Those who do not understand the essence of the computer revolution triggered by bitcoin assume that miners are only interested in one thing: wasting as much electricity as possible to fill their wallets with even more bitcoin.
“Mining” is a misleading term because it tells only one half of the story. The world’s miners use precious capital to dig huge holes in the ground, discover and dig up marketable metals, minerals and gems. They burn resources in order to bring value to the surface. There is no doubt that a bitcoin miner does this, but it also does something else that is the cornerstone of the bitcoin ecosystem: validating data on a computer network based on an open consensus mechanism. Bitcoin, in addition to being an investment tool, is a network of computers connected to the Internet that collectively keep a record of all bitcoin transactions between participants. You connect to the network by running freely available software on an Internet-connected machine, and when you connect, your computer allows you and others to transact with bitcoin, and maintains and stores an ever-growing list — the community ledger — of called a blockchain. People trust bitcoin as a store of value and exchange because anyone can access the blockchain and see the full transaction history until 2009.
"As bitcoin energy consumption increases, so does the number of transactions. If bitcoin handled global transaction volumes, the oceans would boil. "
The energy consumption of miners moves up and down due to competition between miners rather than the number of verified transactions. Digital signature validation uses an insignificant amount of computational power. This competition is healthy because it means that the resources spent on maintaining network security can be automatically scaled along with the transaction data in the blockchain. So the more value there is in the bitcoin network, as it is considered more and more valuable, the more resources they will devote to security. Over time, the intensity of competition will decrease. The bitcoin reward is roughly halved every four years and that’s how it goes all the way to zero. Miners continue to do their job because they also charge fees for transactions, which are charged to network members as an extra per transaction, but the total revenue of miners competing primarily for block rewards is expected to be less than it is today, even if bitcoin prices continue to rise. A smaller reward means less hash power and power consumption.
"Credit card transactions are cheaper and more energy efficient than bitcoin transactions."
A credit card transaction is not a "finished" transaction. Only one payment authorization with at least 5 participants (sender, card issuing bank, card network, recipient bank and recipient). Finally, the transaction is carried over by the participants over the network. In contrast, a bitcoin transaction is considered accounted for the moment it is added to the blockchain and does not have to traverse the swamp of analog institutions along the way. The miner who put it in a block used a lot of electricity, no doubt, but that amount is significantly less than the energy that will clear your credit card payment in a few days.
Energy use alone is not a bad thing. Greenhouse gases are bad, but it’s not that bitcoin contributes to the release of greenhouse gases into the atmosphere in the long run. Moreover, if bitcoin mining became a dominant part of our planet’s energy consumption, it could be good. Just as the consumer electronics revolution has led to unprecedented increases in computing productivity (Moore’s Law), the bitcoin revolution could result in a similar explosion of innovation in clean, efficient energy production and use. For bitcoin miners, electricity costs are a lifeline. Electricity charges account for 30-70% of their total operating costs. Bitcoin miners do not have to worry about the geographical location of their customers or the transportation routes. Bitcoin is digital, it has only two inputs and the network latency is negligible compared to e.g. with a cargo ship packed with aluminum sheets. Miners can load everything in a matter of days and install their bitcoin mining in a country where cheap hydro or geothermal energy is available. If bitcoin mining really starts to become a major factor in global electricity consumption, it will set off an unprecedented green energy revolution. If we want to see an explosion in Moore in the energy sector, it’s better to campaign for a bitcoin mining than to campaign against it.
/Images source: Pixabay
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