⚡ Apocalypse Nope: Why Bitcoin is Actually not that Power Consuming

What's going on: The price of Bitcoin is going stronger than ever and seems to defy concerns regarding the launch of the first "future contracts". Yet there are a lot of critics out there, who argue that Bitcoin is a ponzi- or pyramid-scheme (it's not), exactly like the tulip-mania (no, it's not) or has no real value while fiat money does (nope, not true either).

But one kind of criticism remains, that seems like a real problem: the wast amount of energy necessary to keep the Bitcoin (or Ethereum, or Litecoin, etc.) network running. There are a lot of articles out there that argue how harmfull crypto mining is for the planet. We learn from Motherboard that a single Bitcoin transaction uses as much energy as your house in a week, the Guardian writes that Bitcoin mining uses as much energy as Ireland, and Newsweek thinks that it will use all of the worlds energy by 2020.

So are Bitcoin and the whole planet doomed? I don't think so. First it is in fact true that Bitcoin mining is wasteful and energy consuming by design. Miners process transactions as they race to solve extremely difficult cryptographic puzzles, in return for their effort they get awarded small amounts of coins. This has to be difficult in order to keep transactions secure by raising the bar for anyone who would want to tamper with it, but it also requires miners to build giant farms of servers that consume vast amounts of energy. And it's also a fact that the more valuable Bitcoin becomes, the more miners are willing to spend on equipment and electricity.

But, and that's the important part, you have to take some things into account:

• Total energy consumption is misleading. Bitcoin miners consume an estimated 8.27 terawatt-hours per year. That is actually less than an eighth of what U.S. data centers use and only 0.21 percent of total U.S. power consumption.

• Comparing how efficient Bitcoin is relative to the alternative traditional centralized systems that we are predominantly using (Banks, Visa, Mastercard, Paypal, Western Union etc.) is way more practical. Bitcoin is three times more energy efficient than the banking system alone (without services like Western Union).

• Global production of cash and coins consumes an estimated 11 terawatt-hours per year, while gold mining burns the equivalent of 132 (!) terawatt-hours. And that doesn’t include energy needed to run armored trucks, bank vaults, security systems and so on. So in the right context, Bitcoin is really green.

• Lastly, and this is important: Bitcoin will be upgraded to improve its efficiency. We saw recently the SegWit activation and within the next few months we will see the adoption of the Lightning Network which effectively moves micropayments off the blockchain. Once this is done, Bitcoin will start to resemble more a clearing network with reduced fees and the electricity consumption per transaction will be decreased by several orders of magnitude.

Why should I care: Skepticism is a good thing, especially when it comes to money, the internet and revolutionary technologies. But don't blindly believe all the naysayers, just because it sounds good and brings clicks to their shitty articles. But don't get me wrong: Energy consumption is a problem, but you have to put it in context and have to consider that there are optimizations on the way, that will dramatically reduce energy consumption.

Source: bloomberg.com, bbc.com, hackernoon.com
GIF: giphy.com

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