In a very well documented article called ‘Noahbjectivity on Bitcoin mining’ posted on Medium.com on March 30, Coin Metrics co-founder Nic Carter debunked some claims that were made by Noah Smith, a Bloomberg columnist.
The article that Carter responded to was title ‘Bitcoin miners are on a path to self-destruction’. In the article a couple of claims were made on the environmental impact of Bitcoin mining
The first claim Carter locked onto was where Smith stated Bitcoin to be unique as an asset in that a rising price entails a greater energy draw. While there are many examples that could prove this incorrect, Carter countered by referencing gold, which has the exact same trait in that higher prices result in increased mining and hence energy consumption.
“Bitcoin’s most obvious real-world analogue is of course gold. Gold has this exact same property, so it doesn’t makes sense to single Bitcoin out here…
As the price of gold increases, it drives up production (with a lag). This is similar to Bitcoin price and hashrate dynamics,” Carter wrote.
Another claim made by Smith was that Bitcoin mining uses up high amounts of power and thereby depriving regular and local customers of electricity.
In his response to this “false” claim, Carter provided extensive documentation that in fact the opposite is true. Bitcoin is concentrated in areas where there is actually an excess of unused energy.
Take for example China, where the vast majority of mining occurs in four provinces: Xinjiang, Sichuan, Inner Mongolia, and Yunnan, accounting roughly 63% of the global Bitcoin hashrate from Q4 2019 to Q2 2020. It is easy to frame China as still only relying on polluting sources of energy and neglect the technological advances and innovation that have taken place in its energy sector. Bitcoin miners in the four provinces use a combination of coal, solar, wind, and hydropower and all have a relatively low population density with an overabundance of energy.
“As it turns out, there’s a tremendous amount of stranded energy floating around,” Carter writes. “his includes both on-grid energy that power grids cannot accommodate for various reasons like mismatches between production and demand, and off-grid potential energy that simply has no chance of ever making it to the grid. I call this category of energy nonrival energy, because its use doesn’t deprive anyone anywhere of energy nor does it drive up their costs — in fact, monetizing surplus energy could actually drive down grid costs (because it sponsors the buildout of otherwise-unprofitable energy infrastructure).
It’s very clear that Bitcoin miners didn’t just choose those locations at random. Xinjiang and Inner Mongolia have tons of available capacity — including from wind and solar — and little grid demand to mop it up.”
Carter further explained that Bitcoin mining is starting to grow elsewhere, out of China, with the miners pursuing “renewable strategies”. It is all about finding the right location.
“Suffice to say, there’s enough nonviral energy out there to run Bitcoin many times over. It’s just a matter of deploying hashrate in the right locations, which miners are doing — aggressively.”
If Bitcoin mining, which is relatively portable, is concentrated in areas where electricity is unused (and thus cheap) this complicates arguments that simply total up the power consumption.
Bitcoin mining has been estimated to consume between 89 TWh/year and 138 TWh, according to data from the Digiconomist and Cambridge University.
Recently the Pakistani government announced to venture into Bitcoin mining making use fully of hydro-powered energy.
Smith also expressed criticism on Bitcoin mining’s demand for computer chips and thereby contributing to a global chip shortage, costing automakers and phone industry billions of dollars.
This one was easiest to debunk for Carter, with Smith being off track in an embarassing way.
“This is actually the easiest claim to dispute, because it relies on sources which aren’t talking about Bitcoin at all…
Everyone knows that Bitcoin isn’t mined with GPUs. If you trace that article to its source, you land at an SCMP article which discusses a GPU shortage worsened by high cryptocurrency prices. As anyone with passing familiarity of Bitcoin should know, you haven’t been able to GPU mine Bitcoin since 2013. Bitcoin mining relies on specialized hardware using ASICs. It’s mainly Ethereum’s price resurgence which is driving the GPU shortage.”
A final criticism that Carter responds to is Smith’s suggestion that Bitcoin’s proof-of-work system needs to be replaced in order for it to cut down massively on resources.
With the discussion on energy consumption already being addressed, Carter points that Proof of Stake cannot compete in terms of security and decentralization, lacks the hardness that an energy cost provides and more importantly ignores all that Bitcoin is about:
“This is a cornerstone of the anti-Bitcoin energy argument: the notion that you can have something for nothing with Proof of Stake. No energy consumption, yet still a functioning decentralized consensus…
Of course, this is fantastical. ‘Proof of Stake’ is just a fancy phrase meaning “those who have the most wealth wield political control.” That sounds a lot like our current system, which Bitcoin is specifically designed to solve. Bitcoin explicitly rejects politics, and doesn’t grant any special privileges based on coins held,” Carter wrote.
“And if you expect a Proof of Stake token to go truly mainstream, the system would end up privileging the entities that have access to the cheapest capital: large financial institutions that have access to effectively unlimited liquidity from central banks.”
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