To say that
the cryptocurrency known as Bitcoin eats a lot of energy is an understatement.
If Bitcoin were a country (praise be to
the libertarian god that it’s not), it would be the 39th
most energy-intensive place in the world, running on a similar amount of power to
Austria.
What’s even
worse, as Grist
recently reported, is that Bitcoin’s energy consumption is growing at an unholy 20
percent per month, putting it on pace to consume the equivalent to the total
power generated by all of the planet’s solar panels by the end of next year.
“Bitcoin has
a big problem, and it is growing fast,” wrote Alex
de Vries of
PwC’s Experience Center in the Netherlands this spring in the journal Joule.
In response,
green-minded geeks have launched a batch of competing cryptocurrencies that
take aim at the seemingly insatiable source of energy consumption that comes
with Bitcoin mining, the
proof-of-work system.
Some of the
entrants, like SolarCoin and EnergyCoin, are designed
to spur
construction of new solar farms. Most also use different,
vastly less energy-intensive computation methods in generating their coins. But that
energy savings comes at the expense of Bitcoin’s distributed governance system,
which is designed to ensure the security of its transactions — anathema to
libertarians.
One of the
most promising appears to be Bitcoin Green, designed to solve the “problematic
exponential increase in energy consumed by Bitcoin,” according to a 15-page manifesto posted
on the
cryptocurrency’s website. In its launch
videoposted
to Twitter last month, Bitcoin Green calls Bitcoin “an existential threat to
our beautiful planet.”
To the
Bitcoin bros, those are fightin’ words.
Bitcoin
isn’t as bad as people think, the bros say, because
major cryptocurrency mining facilities are already mostly using carbon-free
energy. And, some say, they’re creating a huge new
demand to build more renewable power!
“The fact is
that the Bitcoin protocol, right now, is providing a $200,000 bounty every 10
minutes (the Bitcoin mining reward) to the person who can find the cheapest
energy on the planet,” wrote Peter
Van Valkenburgh, director of research at Coin Center, a cryptocurrency advocacy
nonprofit. “Got cheap green power? Bitcoin could make building more of it well
worth your time.”
On the first
point, the bros are right. In general, Bitcoin miners are setting up their
warehouses of number-crunching machines in places
where electricity is the cheapest and cooling costs are low. Think near
massive hydropower facilities in secluded regions of China, Canada, and Norway.
In sparsely-populated Iceland, a country entirely powered by geothermal wells
and hydropower dams, the electricity demand for Bitcoin mining will surpass the
total combined electricity use of every Icelandic home at some point later this year.
Of course,
using renewable energy isn’t the same thing as saving energy, and Bitcoin is
already using a significant share of the world’s cheapest renewable electricity
(it’s
impossible to know exactly how much). And that’s to run a computing power-intensive
financial record-keeping system that is
painfully slow, with transactions that are 10,000 times less efficient than
VISA.
So what about
the argument that Bitcoin’s soaring demand for electricity has led to more
renewable energy projects? Even if newly built renewables powered all the
world’s Bitcoin mines, it’s still a silly way to use zero-carbon electricity.
We need lower emissions to stop climate change, and financial systems that
require drastically more electricity production aren’t helping in that effort —
even if they are mostly carbon neutral.
Bitcoin
Green is different. First off, it’s an effort launched partly in response to
reporting by Grist and others on the high environmental cost of
cryptocurrencies. And it seeks to develop a more energy-efficient alternative
currency that’s faster, cheaper, and more scalable than Bitcoin. If Bitcoin
were designed from scratch to fulfill its
supporters’ dreams of it becoming the world’s
universal currency, this might be what it would look like.
The
innovation of Bitcoin Green is that it abandons Bitcoin’s wasteful
“proof-of-work” mining strategy. Instead of computers randomly guessing the
answers to ever-more complex and arbitrary math problems, Bitcoin Green grows
by reversing the incentive structure — so big miners are encouraged to make the
entire system more efficient, not less. It’s a concept called “proof-of-stake”.
If the
entire Bitcoin universe switched over to proof-of-stake strategy tomorrow, its
energy consumption would fall ten thousand-fold, making it about one thousand
times cheaper to operate. Transactions would be hundreds of times faster, too.
The
revolution here is that, unlike the inherently competitive proof-of-work,
proof-of-stake requires participants to cooperate. To borrow a boxing analogy,
if Bitcoin is an unceasing, ever-escalating zero-sum brawl, Bitcoin Green is a
group of people with a common purpose standing in a circle and holding hands.
Bitcoin Green participants are rewarded just for entering the ring — no
fighting required.
“Proof-of-stake
democratizes the mining process by allowing anyone to mine without the need to
purchase expensive hardware, facilities, or technicians,” wrote Daoud Schelling,
a spokesperson for Bitcoin Green, in an email to Grist. “Proof-of-stake also
consumes effectively no energy, and significantly reduces the carbon footprint
of blockchain networks.”
The
newcomers have a steep climb to knock out the reigning champ. Bitcoin thrives
on its growth-based competitive model, and the economics ensure that upstarts
are not going to be able to beat it at its own game. And the recent
collapse in cryptocurrency prices has encouraged miners to double down
on Bitcoin,
despite its obvious
flaws.
That’s taken precious attention and investment away from Bitcoin Green and its
merry band of challengers. SolarCoin, the biggest of the bunch, has a total
valuation of about $6 million (which is more than 90 percent below its all-time
high earlier this year). It’s less than one-hundredth of 1 percent the value of
Bitcoin.
“Although
right now the odds are not in our favor, we believe it is only a matter of time
before proof-of-work energy consumption becomes so egregious that people will
begin to more aggressively seek out sustainable solutions,” Bitcoin Green’s
Schelling said.
That’s the
kind of hope that propels cryptocurrency true believers, like Johnnie
Chamberlin, a science advisor for Boid.com, which uses blockchain technology to
improve access to distributed scientific computing. “I got into cryptocurrency
because of its potential to do good,” Chamberlin told Grist, noting that by
expanding access to financial services, scaling up renewable energy, and
stabilizing volatile currencies, the underlying technology of cryptocurrencies
“has the power to help billions of people.” And the advent of proof-of-stake
could be exactly what is needed to realize that potential.
“Cryptocurrencies
are not static — they are constantly evolving,” Chamberlin said. “Just because
Bitcoin is an energy hog today, doesn’t mean it, or crypto in general, will be
in the future.”
It’s taken
humans about 10,000 years from the birth of agriculture to bulldoze nature and
build all the roads, cities, power lines, and factories that form the
foundation of human society. It’s taken us just 50 years or so, since the
invention of the computer, to create things like Bitcoin — technologies that
don’t physically exist but still have potentially catastrophic real-world
ecological costs. Unless the efforts to provide a reasonable alternative gain
enough traction to take down Bitcoin, the leading cryptocurrency will further
encourage exploitation of renewable energy resources for purposes
other than lighting and heating homes.
Rather than
trying to repurpose the entire
world’s real-life renewable energy resources to feed the insatiable
Bitcoin beast, it’s time to think about investing the money we already have in
ways to use energy more efficiently — or in some cases, not at all.
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