Saturday, May 15, 2021
Oh man! Can we name the first two week of May after ELON MUSK?
From SNL night to his U-turn on bitcoin, all of this happened within a timespan of five days. From his outspoken love for dogecoin and a sudden turnaround from Bitcoin, is Bitcoin energy consumption really a threat to the environment?
Let’s decrypt it from scratch!
Energy usage trend over the past few months is insane
~ Elon Musk citing Bitcoin energy consumption, May 13, 2021
Firstly, we have elected to live in a society where people make their own choices. Some people value flying to Maldives for their holidays in their private jets, some people love air conditioner’s so much that they have installed one in their rest rooms, some people value listening to the latest Bollywood gossips while some people value doing nothing. It’s a big world out there, who are we to impose our opinions on others?
However, there’s something common in everything people choose to do - All the above mentioned things require energy. Then who decides what is valuable and what is wasteful? Who draws the line? Clearly no one!
This is a subjective matter which involves people and their biases. Every single step in human civilization has required more energy. Consuming and directing energy into useful work is the foundation of modern civilization. A bullock cart uses less energy than car, but no one in their sanest mind would ever argue that we abandon the use of automobiles and shift to the ‘greener’ alternatives i.e bullock carts. Our problem as a civilization isn’t the amount of energy we consume. Consuming lots of energy is a good thing and raises us ever further up the Kardashev Scale of technological advancement. Our problem is the manner with which we produce it.
We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has worst emissions of any fuel. We are also looking at other cryptocurrencies that use less than <1% of Bitcoin’s energy/transaction.
~ Elon Musk on Tesla not accepting bitcoin as payment, May 13
First of all Bitcoin is a settlement layer and not a payments aggregator. What do I mean by that?
Bitcoin is a settlement system like FedWire, it is not a payments aggregator like Visa. Energy use per settlement transaction is a nonsensical metric by which to judge Bitcoin’s energy use. Bitcoin and Visa are fundamentally different systems. Bitcoin is a complete, self-contained monetary settlement system; Visa transactions are non-final credit transactions that rely on external underlying settlement rails. Visa relies on ACH, Fed-wire, SWIFT, the global correspondent banking system, the Federal Reserve and, of course, the military and diplomatic strength of the U.S. government to ensure all of the above are working smoothly. Just like the 800,000 or so daily FedWire transactions are not a good measure of the total amount of daily USD transactions, Bitcoin’s 325,000 or so daily transactions are not a good measure of the total amount of daily bitcoin transactions.
Pretty much everyone agrees that climate change is the biggest threat to humans and we can all see the hazardous effects of carbon pollution. Hence, people have this opinion that consumption of electricity by the Bitcoin network is not in the best interest of humans. However, the critics fail to realize that Bitcoin uses the same electricity that powers everything else in the world. It will take whatever electricity you feed it. If the world goes green, so does Bitcoin. Moreover, the Bitcoin network is so competitive that the miners are forced to look for cheap alternatives of electricity generation - RENEWABLE RESOURCES particularly hydropower. Bitcoin mining actually offers an incredible opportunity to push the world towards a greener world.
Electricity is used by miners to solve a complex cryptographic puzzle to add new block to the Bitcoin blockchain and keep the network secure. When you hear phrases like ‘Bitcoin uses as much electricity as Argentina’, what this means in practice is that if some greedy, malicious people wanted to get together and mess with Bitcoin’s transaction record, even if they mustered the country’s entire electricity supply, they would stand absolutely no chance of pulling it off. This makes the ledger immutable.
The entire energy debate boils down to a subjective argument. It depends on an individual’s need for a politically independent monetary system which is permissionless, scarce, deflationary over permissioned and often outright weaponised governments. Bitcoin might seem like a curiosity in a democracy with a stable currency. If you want to understand what crypto is really about, ask Venezuelans if they’d rather own bolívar or Bitcoin.
It’s all very relative. Do your own research, trust the technology and not the biases people hold.
Fun Fact: Back in 2018 Elon was fined 20 Million USD for his tweets which led to manipulation of Tesla stock price. Source
See you next Saturday, until then have a great weekend! :)
Cheers!
Some things that you may find interesting-
Youtube: How an infinite Hotel ran out of room (Must watch)
Thought I am pondering upon: There's an old saying...you can have a religion without a god, but you can't have a religion without a devil.
Song I am listening to: Gold Rush by Taylor Swift
Quote I am enjoying: “Some people never go crazy. What truly horrible lives they must lead.”
Here are the last three posts if you were too occupied to read them:
If someone has forwarded this to you, please subscribe and start receiving updates directly in your inbox. It’s free. Your information is protected. And I never spam. Ever