Crypto Energy Wars
Elon shone a spotlight on bitcoin’s prodigious energy use. Is it possible to be a carbon conscious crypto investor?
Major market moves are always so painfully obvious in retrospect. The price of bitcoin surged almost 600% in six months. Alts did that and a whole lot more. Absolute dumpster pile meme coins were being valued in the tens of billions. And yet we were all out there screaming for US$100k bitcoin and one dollar DOGE. What were we thinking?
So, while Elon’s now infamous broadside on bitcoin’s energy usage felt like the cause of the collapse, it’s perhaps better understood as the catalyst for the Crash We Had to Have. (And hopefully just a brief rest before the bull run resumes in full force).
The bigger question though: is Elon right? Is bitcoin destroying the environment? Can cryptocurrency be justified in a carbon conscious age?
It ain’t easy being green
While nobody enjoys a 50% haircut to their crypto portfolio, a little more reflection on crypto’s energy usage isn’t the worst thing in the world. Few issues are more pressing than climate change and it’s not good enough to simply say that mining gold or traditional finance are worse when it comes to carbon emissions.
The truth is that there isn’t enough transparency around bitcoin’s energy mix right now. While previous analyses have suggested that over 70% of bitcoin mining uses at least some renewable energy, it’s hard to make any definitive statements about how much carbon bitcoin produces because the mining outfits themselves are famously opaque (read: based in China).
Fortunately, there are glimmers of change emerging. China’s recently announced crackdown on bitcoin mining is already pushing mining operations to locations with better oversight. Elon himself announced that he’d been meeting with North American miners to discuss making bitcoin more sustainable. Meanwhile, the Crypto Climate Accord is a worldwide consortium of crypto miners and blockchain companies looking to go carbon neutral by 2030. Research from payments provider Square has even shown how bitcoin mining could become a driver of renewable energy growth.
Is bitcoin worth saving?
But bitcoin undeniably does use, I believe the technical term is, a shitload of energy and there are plenty of cryptocurrencies that do what they do with a minuscule fraction of its electricity demands. Coins like Ripple (XRP), Stellar (XLM), Algorand (ALGO) and EOS – which you can invest in en masse with CoinJar’s new Green Bundle.
Does that mean there’s no place for bitcoin in a post-carbon world? Not entirely. Many of the things that make bitcoin so interesting, so revolutionary – its decentralisation, durability, censorship-resistance and permissionless nature – are inextricably bound up with the energy it takes to produce it. While other blockchains may use less energy, there’s always a sacrifice made along the way. Bitcoin is the original blockchain, the purest and most accessible expression of digital value we’re ever likely to see. And the price of admission is energy.
So, it’s on the crypto community – the investors, miners, entrepreneurs and traders – to start pushing for better practice and more transparency. Cryptocurrency has long wanted to be taken seriously by the rest of the world. Taking responsibility for and finding new ways of mitigating our carbon usage is one way we can prove that we’re actually the legitimate force for good we often claim to be.
Like many investments, cryptoassets carry risk. Given the potential price volatility which can be extreme, the value of your cryptoassets may fall rapidly or over time. Cryptoassets are also currently unregulated by the FCA and you are unable to access the Financial Services Compensation Scheme or the Financial Ombudsman Service.