Stop Fooling Yourself: Bitcoin Is Not ‘Green’

So I recently wrote this article that talked about how Bitcoin is going to die in 2022:

The basic idea is proof of work is inefficient and with all the negative news I suspect a proof of stake coin will eventually surpass Bitcoin. It’s more of a follow-up to another article I posted about Ethereum:

So I got a lot of comments on this article. And some of it is fair, I mean I did not expect to get so much attention on it. If I did maybe I’d elaborate a bit more. Most of my arguments are in the Ethereum article. This article is mostly just an addendum to that.

But there is this comment that I saw over and over again. That Bitcoin is somehow ‘green’ because it uses ‘renewable energy’. OK, let’s take a look at these claims.

Biased Estimates

So I see this number ‘70% renewable energy’ thrown around over and over. And if you believe this… well, I have a bridge to sell you.

There are a lot of estimates on how much renewable energy bitcoin uses. These range from about 20% to 70%. And they are incredibly biased. Like if you are anti-bitcoin you probably think that Bitcoin uses 20–40% renewable energy. If you are pro bitcoin you probably think bitcoin uses 50–70% renewable energy.

These are all just estimates and are extremely flawed. All of them. Like I read one that was like, “Oh, because a lot of Bitcoin mining is done in the regions of China where they have a lot of hydro we’ll just say China is 100% renewable.” Really? China. The country that is experiencing rolling blackouts because they banned imports of coal from Australia. Okey-doke.

And you know, power grids share power. If there’s more demand in one part of the country they’re going to share. So just because there’s a hydroelectric dam next to your house doesn’t necessarily mean you’re getting 100% hydroelectric power. Oh, yeah, and obviously this report was done before China banned bitcoin for the 46th time.

So how much renewable energy does Bitcoin use? Let’s just pick the midpoint of the guesses and say that 45% of crypto’s energy is renewable. It’s not that bad considering that 29% of energy produced in 2020 was renewable.

Which makes sense. The big players will probably go where energy is cheap. But the majority of miners are probably not willing to move to get cheaper energy costs.

Opportunity Cost

But the exact numbers aren’t what annoys me the most about this. Even if bitcoin was powered by 100% renewable energy and we could prove that for a fact I’d still be annoyed.

The reason is opportunity cost. If you use renewable energy to power Bitcoin that means you’re not using that renewable energy to power something else.

And if you can’t use that renewable energy that means you need more energy. And how do you get that energy? By building more powerplants. So even if you are using 100% renewable energy you could still be putting pressure on the grid which causes someone to build more power plants.

Now, this alone is a big problem but when you’re talking about ‘renewable energy’ it’s even worse. And that is because of something called the ‘duck curve’.

This curve is made from 2 graphs: energy demand and solar power output. Solar power peaks at midday so you’re not going to get a consistent level of solar power throughout the day. Well, maybe once we get cheap batteries we can solve this problem but not yet.

And the same problem exists in wind energy too. Hydro energy gets around this but you can only build so much hydro.

The primary way to get around this problem is by building power plants using non-renewable energy.

Now energy prices usually vary throughout the day which mitigates the problem a little. But at least here in Ontario, there are only 3 price regions which doesn’t really solve the problem completely.

And I doubt someone would shut down all their mining machines because energy prices are twice as expensive. You’re still making money just not as much. And the alternative is you make 0 money.

Renewable Energy Isn’t Free

Finally what really drives me crazy is this idea that renewable energy is somehow magically free. Renewable energy does not magically appear from nothing, it was made somewhere.

If you build a dam you are destroying ecosystems and possibly displacing residents. Solar panels contain heavy metals. Wind turbines kill birds and can make annoying sounds. I can’t think of any problems with geothermal but it’s not very popular right now.

Sure, this is better than something like coal but it’s not ‘free’. It still has a cost.

This is another thing. Bitcoin will somehow magically incentivize renewable energy sources. Well, that’s questionable because a lot of countries still have plans to develop coal power plants. What makes you think Bitcoin will be any different?

And second, all else being equal do we really want more renewable energy if we’re just going to blow it all on Bitcoin? Something that we don’t even need in the first place? And Bitcoin uses a lot of energy. The same as a mid-sized country. Even if that’s all renewable that is just tons of resources wasted.

Conclusion

I thought this ‘bitcoin is green’ nonsense was cleared up a while ago but I guess not.

And just to be clear, I don’t have anything against crypto. Only proof of work.

And I just don’t like it when people just copy and paste the claim that ‘bitcoin is green’. It is just complete nonsense.

But you know what they say:

It is difficult to get a man to understand something when his salary depends upon his not understanding it.

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