinformed or downright dangerous.

What is Bitcoin?

Bitcoin is a peer-to-peer electronic cash system that allows money to cross borders without a 3rd party within milliseconds, 24 hours a day and for pennies. It solves a multitude of issues we have with our current financial system including fraud and trust. All transactions are recorded on an open-source blockchain. Since Bitcoin’s inception on January 3 2009, it has never been hacked.

There is a capped supply of 21 million and each bitcoin is divisible into 100,000,000 Satoshis. With the Lightning Network, it has the potential to be divided into smaller increments, giving it the potential to be used as a world reserve currency.  The Lightning Network is a payment protocol layered on top of the bitcoin blockchain to facilitate faster transactions and is enabling bitcoin to scale. 

Its hard-capped supply means it cannot be inflated and no more can be made, thus making this the ‘hardest money’ known to humanity. It means that in the future your bitcoin is mathematically programmed to go up and not down, unlike the fiat money we use today.

Bitcoin is decentralised, meaning it’s operated by a global community of miners and nodes, instead of a central authority. Its rules are programmed into code and cannot easily be changed. Sounds amazing, right? So why are there only a select few who have taken the time to learn about this revolutionary ‘new’ blockchain technology?

Who created Bitcoin?

Satoshi Nakamoto created Bitcoin and the first widespread application of blockchain technology. This name is a pseudonym to disguise the person or team who developed Bitcoin. Satoshi was active in the development of Bitcoin up until December 2010, then they withdrew from the project and handed it over to developers who have continued to work on the mission. Many people have claimed to be Satoshi Nakamoto but, in truth, no one knows who he/she/they is/are.

Bitcoin’s development started in 2007 and its release coincided with the 2008 Financial Crisis. A few weeks after the bankruptcy of Lehman Brothers and the Merrill Lynch bailout, Satoshi published the Bitcoin White Paper and hid a message in the genesis block, which was mined on 3 January 2009. Satoshi wrote of the failure and injustice of central banking and our fiat system.

He also wrote : “We have proposed a system for electronic transactions without relying on trust.”

The birth of Bitcoin would eventually lead to us rethinking the existing global financial models and systems currently in place.

Myth busting

Myth 1 –  Bitcoin has no Intrinsic Value

As mentioned above, there will only ever be 21 million Bitcoin and this scarcity is a major driver of its value. In addition to this supply cap, the amount of new Bitcoin being mined is declining over time.  An event called a “halving” takes place every four years, and the result is block rewards paid to miners in the network are cut in half. This ensures the supply is always reducing which, by the basic economic principle of scarcity, has worked to keep the price of Bitcoin gradually trending upwards over the long term.

Bitcoin also provides value from the work the computers on the network contribute via a process called mining. Powerful computers all over the world supply a vast amount of processing power towards the work of validating and securing every transaction and in exchange, they are rewarded with new Bitcoin. This is called ‘proof-of-work’ and is essential to the security of the network. I’ll come on to this in more detail later.

Myth 2 – Bitcoin will be replaced by a competitor

There are about 22,000 cryptocurrencies and some are direct copies of the original Bitcoin white paper; however, Bitcoin currently makes up approximately 60% of the total cryptocurrency market cap. The transparency and virtue of its task as a decentralised and open currency make it unrivalled to date. Cryptocurrencies are technologies trying to solve different problems and there are others with smart contract capabilities however, these are not all decentralised and do not all use proof-of-work (PoW), more on this later.  

Myth 3 – Not secure

It’s probably one of the only systems on earth that has not yet been hacked. Satoshi’s genius was to make it so it was easier to join the movement and mine Bitcoin than to try and hack it. It simply moves too fast for it to be hackable. It has been up (online) 99.9% of the time since 2009. The amount of computing power it takes to secure the network is large, however it is still relatively small in comparison to the current financial system. The miners that power the network are located around the globe in over 100 countries. The more miners and nodes the stronger the system becomes as there is no single point of failure. In a nutshell, this is the benefit of Proof of Work.

Myth 4 – Bitcoin is a bubble

Bitcoin has gone through multiple price cycles throughout its 14-year history, each time the price has recovered to achieve new highs. As this is a new technology, boom and bust cycles are to be expected. As adoption increases, Bitcoin’s volatility will subside and it will settle into relative stability. 

Myth 5 – Bitcoin has no real life uses

Bitcoin can make payments to anyone in the world without a bank or payment processor, all for a fraction of the cost of traditional banking. The disruptive nature of this technology has the potential to make banks and companies such as Mastercard and Visa obsolete as these payment systems have not changed since the beginning of the 20th Century. In addition to this, nearly every human being on the planet has a mobile phone but not everyone has a bank account. This improves accessibility for all. I’d say this has real value.

Myth 6 – It is a speculative asset

It could be considered speculative depending on your vantage point. As this new technology is adopted by institutions, I would argue we are coming out of the speculative phase. I would also argue that Bitcoin has held up better against more traditional equities and gold in the past 6 months.

This leads me to the most important myth:

Myth 7 – Bitcoin is bad for the environment

I am not disputing that mining Bitcoin is energy intensive but so are all aspects of the digital world and economy we now live in. The current banking system is nearly 10 x more energy-hungry if we look at the global system of processing transactions, running banks and powering offices.  Moving away from traditional banking and into DeFi (Decentralised Finance) would be a benefit to the environment.

Extract from Bitcoin Magazine.

Bitcoin’s Energy Use Compared To Other Major Industries

The amount of energy used by the Bitcoin network is inconsequential compared to other industries. Most industries round off the amount of global energy used by 1-2% and Bitcoin uses approximately 0.002% of the Global Energy in terawatt hours, which is less than a rounding error. 

Data sources will vary and the Cambridge Bitcoin Electrical Consumption Index shows a slightly higher consumption rate with the caveat that the exact proportion is dependent on fuel type and power plant efficiency. Regardless of where you get the data, consumption in comparison to other industries is low. 

Cambridge Bitcoin Electricity Consumption Index researchers concluded: “Bitcoin’s environmental footprint currently remains marginal at best.”  The economic incentives fundamental to Bitcoin i.e. finding the cheapest source of energy to mine from, are helping to drive renewable innovation. They need cheap, renewable energy to make mining economically viable.

The FUD around this industry falls in line with history when any change is implemented which disrupts. What you often read in the news is centralised misinformation. It is found constantly in the writing on this subject and some journalists are often reporting false and misleading information. 

Email was demonised initially and this new technology was considered too energy intensive and the post service was deemed more efficient. The same narrative to the internet, again it consumes too much energy. The energy argument is used ad-nauseum to demonise a switch from an analogue system to a digital system. These narratives just prove one thing; we are early.

Studies have already concluded that running Bitcoin is more efficient than the current system. In fact, due to the FUD around Bitcoin mining, it has driven the industry to find ingenious ways to run mining equipment from stranded and renewable energy.

Bitcoin is even mined from the geothermal energy of volcanoes. According to the Bitcoin Mining Council, 59.5% of all energy used is green. They are working to make it 100% renewable. In addition, the Bitcoin Network could reduce global temperatures via the direct reduction of greenhouse gases. This can be made possible with the use and curtailment of methane from landfill and agriculture and much more. 

Troy Cross and Michael Saylor say it best…

Troy Cross on Twitter: “Once they see how mining balances grids… Once they see how mining incentivizes renewables and nuclear… Once they see how mining replaces fossil-powered heating… Once they see how bitcoin substitutes for more carbon-intensive equities…” / Twitter

Michael Saylor on the Bitcoin Environment Argument

If we can turn excess and stranded energy into a store of value then the renewables industry will become more cost-effective and economically viable. It would provide money to invest and regenerate, making the industry and its companies even more sustainable by providing investment for the future and consuming stranded energy.

Excess natural gas and geothermal are also being utilised. Some renewable plants need to switch off production when there is a chance of overloading the grid. By switching this excess power over to Bitcoin mining it could help stabilise the grid. Bitcoin provides a solution for using this excess energy while creating value.

Bitcoin promotes energy independence and this benefit cannot be overstated. Eventually, mining could become a matter of National Security. Countries that produce cheap energy will be independent because they want to mine cheaply and sustainably. The countries that understand the technology, mathematics and engineering behind this will have a geopolitical advantage. A world with more localised…