In order to secure the transactions that the decentralized network of blockchain executes, a worldwide network of decentralized computations is executed, increasing in power and capabilities daily. The resources of energy, hardware and ingenuity that are accruing in this planetary computer are economically rewarded. Too many people miss the point of the positive sum game this represents, concentrating only on the apparent negative of the energy use.
There are several considerations to be made against the arguments bashing cryptocurrencies based on their energy consumption. Almost daily there are articles comparing the energy use of bitcoin mining with a given country’s, under the assumption, often made explicit, that the first use if worthless, while all the other uses would be more worthy.
However, these arguments are profoundly misguided.
1. The comparison must be made with the alternative. Even Google had published a report a decade ago in which it justified the energy use of its data centers. Compare the cost by getting in the car and going to the library to do the search equivalent to a query on Google. How much does the traditional monetary and banking system cost? Starting from the cost of paper, printing and its distribution, collection, sorting, security, robberies, to inefficiencies and distortion of values.
2. The focus of attention could be on things that are not possible otherwise. How many questions would not even be asked if Google did not exist? If we give up blockchain because it is a waste, what opportunities for emancipation will not arise for billions of people who are not eligible to participate in the current financial system?
3. All considerations observe the economy as a closed system, a zero-sum game. But you do not win because I lose. The energy invested in securing the Bitcoin network is not removed from communities living in poverty.
4. We need to build ambitious new realities. If you have to choose the method of allocating resources and settllng payments of economic transactions for the swarms of intelligent robots that will colonize the asteroid belt, do you prefer to use banknotes or credit cards?
5. There are alternatives that are continually explored in the current architecture of blockchain and Bitcoin. Not only proof of stake, which will be adopted by Ethereum, but also, for example, the knowledge mining that Neuromation is implementing, where it uses the blockchain GPU network to generate synthetic data to train neural networks, democratizing access to modern deep learning techniques of artificial intelligence.
6. Many crypto mining operations are now starting to be based on renewable energy, hydro, wind, solar, or a combination. The simple reason being that at an ever increasing rate renewable energy is the cheapest energy that is available in more and more regions of the world. There are projects like The Sun Exchange, that are mashing the directly the world of crypto, funding solar projects, and will aim to develop mining opportunities too.
The processing power of ASICs is non-local: you can buy the cards, and ship them wherever you want. This means that, after the first few weeks when a new card is released, computation can theoretically get uniformly distributed. Why isn’t it? Because electricity becomes one of the most important factors of mining profitability. If you were to represent as an animation Bitcoin mining density on a heatmap, and overlapped it with a scalar field map of the price of 1 kWh, there would be a decreasing difference between the two. The economic incentives of the 12.5 BTC every ten minutes of the Bitcoin network’s heartbeat (until the next halving) push to a constant exploration of where can electricity be reliably cheap anywhere on the planet.
Valkenburgh again, writing in Coincenter: “If you want to see a Moore’s-Law-like revolution in energy, then you should be rooting for, and not against, Bitcoin. The fact is that the Bitcoin protocol, right now, is providing a $200,000 bounty every 10 minutes (the bitcoin mining reward) to the person who can find the cheapest energy on the planet. Got cheap green power? Bitcoin could make building more of it well worth your time.”
(Disclosures: I’m long on Bitcoin, Ether, many tokens, own and operate cryptocurrency mining equipment, and am an investor or an advisor in token sale projects, including The Sun Exchange and Neuromation.)
This post is also available in: Italian