Is Bitcoin Unsustainable, and How Can It Be Made Sustainable?
“Bitcoin Is Unsustainable,” claims the title of a provocative essay by Motherboard contributor Christopher Malmo that has spurred considerable debate. Malmo’s central thesis is that Bitcoin uses way too much electricity.
The essay opens with a future scenario that, in view of the crisis in Greece, is beginning to appear more plausible – in 2018, Greece is long out of the Eurozone and economic malaise is spreading to neighboring countries. Panicked Europeans sell their euro for bitcoin, which is becoming a stable and respectable currency, causing even more user adoption and recognition by governments.
According to Malmo this scenario, which sounds like heaven to faithful Bitcoin enthusiasts, is more like hell – a burning hell of bitcoin mining circuitry and electricity costs spiraling out of control.
Malmo mentions huge mining operations in China with a catastrophic environmental impact, and notes that the total power consumption of the Bitcoin network is estimated by computer cooling firm Allied Control at 250 megawatts to 500 megawatts.
“That’s around enough zap to power 173,000 average American households’ daily electricity usage,” says Malmo. “With about 110,000 transactions per day, that works out to 1.57 households daily usage of electricity per bitcoin transaction.”
His conclusion: “Yes, every time you buy something in bitcoin, you could be using as much electricity as 1.57 American families do in a day.”
As climate change becomes a more pressing concern for humanity every day, this huge level of energy use is difficult to justify for a currency wanting to improve on the current arrangement.
“It appears there are significant challenges to ensuring that Bitcoin’s growth minimizes environmental impacts,” noted Jeremy McDaniels, a financial system sustainability expert with the United Nations Environment Program. “Energy footprints could be an issue if major scale-up is achieved.”
That’s is already a lot for passionate Bitcoin evangelists to swallow, but Malmo makes things even worse when he unfavorably compares Bitcoin to the Visa network – of all things – in terms of energy consumption:
“That makes Bitcoin about 5,033 times more energy intensive, per transaction, than Visa.”
That caused the anger of many readers, who promptly pointed out that the analysis doesn’t take into account the overall energy footprint of traditional payment, banking and financial service providers. Some accuse the author of just having his facts wrong.
Malmo’s analysis seems, indeed, a bit forced and overstated. However, dismissing it without consideration would be a disservice to Bitcoin, because everything needs constructive criticism to move beyond current flaws. Bitcoin is – though perhaps not to the extent denounced by Malmo – less energy efficient than it could and should be.
Malmo notes that developers might be able to reduce Bitcoin’s energy footprint by moving ahead with the controversial proposed increase of the block size to 20 megabytes, or 8 megabytes.
Another option to reduce Bitcoin’s energy footprint would be implementing energy-efficient Sidechains, separate from the main Bitcoin blockchain but interoperable with it by means of two-way pegs, or Lightning Networks, where related transactions can take place instantly on “micropayment channels” off-chain, and only the final settlement is processed by the blockchain. Lightning networks could enable bitcoin scalability, efficient micropayments and near-instant transactions.
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