The carbon footprint of Cryptocurrencies is always a heated topic. There are really two sides to this. For one, it’s a legitimate concern and a good discussion could be made on the topic. On the other hand, it’s used as a tool to bash everything blockchain by people who would still hate it even if the issue was solved.
Why Proof of Work Must Waste Energy
The part that makes Bitcoin bad for the environment is not the transactions themselves. It’s the proof of work system that helps secure the network. Miners must “waste” energy essentially as lottery tickets for block rewards. The more used in comparison to other miners all around the world, the more money you’ll claim (statistically). The “waste” part is actually important. Because there is no beneficial side effect, there is no incentive to balance out the massive cost of hacking the network vs cooperation and block rewards.
Bitcoin Isn’t Incompatible with Green
The fact that Bitcoin “wastes” energy is not incompatible with Green. Further, what constitutes as a “waste” is a useless discussion to have. You can’t (and shouldn’t) be able to tell someone how they can spend their money or use the electricity they pay for with their money. Instead, we should focus on how the energy is produced.
Mining is a delicate profitability equation where the cost of energy spent must be cheaper than the money earned. If that means mining in a volcano, so be it. Bitcoin is not picky about which energy is used. It will be green the moment it becomes cheaper to use a renewable energy source.
This could even be artificially enforced. A carbon tax that is applied to energy sources that pollute the environment would change align economic incentives with protecting the environment. It would be a lot more fair and neutral to do something like that than “Ban Bitcoin”.
Green Can Be Complicated
Solar panels aren’t 100% green. It’s a function of how much sun they receive in contrast to how much it costs to produce them. Am I saying Bitcoin is comparable to solar panels? Obviously not. The point is that there is always a tradeoff between the energy used and the value created.
An article this week on an old coal mining plant that was bought and now mines bitcoin brought a lot of anger. Except what was actually happening is that the coal mining plant is selling electricity to both the power grid and the Bitcoin network. They claim doing that is greener than shutting down and restarting to meet fluctuating power demands, but they aren’t exactly an impartial opinion either. Another article this week shows Bitcoin miners partnering with owners of nuclear energy plants.
All this to say, the only thing conclusive about being “Green” is how inconclusive it is. Bitcoin mining puts a floor price to energy. It will be found anywhere the economic incentives align. The impact of it is likely not as positive as an enthusiast would have you believe, yet it’s also not as doom and gloom as the naysayers. It’s much more complicated than any one clickbait headline
There is More Than Just Proof of Work
Proof of Stake is the most popular method of “green” consensus. It uses the accumulation of the currency as a means of security instead of an outside resource. Ethereum and many other currencies are moving to this model. There are other ideas also being explored like “Proof of Space”.
Bitcoin will likely stay as is for a while. As the very first cryptocurrency, it’s been secure for over 10 years now. For a lot of people Bitcoin is synonymous with cryptocurency. While the rest of the market takes risks and innovates, it’s most likely good for the entire industry that Bitcoin remains old and reliable.
While there is certainly an issue with the carbon footprint of proof of work cryptocurrencies like Bitcoin, it’s not the death of blockchain or the world. There are more shades of gray than the headlines would have you think. The concerns are not being ignored at all. For someone who’s only hesitation is the environment, there are “green” projects out there for you to support