Opinion Bitcoin Energy Issues in Early 2022

Bitcoin Energy Issues in Early 2022

February 19, 2022

The problem of bitcoin’s consumption of energy is something that has been pressing hard on many in the crypto community for more than a decade. But, the issue when it comes to the wider public came to the forefront less than a year ago, when Elon Musk drew a lot of international attention with his very prominent decision to pull Tesla Motors from working with crypto payments because of the wasteful nature of the bitcoin network. The same could be said in an almost identical manner for any other proof-of-work network that consumes electricity on a massive scale (comparatively to other digital enterprises) to make sure that their basic setups function as intended.

So yes, it is absolutely correct that bitcoin consumes a waste of electrical power. However, what Elon Musk omitted, like so many discussions back in 2021 was the issue of where the same energy comes from and what is the general vision behind that energy consumption. Both factors are more than important for the future of not just the bitcoin network, but also the means to achieve a financial and technological level of infrastructure which allows cryptocurrencies to exist and offer its benefits to the global population. 

Global Energy Issues

The problems that bitcoin and cryptocurrency proof-of-work networks are facing are in many ways similar to the energy issues that are prevalent across the globe. In any domain of modern human activity that utilizes electrical power, the same set of problems can be presented. It might seem that the crypt networks use energy that is not necessary, unlike, for example, servers that stream funny cat videos on YouTube, but all of them are, to a point, unnecessary. However, while very few are arguing that global climate change requires that humanity stops using video streaming services or esports portals, a lot more are making the claim that cryptocurrencies are not necessary. 

But, there is no value to be gained from these discussions, as they end up on the concept where people who do not use a particular thing believe that others who do should stop. The chances of resolving the global energy crisis through the same approach are really slim. At its core, that manner of critique simply calls for a particular thing to stop, without offering any kind of a viable alternative. Time and time again, the same kind of complaints add up to nothing. Instead, an important first step would be to recognize that the energy issues modern global civilization faces go a lot further than the problems of the bitcoin network electrical power consumption.

List of Complaints

Over the years, bitcoin amassed a range of powerful and vocal critics. At first, the issue with the network for many was that it was – so obviously –  a scam. That quickly morphed to the idea that only criminals use BTC tokens and no one else in their right might would want to do anything with them. Later on, that narrative moved to a bubble, like the dot-com fiasco, which was not a scam in any traditional sense but was a setup that clearly could not sustain its astronomic price growth. One of the latest issues with the network is its power consumption. 

Yet, at the same time, bitcoin is now one of the nationally accepted currencies in El Salvador. While many illegal activities use bitcoin and other digital currencies, many more do the same with fiat and cash, which remains the best friend of any crime in the world. The network did not turn out to be a scam or a bubble either, despite its drastic volatility, which was always in the open for its users. Now, the narrative remains that of a scourge for the environment, but that too is going to gradually take its place among other unfounded criticism of the past.

Energy Sources

The problem of energy consumption of the bitcoin network is not in the fact that electrical power is being used. After all, everything in the world is employing electrical power. The problem comes from that part of the same power consumption that uses fossil fuel to be generated in the first place. That use of fossil sources, in turn, emits harmful gasses like CO2 that add to the ongoing problem of climate change taking place on the global level. But, at the same time, cleaner or renewable sources of electrical energy do not come with the same issue. 

Today, there is a prevalent sense among many in the public discourse that bitcoin and crypto mining, in general, is adding disproportionately to the ongoing climate crisis. However, the same is simply not true, as even now most of the electrical power generated for crypto mining comes from renewable sources. The same approach is not only an environmentally-friendly gesture but a business necessity. With many countries like Kazakhstan and China out of the crypto mining global industry, other locations have to switch to renewable sources because others simply cannot be afforded in the long run. 

Growth and Change

On average, BTC price increased around 100 percent over the past several years. Strong growth, regardless of the short-term issues and hurdles, as well as macro factors, will continue for many more years according to the current data and the outlook of the majority of analysts. With inflation and economic problems around the corner for the fiat currencies, it is natural that many are looking to branch out. While bitcoin is not the hedge currency many would like it to be, it is still a powerful new financial tool that is beyond useful for so many across the world. 

Energy is needed for that setup to continue to exist. It is a revolutionary technology in its own right and it will be a part of the jigsaw that will see humanity transition to better sources of energy that produce less or no carbon footprint. Stoking fears about crypto energy problems will not solve them, nor raise attention in any meaningful quarter. Instead, the resolution for any real energy consumption issues bitcoin faces in 2022 and beyond will come as it did for many other crooked narratives – through the painstaking work of the crypto community.