5 Arguments to Convince Your Partner to Invest in Bitcoin Despite Its High Energy Consumption
Munich, Germany — December 2021 — This article is written for individuals who are concerned about our planet’s climate and simultaneously want to participate in one of the most crucial inventions of our time — Bitcoin! The following five aspects can help to take a new perspective on Bitcoin’s energy consumption.
Since I spend almost every free minute learning about topics surrounding blockchain (cryptocurrencies, DLT, NFTs, Web3.0…), friends and colleagues regularly approach me with questions about Bitcoin and the crypto space. Besides questions related to the buying process or storage of crypto assets, the most popular and pressing topic in many of my conversations is the energy consumption and climate impact of cryptocurrencies, especially Bitcoin.
I have the impression that some people have a seemingly irresolvable conflict within themselves and think they can only pursue one of two goals: Either buy Bitcoin (and destroy the climate at the same time) or stop climate change. The narrative that Bitcoin wastes energy is deeply rooted in people’s minds. One of my colleagues literally said to me the other day, “I want to invest in Bitcoin, but my wife doesn’t want to, because Bitcoin uses way too much energy. What can I say to her?”
Below you will find five arguments to convince your partner (or yourself!) to invest in Bitcoin despite its high energy consumption.
1. Bitcoin’s energy consumption ensures the security of the network
Bitcoin serves as a digital financial commodity, as a speculative asset and a long-term value reserve. Now, after Bitcoin was introduced as an official means of payment in El Salvador in September this year, Bitcoin is indeed used as a currency.
Bitcoin can hardly be shut down by any single person, government or authority. Bitcoin could survive a global nuclear war. Bitcoin is said to be the most secure digital system in the world and the most decentralized and reliable monetary system ever invented, while also serving as an alternative to banks, governments and global corporations (isn’t that incredibly valuable?).
One of several guarantees for Bitcoin’s security is the network’s high energy consumption. If a central authority wanted to capture and own the network, it would require massive amounts of energy (and hardware) to do so. Bitcoin does not want to consume less energy. Bitcoin’s energy consumption is made by design. It is not a weakness with regard to the aspect of security, but a strength!
Other crypto assets such as Ethereum are more energy-efficient than Bitcoin and will become even more efficient in the future (with the switch to “proof of stake” as consensus mechanism), but as a trade-off these alternatives accept losses in security! If you plan to store your digital assets for the long term and perhaps even plan to bequeath these assets to your descendants, are you willing to compromise on securing them?
If you are not yet familiar with the technological components of Bitcoin and want to learn more, I highly recommend reading the short book Inventing Bitcoin by Yan Pritzker. This comprehensible book guides the reader step by step through the invention of Bitcoin. Another recommendation is the documentary series The Mystery of Satoshi by Arte. It describes Bitcoin’s genesis from the perspective of its creator(s) and illustrates the importance and tremendous value Bitcoin can have for humanity.
2. Bitcoin can help promote renewable energy in the medium term
To follow argument 2, it is important to know that Bitcoin mining is location-independent and flexible in the sense that mining can take place when it is profitable and can be temporarily shut down when it is not. The following idea is not often discussed in the media, it is simplified as follows:
Bitcoin’s reward system is only beneficial to miners who have access to low-cost electricity, i.e., Bitcoin mining companies tend to be located where electricity is cheapest.
The cheapest electricity is normally generated from renewable sources, such as wind, solar and geothermal energy or hydropower. On average, renewables have lower marginal costs than conventional energy sources, which is intuitive because the sun shines and the wind blows for free, and water automatically flows through power plants due to gravity.
Because of Bitcoin’s incentivization system, highly efficient miners will drive less efficient miners out of the market and consequently the “renewable energy based” mining companies will drive the “fossil fuel based” mining companies out of business.
The latter prompts engineering companies and energy suppliers to invest in R&D to improve power generation plants and related equipment. Therefore, Bitcoin can contribute to higher R&D investments in renewable energy use and generation.
Consequently, it can be assumed that the share of renewable energy for the Bitcoin network will steadily increase. This shift towards lowest-cost electricity generated from renewables already happened. According to estimates, the share of renewable energy sources powering the Bitcoin network exceeded 50% in 2019, which was about double(!) the share of energy from renewable sources worldwide. (As stated by the IEA, the share of renewables in global electricity supply reached 27% in 2019.)
How Bitcoin can help promote renewable energy is detailed in an article by Philipp Sandner and Daniel Wingen (and others) titled The Green Bitcoin Theory: How are Bitcoin, Electricity Consumption and Green Energy Related?. At the time this article was written, one Bitcoin cost only $8,770, but except for Bitcoin’s price and market capitalization, the article’s basic statements are still up to date ;)
3. You can compensate the CO2 emissions caused by your Bitcoins
There is a consensus among climate scientists that greenhouse gas emissions should be dealt with in the following order: Avoid emissions, reduce emissions, offset emissions.
As revealed with argument 1, high energy consumption is necessary for the security of Bitcoin and thus avoidance is not possible by design. Argument 2 states that a reduction in emissions is likely in the medium term, as cheap electricity from renewable energy is particularly attractive to miners. This leaves offsetting Bitcoin mining emissions as an option for the short term:
Analogous to flights, you can calculate and compensate for your CO2 emissions caused by Bitcoin purchases. A calculation basis including suitable examples can be found in the article Study: The Carbon Emissions of Bitcoin From an Investor Perspective.
A very concrete example: If you purchase 1 Bitcoin once and hold it for one year, then according to the study’s ownership-based approach you could offset USD 102.20 to compensate for the carbon emissions caused by your Bitcoin share. Your calculated carbon footprint would be 2.04 tCO2eq (carbon dioxide equivalent per ton), which is less than a round trip flight from Munich to San Francisco (according to myclimate this flight would cause 3.1 tCO2eq). The amount of emissions to be offset is reduced accordingly if you buy only a fraction of a Bitcoin (yes, you don’t have to buy a whole Bitcoin to own Bitcoin!).
4. You could abstain from other things that consume energy
This argument is less of a recommendation and more of a thought-provoking one. As mentioned in the introduction, I often hear and read in the media that Bitcoin would “waste” energy. According to estimates presented by the University of Cambridge, the Bitcoin network consumes slightly more electricity than the Netherlands (112.2 TWh vs. 111.0 TWh per year at the time of writing). This is indeed an immensely high consumption of electricity, but is it wasteful?
For comparison, in the United States alone, 6.6 TWh of electricity is consumed annually for Christmas lights, according to Phys.org. If you take into account that there are many more countries around the world where Christmas is celebrated, then you can ask the question of “waste” here as well. And what about the energy consumption for gaming? Or air conditioning?
To convince your partner (or yourself) to buy Bitcoin, it might be a compromise to additionally avoid Christmas lights or other devices that consume a lot of electricity. Alternatively, you could trigger a constructive discussion with your loved ones about the terms “waste” and “value”.
Do Christmas lights have a greater raison d’être than the Bitcoin network? To answer this question, does one compare the value of decoration to the value of a decentralized, inclusive financial system? How does one quantify that? What is waste and who decides that?
In a free, democratic world, the only applicable reasoning is the following, taken from the article you find linked back in argument 3: Electricity consumption should be viewed from a neutral perspective. What matters is the source of the electricity that is consumed.
5. There is infinite energy in our universe
You may have heard the term “zoom out” in the context of Bitcoin’s extremely volatile price movements. “Zoom out” summarizes that despite regular heavy price drops, Bitcoin’s price is steadily trending upwards. Over the last 12 years Bitcoin’s price has increased by an average of 200% per year, making it the most successful asset of the last decade.
You may also find it interesting to zoom out when looking at the most pressing challenge of our time, which is how humans efficiently manage to generate enough energy from renewable sources. (Of course, it remains an indisputable fact that contemporary climate change can have irreversible effects on our planet. Our actions are critical today and will be crucial in the decades to come!)
Physicists agree that there is virtually infinite energy in our universe which we can use with little effort one day. This infinite energy is mostly provided by stars such as our sun. And should our solar system’s sun have inflated in billions of years, there are other suns in other galaxies that could and might still provide energy for the human species.
Because the history of mankind shows that humans are evolving (otherwise we would probably still be living in caves) and that their curiosity and imagination makes them invent new tools (and code!), I am optimistic that it is only a matter of time until we will be able to generate most of our electricity needs by emission-free energy. I consider it likely that Bitcoin can play a critical role along the way, as outlined with argument 2.
Maybe this last thought can comfort or even inspire you. If not, you can still decide to turn off your Christmas lights. ;)
If you want to zoom out even a bit more and think about how humanity might evolve in the future, constrained only by the laws of physics, I encourage reading the book Life 3.0 by Max Tegmark, physics professor at MIT. It expanded my worldview and posed numerous exciting questions.
Remarks
I’m glad you considered reading my article. My goal is to stimulate thought and motivate the reader to further explore the topic. If you don’t agree with statements in this article or if you want to provide additional aspects to the topic, let’s discuss in the comments or on LinkedIn. I am happy to connect!
Writing my own article about a blockchain-related topic was motivated by the DLT Talents program. DLT Talents is an 18-week mentoring program which fosters leadership in the blockchain, crypto assets and DLT space for ambitious female talents.
The photo accompanying this article was taken by Kevin Fitzgerald and is available on unsplash.com.
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