As cryptocurrencies have risen to prominence, so have their mining operations. The act of mining cryptocurrencies means a lot of power is used as processors try and solve difficult mathematical equations. This energy usage has been exploding, to the point where it has been compared to the same usage as places like Denmark and Ireland.
However, it is easy to compare and contrast the electricity usage of Bitcoin mining and comment on its environmental footprint. The issue is, when looking a little deeper into the argument, the amount of energy that is used by Bitcoin mining pales in comparison to other, similar, industries- such as banking.
Well regarded Blockchain expert, Andreas Antonopoulos, has flipped the entire mining energy-thirsty, environmentally damaging argument on its head, but he has also suggested that there is room for proof of stake chains to circle around one major proof of work chain- Bitcoin.
The first thing to consider when examining the power usage of cryptocurrency miners is how energy works on a global scale, and how energy is sourced by miners. Firstly, when electricity is produced in an area, it is often produced for future usage, creating more supply than demand, and in the case of renewable energy, such as solar, hydro or wind, there is no way to turn it off.
This leads to a lessening of price as the supply outweighs the demand, and in these circumstances, cryptocurrency miners often move in. There have been many cases of mining operations cropping up in rural places where renewable energy is abundant.
“What if you could find a way to turn that [surplus] energy into an alternative store of value? Then instead of paying off the powerplant in five years, you pay it off in one year by using electricity that would otherwise be wasted,” Antonopoulos explained
“Suddenly, Bitcoin is an environmental subsidy to alternative energy all around the world! Because it is causing these projects to be amortized over a year instead of five - Oh! So we are running a green coin all this time!?”
Bitcoin miners are basically operating like electricity arbitrages, they can operate globally wherever there is electricity cost that suits them, and the upshot of that is the most profitable spot for miners is where electricity would be wasted anyway.
So, while mining may be using energy that is equivalent to small European countries, the power it taps into is often renewable, or at least not in demand, and thus available and potentially a money making option for power that would have been wasted anyway.
The banking energy monster
What makes cryptocurrency mining such an obvious target when it comes to criticizing an environmental footprint is its usage can be traced and pinpointed. But, when it comes to other areas of finance and economics, such as banking, their electricity usage is not as obvious, but it is by far much bigger.
“Every time you pull out that little plastic card and you use it to do a transaction you are not aware of the 100,000 square-foot data center that is churning 100,000 servers to do fraud detection or clearing. You are not aware of the tower offices that are lit 24 hours a day, and the trading floors and the bank vaults, and the armored cars and the diesel trucks, etc. All of those costs are mostly hidden, and they are enormous,” Antonopoulos added.
The fact of the matter is that yes, cryptocurrency mining does utilize a lot of power, but on a global scale, it is nothing compared to just the banking sector. There are thousands of banks across the globe, all with their own energy-hungry ecosystems, while Bitcoin is one entity that has one instance of power usage.
A fallacy of an argument
The argument that mining is destroying the environment needs to be taken with a pinch of salt. It is a badly worked argument, and in context, is a total fallacy.
However, even if the mining operation does start to get too big, or there needs to be a change in the operation, cryptocurrencies have the ability to utilize proof of stake over proof of work, something that Antonopoulos also looks into.
“I don't think we can afford two proof of work systems on this planet, but I think we only need one. Maybe everything else could be proof of stake and anchor into the only proof of work we have. We need one planetary proof of work system to offer us true energy dependance immutable, but maybe we can only afford one. Turns out that might be Bitcoins killer app,” he concluded.