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Coin Metrics co-founder Nic Carter has produced a well-researched rebuttal to some of the key claims suggesting power-hungry Bitcoin mining is causing an environmental disaster.
In an in-depth article called Noahbjectivity on Bitcoin mining penned on March 30, the Castle Island Ventures Partner responds to claims by Bloomberg columnist Noah Smith in a March 24 article titled Bitcoin miners are on a path to self-destruction.
The first claim Carter took aim at was that Bitcoin is unique among assets in that a rising price entails a greater energy draw. Carter stated that gold has the exact same trait in that higher prices result in increased mining and energy consumption.
Secondly, there was a claim by Smith that Bitcoin mining hogs local power resources depriving regular customers of electricity. However, according to figures produced by Carter, mining is concentrated in areas where there is actually an excess of unused energy.
Within China, the vast majority of mining occurs in four provinces: Xinjiang, Sichuan, Inner Mongolia, and Yunnan. Between them they accounted for 63% of the global Bitcoin hashrate from Q4 2019 to Q2 2020. These areas use a combination of coal, solar, wind, and hydropower and they all have a relatively low population density and an overabundance of energy.
Carter calls this surplus energy that will never make it to the grid ‘nonviral’ and delved deep into the figures to reveal that in previous years China has curtailed or sequestered 100 TWh on average worth of hydro, solar, and wind energy, collectively. Curtailing is a process that refers to removing excess energy from the grid or public consumption often to maintain price levels.
Bitcoin mining has been estimated to consume between 89 TWh/year and 138 TWh, according to data from the Digiconomist and Cambridge University.
“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.
For example Alex de Vries, founder of Digiconomist, wrote in a recent article:
“The record-breaking surge in Bitcoin price at the start of 2021 may result in the network consuming as much energy as all data centers globally, with an associated carbon footprint matching London’s footprint size.”
The Cambridge Bitcoin Electricity Consumption Index (CBECI) estimates Bitcoin’s annual electricity consumption is currently somewhere between that of Sweden and Malaysia.
In Smith’s original article he argued that Bitcoin developers needed to adopt an alternative to Proof-of-Work, citing Proof-of-Stake as a viable candidate. Ethereum is moving to Proof of Stake with Eth2, which is estimated to use 99.98% less electricity.
Carter doesn’t believe that Proof of Stake can compete in terms of security and decentralization however:
“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. If this logic reminds you of perpetual motion machines, it’s because that’s exactly what is being proposed here: a completely free lunch where you get precisely the same assurances as Bitcoin with no costs whatsoever.”
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