Climate activists don’t care about Bitcoin’s energy consumption:

they just want you to be poor.

Establishment propaganda media outlets are full of articles screaming about how evil Bitcoin is destroying the planet with its vast energy consumption.

These articles make long lists of frightening statistics about how Bitcoin consumes the energy of a small country. They make moral arguments about how many poor people’s homes could be heated with the energy ‘wasted’ by Bitcoin. Or how we could cure cancer if only that computing power were used to sequence genomes or some other ‘virtuous’ activity.

The problem with all this virtue signalling is that none of these activists answer the only question that actually matters:

“Does Bitcoin use more energy than the next best alternative Store of Value?”

Why do we need to make this comparison? Because we care about the planet and one of the central goals for any activity or technology is that it is completed with the least amount of energy possible.

Bitcoiners genuinely care about the environment, that’s one of the reasons why we invest in Bitcoin.

So comparing to alternative methods of storing value is the most important job for any of us when considering Bitcoin’s effectiveness and efficiency.

Comparisons:

You see Bitcoin isn’t a country, so comparing its energy consumption to Argentina doesn’t make any sense (unless you are insane).

And Bitcoin isn’t a heating solution for poor people (although one day soon it might be), so comparing it to a HVAC system doesn’t make sense either.

And even it’s most ardent advocates have never claimed that Bitcoin can cure cancer, so criticising it because it doesn’t cure cancer is like criticising a fish because it can’t ride a bicycle.

Making these types of false comparisons is at best foolish, and at worst…well, we’ll come back to that later in this essay.

What Bitcoin is, is a Store of Value.

That’s It.

No ifs, no buts, no bells, no whistles.

That’s all it does. If you want to scream about energy consumption then you need to compare its energy use to other things that meet the same use case. Any other comparison is either a deliberate lie, or the ravings of an idiot screaming at a fish strapped gasping to a pair of handlebars.

(Seriously folks, mental illness is no joke)

So if Bitcoin is a Store of Value then we need to understand two things so that we can make a fair comparison to the next best alternative:

1. Stored Value is an energy storage system. This is true of any technology that stores value: Gold, Fiat Currency, Real Estate. For example: A person does some work and creates some value (e.g. they work 8 hours in a coffee shop), their customers or employer then ‘buy’ the work/value that the 8 hours of labor created by exchanging it for money. That money is now a store of that 8 hours of human labour that can be moved through space (by carrying it around) or through time (by holding it for hours, days, or even years). The quality of that store of value is measured by how easily it can be moved through space, and how easily it can be moved through time, and how much value is lost through either or both of these processes (e.g. cost of transporting it, or degradation in its value over time by inflation). Stored Value is the Original Gangster of Energy Storage.
2. Not all Store of Value methods are equally effective. The effectiveness of the Store of Value technology can be measured by how much energy it takes to create it (this is the value it stores) minus the cost to operate it and the rate at which it’s value degrades over time (batteries that lose their charge are less effective at storing energy than batteries that are thermodynamically stable). Using Gold as an example the costs are: finding it, mining, refining, storing, security, and transportation. So:

Value (Gold) = Production Cost — (Opcost + Inflation)/Time

For gold inflation is roughly 2% per year so if GDP growth averages 2% then we would expect Gold to have roughly stable purchasing power over time, which it has for thousands of years.

The Answer: TLDR

So now we can easily compare the energy requirements of different Store of Value methods (or technologies) and find out once and for all whether Bitcoin is as bad as the activists and propagandists say it is:

Let’s look at the 2 most widely used Stores of Value: Gold, and Fiat Currency (I am ignoring real estate because unlike the other two it cannot be effectively moved which means it is useless in many critical circumstances where people might most want to store value, like for example when fleeing an oppressive government or war).

Gold:

Cur­rent gold pro­duc­tion is around 3,000 tons a year against an in­vento­ry of about 200,000 tons, which is all the gold that has been pro­duced through­out his­to­ry. Of that, less than half is used for jew­ellery. The so called stock-to-flow ra­tio, which is a mea­sure of scarci­ty where a high­er num­ber is bet­ter, is there­fore cur­rent­ly around 56: at the cur­rent rate of pro­duc­tion, it would take 56 years to dou­ble the in­ven­to­ry. This relatively low inflation rate is what makes Gold a stable store of value. Gold’s stock to flow is approximately the same as that of Bitcoin so they are both comparably scarce at this time — although after the next halving event Bitcoin will become twice as scarce as Gold.

The es­ti­mat­ed CO2 emis­sions for pro­duc­ing new gold is more than 100 mil­lion tons per year. Es­ti­mates vary, but re­cent stud­ies put Bit­coin’s CO2 emissions around 30 mil­lion tons per year.

Bitcoin’s annual carbon emissions are less than one third of gold’s.

As re­new­ables in­crease in the mix, Bit­coin’s CO2 emission in­ten­si­ty should drop sig­nif­i­cant­ly. Note that this is still dis­re­gard­ing the cost of re­fin­ing and stor­ing gold.

It’s not even close.

Fiat Currency:

Fiat Currencies like the US Dollar, Mexican Peso, or Turkish lira could all be used to store value for a period of time. The problem is that inflation in the money supply by central banks has debased the value of every fiat currency in history, and there is no effective way for holders of the currency to limit the central banks’ ability to destroy the value of their savings. Just ask any Turk­ish work­er the next time you are on va­ca­tion how it feels to have your cur­ren­cy de­pre­ci­ate by al­most 50 per­cent against the dol­lar in a sin­gle year. It has hap­pened, it hap­pens, and will hap­pen again.

Inflation is a stealth tax that transfers wealth from savers to borrowers and from poor people who work to rich people who own assets. It is one of the most evil inventions in the history of mankind and has caused more death, destruction and misery than almost anything else.

Any activist who is advocating for centrally controlled Fiat Currency of any kind is cheerleading for the greatest evil in history. It doesn’t matter how many rainbows they wear on their clothes or flowers they put in their hair, cheerleading for central banks is EVIL.

Inflation makes Fiat Currency basically useless as a long term store of value — the US Dollar has lost over 95% of its purchasing power in just 50 years. Even short term utility is under threat since 40% of all dollars in existence were created since March 2020 so it hardly seems necessary to calculate its carbon emissions but let’s look at some highlights just for fun.

Since Nixon decoupled the US Dollar from the value of gold in 1971 the value of dollars has been upheld by the petrodollar — the fact that Oil and other international commodities are all priced in USD and that most international trade is transacted in USD and has to be routed through a US bank. OPEC agrees to this in return for the USA playing the role of international policeman securing the sea lanes and providing arms and military support for key OPEC states. To fulfill this obligation the USA runs the world’s biggest military budget, thousands of aircraft, hundreds of ships and aircraft carriers, hundreds of thousands of vehicles (60 thousand Humvees alone!), military bases all over the world, and over 1 million military and support personnel. (armed forces of the USA)

The US department of Defense is the world’s single largest consumer of petroleum and in 2017 Forbes and Statista estimated that the US Military emitted 59 million tonnes of CO2. (US DOD CO2 emissions)

If we ignore all of the other costs of Fiat Currency — hundreds of thousands of bank branches, huge corporate HQs, some of the the world’s largest computing resources, tens of millions of paper pushing bureaucrats, endless wars funded by infinite government debt that will never be repaid, and imagine that just half of the US military is used to support all of this nonsense (I think I’m being generous here), then we can do a simple calculation for the CO2 emissions for the US Dollar per year per unit value stored and average it over 5 years to account for inflation — since anyone holding cash for longer than 5 years basically won’t have anything left by the end of it anyway.

A rough calculation looks like this:

5 year USD SoV Utility = SoV(1 — inflation in money supply) to the power of 5(years) x ½(59 million)

We then need to do the same calculation for the Euro, GBP, Yen, RNB and every other fiat currency in the world and then add them all together.

This means that provided that we don’t have another war anytime in the next 5 years (good luck to anyone who wants to take that bet!) that the carbon emissions of Fiat Currency will be between 10 and 20 times higher than Bitcoin in peacetime and between 20 and a million times higher depending on the type of war we end up having.

As I said, it’s not even close.

Conclusion:

It’s not even close. The nearest equivalent technology for the Store of Value use case is Gold, and even allowing for the fact that gold’s utility is vastly inferior to Bitcoin’s, and ignoring the carbon cost of refining, storage and security (all of which are significant), the fact is that Bitcoin’s carbon emissions are less than one third that of the next best alternative.

Another way of putting it is that Bitcoin is 200% more carbon efficient than the next best Store of Value asset.

I call that a big win for the planet that I love…

…and I am proud to be a Bitcoiner.