When faced with the realities of climate change, bitcoin mining is a waste of energy
In Dresden, New York, crypto-miners have fired up a moth-balled fossil fuel power plant to power their bitcoin mining operation. It takes 44 megawatts of electricity to power their 15,300 computer servers. That’s enough energy to power 35,000 homes. Climate activists are concerned that more bitcoin mining operations will follow suit, and more decommissioned fossil fuel plants with be brought back online. Although bitcoin is the name of a currency, I will use it as the generic term for all cryptocurrencies for this article.
Hello bitcoin speculators — the world’s trying to cut back on the use of fossil fuel, not fire up decommissioned fossil fuel plants
Bitcoin cheerleaders argue that cryptocurrencies use less electricity than our traditional banking system. True, but bitcoin accounts for a tiny fraction of the worldwide business transactions carried out by our traditional banking system.
While traditional banking uses electricity to carry out the real business of the world, 90 percent of bitcoin activity is mere speculation, and a mere 10 percent are actual business transactions.
“Hardly anyone is using cryptocurrency for anything beyond speculation. Data from blockchain researcher Chainalysis Inc. show that only 1.3% of economic transactions came from merchants in the first four months of 2019 — little changed from the boom and bust cycles of the prior two years.” —Los Angeles Times.
What a scam!
I’m sure you have heard of Bitcoin, but what about the other cryptocurrencies vying for attention? According to Coinmarketcap.com, there are over a thousand. How many exactly? Who knows, I got tired of scrolling when I hit 1000, and yet there was still another “Load More” button.
What determines a crypto currency’s price — not assets, not sales history.
- The supply of Bitcoin and the market’s demand for it
- The cost of producing a bitcoin through the mining process
- The rewards issued to Bitcoin miners for verifying transactions to the blockchain
- The number of competing cryptocurrencies
- Regulations governing its sale and use and the state of its internal governance
- News developments
The number one factor driving the price of cryptocurrencies is demand. There is a massive demand for wealth that comes from sheer speculation — no work required. Like B.T. Barnum said, “There is a sucker born every minute.”
Government regulations could throw a huge monkey wrench into crypto. Anything that threatens the currency of a sovereign nation is a bit sketchy. Once any of these currencies pose a threat to a nation’s stability, all bets are off. Do you really want to bet your future on what the U.S. government might do to protect the dollar? Crypto-currencies are so unstable that a few words from a prominent figure like Elon Musk sends the entire house of cards crashing to the deck.
In a perfect world that is not threatened by climate change, I’d say, “Let the fools rush in.” But climate change is real, and wasting energy on speculation is a pathetic waste.
Worse yet, crypto-mining is a growing monster requiring more and more energy for each speculative transaction.
In 2009, you could mine one Bitcoin using a single computer setup in your living room. You could mine a bitcoin with a few seconds worth of electricity, and the bitcoin was worth — nothing. Today you need a room full of specialized computers, each costing thousands of dollars and about $12,500 worth of electricity to mine one bitcoin that might be worth $50,000.
The work of the bitcoin miner is to maintain the bitcoin bookkeeping by way of its distributed ledger. Cryptocurrency bookkeeping is not kept in a single location but spread over the internet. However, bitcoin miners must compete to be the ones to log or verify a bitcoin transaction. The competition gets stiffer and more complicated the more bitcoin miners attempt to win the right to log the transaction. The competition is a complicated guessing game that grows ever more complex every day.
That’s why bitcoin miners are packing warehouses with expensive computer servers, all racing at top speed to win the competition. Of course, this requires an enormous amount of energy. When a round is won, the ledger is updated with the transaction, and the miner is paid in bitcoin.
“The bitcoin network is designed to make the guessing game more and more difficult as more miners participate, further putting a premium on speedy, power-hungry computers. Specifically, it’s designed so that it always takes an average of 10 minutes for someone to win a round.” — New York Times.
The amount of energy to mine one bitcoin has been compared to the energy usage of the average household. Today it takes twelve years of an average households’ energy to mine one bitcoin.
Does bitcoin mining make sense in light of our pressing need to cut back on energy use? Bitcoin contributes nothing to society. It’s simply a get-rich-quick scheme that is wasting energy at a time we need to conserve. Bitcoin mining might be acceptable if the energy used was green, but recommissioning fossil fuel power plants is an idea that should be taken off the table.