PoW : about this "humongous energy consumption" argument
From time to time, there seems to be this argument popping either in conversation or in some "informed" media piece that analyze cryptocurrencies in general and Bitcoin flavours in particular : the proof-of-work, used mainly in Bitcoin Core, Bitcoin Cash and some other variants, is extremely voracious energy-wise.
Generally, this argument is touted alongside some other broad considerations about security (of the cryptocurrency itself and its underlying network) and, way more often, about the environment, driving home the point that using Bitcoin is not only very shady (you know that Bitcoin is used by neonazis, pedophiles, drug dealers and dead unicorns smugglers, right ?), but also tends to destroy the climate, our planet and any hope for the future generation to see a clear blue sky.
The argument is fairly simple : since each transaction is added to a block, and since each block needs a proof-of-work to be added to the blockchain, since each proof-of-work is more and more complex and energy-hungry as the number of interested miners grows, this general cryptocurrency experiment is bound to burn a lot of non-renewable fuel and produces a lot of carbon dioxide. Hence mining is an eco-abomination that should motivate all of us to stop using Bitcoin (and stick with the current oh-so-nice banking system I suppose).
However, even when taking into account the so-called "study" of Digiconomist that goes to great length to precisely prove that, indeed, Bitcoin is an ecological nightmare in the making, this argument does not stand scrutiny.
First of all and contrarily to the general wisdom, the whole concept of mining is based on efficiency. This means that if, indeed, the purpose of searching a specific hash needs a lot of energy, each and all miners have a direct and clear incentive to spend as little energy as possible to get to the rewarding result. This leads to a constant Research & Development effort for the best specialized chips in order to solve the problem at end. Furthermore, it also means that, from any power source the miner will use, it will always be the cheapest possible : the economically sensible miner will have to consider the cheapest electricity, one that can be found with the least effort. Typically, electricity coming from geothermal energy, from wind, hydro-electric dams and, to some extent, photovoltaic will definitely qualify. In that sense, the miners are economically pushed to "go green".
But even without considering the general trend already observed among miners now setting up their mining farms in such places as Canada or Iceland for the above mentioned reasons, the ecological point made by all the eco-alarmists raging against Bitcoin mining does not stand as it compares the generic energy consumption for validating a transaction into this system to the same operation in the regular banking system.
But Bitcoin is not a transaction validating mechanism. Or not only to say the least.
If you have to compare cryptocurrencies with the current banking system, you have to take into account the production of currency, its distribution, its securing, its transaction and its destruction.
In effect and by construction, the mining produces the currency that is used everywhere else. In so doing, the energy consumed to secure transactions is also the same used to produce each new batch of tokens. In the "real world" banking system, producing the millions of bills and coins sure does not come for free, and burns quite a lot of energy.
The distribution of the each token in the real world is, in itself, a full industry : from the thousands of Brinks trucks (still running on non renewable, by the way) to the human teller at your local bank, to the electricity eaten by the ATM at the corner of the street, even to the green potted plant placed in the bank office that will need water, light and some maintenance every so often by some employee, all of these costs are directly needed for the general banking industry to perform as intended. Even if you can dismiss the potted ficus as irrelevant, the rest cannot be so easily forgotten in the general energy consumption of the current monetary system, and its total is absolutely huge. On the other side, one has to admit that the energetic cost of distributing Bitcoin is only a very small fraction of the currency distribution in the real world (and not only because there are no potted ficus at the Bitcoin teller).
It also seems quite obvious that there is quite a huge energy bill regarding the securing of the current real-life monetary system : each bank has to process all its transactions through huge data-centers, containing huge databases, full-fledge teams of developers, system admins, project managers, white hat hackers and much more, all of which need energy (from food to fuel for their cars or transportation system when they have to come to work) to perform the tasks needed for the banking system to function as expected. Needless to say, the Bitcoin system replaces all of this with a very efficient mechanism with much smaller teams ; and its track record (9 years without any hack or broken transaction) compares very well with the one of the banks in which hacking, bugs and maintenance problems are quite routine.
You also have to account for the misuses of the current banking system.
From fraud to counterfeiting, the countermeasures in places cost a lot. Visa, Mastercard and the other operators have to take into account that as much as 2% of the transaction amount is probably a fraud ; the number of counterfeited currency on the market count for more than 70 millions dollars at any point in time. Compared to 0 counterfeited bitcoins and the sheer complexity to create a double-spend, the energy spent to secure the dollar (or any other currency for that matter) seems already quite a high price for a mediocre result : from police investigations to mafia regulation (or attempt thereof), the total bill for securing any real currency far outpaces any amount spent by Bitcoin miners to secure the blockchain.
On top of that, you will also have to remember that a by-product of the current monetary system is the ability to create debts and indulge in overspending. The 2008 crisis is the perfect example of the kind of huge economical, political and social costs the current banking system has to deal with that Bitcoin does not, by construction. By the way, what is the economical and ecological cost of inflation or recession ?
When all is said and done, if Bitcoin were to replace the current banking system in its monetary portion (the exact one Bitcoin process with such success), even taking into account the huge number of daily transactions, the general energy toll would be far lower : as any disruptive system that completely removes intermediaries, Bitcoin lowers the price of transactions to a record new low, by lowering the price of creating, moving, securing and using its specific electronic currency.
In short, if you really care about the environment, use Bitcoin, not banks.
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