Bitcoin inventor was aware of currency’s power requirements

Bitcoin designed to replace traditional finance and gold mining. Court documents say Nakamoto is aware of energy consumption issue. Time to exploit for the benefit of future generations.

A court case currently underway in London, UK has made several emails more public, allegedly written by the inventor of Bitcoin, Satoshi Nakamoto. In them, they considered the energy use of the Bitcoin network.

The legal case centers on Craig Wright’s claims that he is Nakamoto. The real identity of the inventor of the cryptocurrency is not known for certain, and Wright’s claims, if validated, would mean that he has a significant say in the future development of Bitcoin projects.

Satoshi’s emails published in Wired last week contained several comments about the network’s energy consumption.

“As [Bitcoin] has grown to consume significant energy, I think it will still be less wasteful than the labor and resources of intensive conventional banking activities it would replace,” Satoshi said in a message to Martii Malmi, one of the early developers of the technology. said.

Bitcoin’s energy consumption

The actual levels of power consumption by Bitcoin are uncertain: miners operate in a highly competitive market and therefore do not tend to be particularly transparent about the details of their operations.

Energy consumption comes largely from two activities in the Bitcoin network that consume electricity – throwing massive computing power at the process to ‘solve for coins’, and the processing required to handle individual transactions when cryptocurrency changes hands.

A well-accepted measure by the Bitcoin industry on energy consumption is the Cambridge Bitcoin Electricity Consumption Index (CBECI), published by the University of Cambridge’s Judge Business School. The School revised its model in August of last year to account for changes in the underlying technologies and hardware at the heart of the Bitcoin network since 2019. The update is partly a “response to evidence showing a periodic overestimation of indicate electricity consumption.”

The figure representing the total energy consumption by the Bitcoin network has been revised by 9.8TWh (terawatt hours) for 2022 to 95.5TWh. This places the global system’s consumption alongside nation states such as Belgium and the Netherlands. The paper publishing the index’s review details also notes that the efficiency of Bitcoin mining has generally increased as hardware advances and refines (although now at a slower rate than in the currency’s heyday).

Bitcoin’s Environmental Impact

The environmental impact of Bitcoin operations is even more complex to estimate than their total energy consumption. Renewable energy is said to power a significant portion of mining operations, with estimates varying [paywall] from about 40% to 75% of the total power consumption. Bitcoin mining operations tend to congregate where energy is abundant from renewable sources, such as hydroelectric power. In these places, such as certain areas of the US, China and Scandinavia, such hydroelectric power tends to be cheaper than fossil-derived alternatives.

But environmental damage is also said to come from e-waste consisting of discarded mining rigs, which are being replaced by faster, more efficient hardware in generational upgrades. Processing a single Bitcoin transaction will reportedly produce over 700 pounds of carbon, plus there are additional emissions from data center cooling systems and water use, just to name a few other factors.

The two human activities that Bitcoin’s creator thought could be replaced by Bitcoin, conventional banking and gold mining, still create significantly more negative environmental effects than the entire Bitcoin apparatus, with conventional financial systems alone estimated to produce double the carbon emissions of Bitcoin.

But the slow rate at which Bitcoin transactions can be effectively achieved makes the currency unviable as an everyday medium of exchange (there are other networks, such as Ethereum, that are capable of the type of scale required, and that do not use the power .intensive proof-of-work model to mine new coins).

The fact that Bitcoin exists in addition to the activities it was supposed to replace raises the question of its viability. It is clear that the technology cannot be reinvented, and attempts by governments to limit its use have been mostly unsuccessful, with most adopting the accept-and-tax approach to crypto-currencies. No government control of the Bitcoin was, it must be said, part of its design brief.

But like renewable energy, which exists as a complement to fossil-derived power, not as a substitute, Bitcoin and its ecological effects exist in addition to all the effects of fiat finance.

Grist to the Extinction Mill

The Bitcoin network’s activities are said to consume the equivalent of about 2%-3% of the US’s annual power consumption. Reducing energy consumption worldwide, year-on-year, is the most important way to downgrade the status of environmental degradation from an extinction event to merely a chance of survival for the generation that will be alive at the end of this century. (NB experiencing survival will still be very unpleasant.)

Since Bitcoin’s purpose is currently just another flavor of market speculation, and it will not replace conventional finance or gold mining, it may be time to consider its net utility.

“Factory – Pollution” by plagal is licensed under CC BY-SA 2.0.