It’s in vogue to think that Bitcoin is accelerating the climate crisis.
The common argument is that Bitcoin uses lots of energy, which must mean more carbon emissions, so as a result, it’s ruining the climate. Of course, critics also seem enraged at Bitcoin itself, believing it doesn’t do anything useful beyond facilitating a casino for Reddit memelords and “libertarian nerds” to get rich in. To these critics, Bitcoin is a totally useless, degenerate system that will end up consuming all energy on the planet in 18 months if we don’t stop it right now.
While this fatalist prediction might succeed in earning clout on Twitter, it is fortunately far from the truth. Incredibly far. In fact, if I may do some clout chasing of my own: the prediction that Bitcoin will destroy the climate is the literal opposite of what Bitcoin is likely to do.
Bitcoin will save our Earth.
By the end of this read, you will understand how Bitcoin uses energy to validate transactions, and how this is driving more efficient energy usage and lower emissions for the entire global energy grid, not just the Bitcoin system.
Why Does Bitcoin Need Energy?
This is the first part that confuses many people, because Bitcoin is a novel type of monetary technology which has no analogue. Importantly, Bitcoin is not Visa or PayPal — and it uses energy for different purposes.
Bitcoin requires energy in order to secure the history of transactions. A recipient of bitcoin can reasonably trust that the bitcoin they’ve received is really theirs because miners expended energy, and therefore incurred an unavoidable real-world cost, in order to fit that transaction into a block of transactions and hitch it onto the “blockchain.” We call this strong assurance that a transaction is completed “finality.”
If you take out that energy expenditure, there is no cost associated with changing a transaction. The original sender could decide later to change their transaction so it points to another one of…