• We are in a climate emergency
• Bitcoin’s Energy Use
• The Cost of Producing Value
• Saving for our Environment

§We are in a climate emergency

Without a doubt, man-made CO2 emissions are causing our climate to rapidly change beyond what humans have ever experienced in our history. It is changing quicker than what much of the natural world can adapt to. There is a measurable energy imbalance between the energy coming into our planet and the energy leaving our planet. This is a fact. The only way to feasibly reduce this imbalance is to stop emitting more greenhouse gases into our atmosphere where they’re accumulating and creating this energy imbalance. I will not be getting into the debate as to whether humans are the main cause of this imbalance because there is no debate to be had there. The current science on this has already been debated ad nauseam for decades and the conclusion has only become more and more clear as time has passed as our understanding continued to grow.

Emergencies, however, always yield many calls to action about what is best to do about them. I do think there is plenty of debate to be had in this area. Policy is a very difficult matter to discuss as there are many trade-offs when it comes to what types of policies to implement, at what cost, and for what benefit.

One of these debates that have been had frequently over the last several years is the debate about whether bitcoin is a scourge for our climate. As a long-time environmentalist and as someone who is deeply concerned about our planet’s environment and the stress that humans place on it, I am also someone who passionately believes in the benefits that bitcoin can provide for humanity. This may come across as a stark contradiction, but my hope is that I can help provide a better understanding for why I and many others hold this belief. Many articles have been written about bitcoin and its energy and emissions cost both against and in defense of it. I’ve read many of them myself and have often come away from them with a feeling of bias on both sides and a feeling that many points are both under-discussed and misunderstood.

§Bitcoin’s Energy Use

So how can an environmentalist like myself justify bitcoin’s current energy cost in the face of a climate emergency? To justify bitcoin’s energy usage and whether or not it is a worthwhile cost for humanity, we must first understand what that energy is being used for and why.

Contrary to many claims that are in argument against bitcoin’s energy cost, the energy being spent today is not being spent to process transactions on the network. The early phase of bitcoin’s life is its production phase where bitcoin is being “minted.” Approximately every 4 years, the bitcoin reward for miners when they find a new block is cut in half. The first halving took place in 2012 when the block reward went from 50 bitcoin to 25. Then in 2016 it went from 25 to 12.5 bitcoin. The most recent halving took place in 2024 that cut the reward down to 3.125 bitcoin. This is a subsidy provided to miners as an incentive to mine bitcoin. A new bitcoin block is found about every 10 minutes. When a miner finds one of these blocks, they are awarded this subsidy along with any transaction fees for the transactions that are included in that block. At the moment, these transaction fees only account for about 2% of the total financial incentive for mining a block. Since the financial incentive for finding a block is what drives how much energy can be used as an expense for this work being performed, then this means that the vast majority of energy being currently consumed is driven by the “minting” or production of new bitcoin into circulation.

However, because this reward is cut in half every 4 years, we are trending toward the end of bitcoin’s minting phase. One thing I think everyone can agree on is that bitcoin’s exchange rate can’t go exponential forever. It just isn’t economically feasible. This means one simple fact; bitcoin will transition from a network that is incentivized to spend energy based on the value of the bitcoin being minted to instead spending energy relative to the transaction fees that are provided as a result of real-world economic activity. This is an important mechanic to understand.

Many critics of bitcoin mining criticize mining for not providing many jobs since it doesn’t take a lot of human capital to run a large bitcoin mining operation. But this efficiency is one of bitcoin’s strengths. Broadcasting, confirming, and validating transactions with bitcoin has almost no overhead beyond the electricity it consumes. When bitcoin transitions to a largely fee-based mining incentive, this low overhead will make bitcoin one of the most energy efficient means of moving money around in the economy. Moving $1,000,000 on the bitcoin network will require a certain amount of energy that is limited by the amount of money the sender of the transaction is willing to pay in security fee for that transaction to take place. No more, no less. The profit margins in bitcoin mining in this post-subsidy era will be extremely thin as the industry has matured greatly and since the price of bitcoin is now a negligent factor in mining’s profitability, price volatility will also be a negligible factor. All that will matter is that someone looking to broadcast a bitcoin transaction is willing to pay a specific amount in fees to have that transaction confirmed and that miners will be looking to compete at a global level to spend as little energy as possible (their expenses) to confirm that transaction.

Not only will bitcoin be a more energy efficient means of moving monetary value globally around the world, but it is also a network that will be globally incentivized to utilize the cheapest electricity globally. This is something that should align with every environmentalist’s ideals. Humans are pushing to have renewable energy become the cheapest methods of production around the world. This means bitcoin will not only be more energy efficient than our current traditional financial systems at moving monetary value, but it will also be naturally incentivized to align with our goals of utilizing more renewable sources of energy. Contrast this with our traditional financial systems today that are not only energy inefficient with large overhead costs of transferring monetary value, but they also don’t have any natural incentives to opt into using renewable energy during this transition. Furthermore, because many of our traditional financial systems and central banks are not unbiased monetary networks, as recent reports have shown, they have actually facilitated policy and funneled large sums of money to the benefit of the fossil fuel industry. This should at the very least give pause to anyone that questions the benefit of a neutral and global monetary network.

Furthermore, bitcoin’s proof-of-work consensus mechanism is extremely transparent which is also something that no other financial or monetary system today has. It is possible to calculate with relative certainty how much energy the bitcoin network is consuming globally. In fact, this is one reason why I believe it is the focus of so many critics today since, relative to many other energy consumers in the world, bitcoin’s energy costs are so readily available for critique. I feel there is an undue focus on emissions from bitcoin mining relative to the total amount of greenhouse gases in our atmosphere.

But while bitcoin’s future energy costs look promising as an efficient means of moving money with little energy overhead, what about its energy costs today? Can we justify its current energy usage based on some promise of the future? As I mentioned earlier, bitcoin’s current energy usage is primarily driven to mint new bitcoin into circulation and this is a short temporary phase that will not continue forever. To determine whether or not this energy expenditure is of worthwhile value to humanity, one analysis that can be used is its cost of capital or value.

§The Cost of Producing Value

Every economic output costs energy. This is a fact of life. As an environmentalist, I feel that one of the most important aspects of ensuring that humans can continue to live in harmony with nature is that we look to implement sustainable design and planning across our entire economy. This goes far beyond just renewable energy. It doesn’t make sense to have renewable energy if all the things we are producing for humanity using that renewable energy are single-use economic goods that can only be used once. Regardless of whether the energy used to bring that good into existence is renewable, much of the value that the energy could provide humanity will have been wasted if that produced good can only be used once in its lifetime. Using an electric car is a great alternative to using a gas car, but not if you’re going to buy a brand new one every two years. The same goes for cell phones, clothes, furniture, and all of the economic goods that we use on a regular basis. As humans, we need to become less consumers of the goods we choose to use and think of the goods we produce as investments for the value they can provide for us long into the future. Never-ending consumption and sustainability are at odds with each other. If a good cannot provide value long into the future, then we need to question whether it has any value at all. Bitcoin epitomizes this concept. Being a digital ledger, entries on bitcoin’s ledger are permanent and the unit of account used on that ledger (bitcoin) is infinitely reusable without requiring the energy used to produce it to ever be expended for production again.

This is important to keep in mind when thinking about bitcoin’s cost of capital or value. A vast majority of bitcoin that will ever exist have already been mined. The 20 millionth bitcoin was recently mined not too long ago and there will only ever exist 21 million bitcoin. 99% of all bitcoin that will ever exist will have been mined within the next decade. The bitcoin that is used in circulation today is the same bitcoin that can and will be used as an accounting measure for centuries to come. When we think about what the value of bitcoin could be to society, we often just represent it as a comparative measure versus common unit of accounts today such as the US dollar or the British pound. But what about the value of a bitcoin in relation to the energy it requires to bring it into existence? Since this is just a one-time energy expenditure, this is a crucial analysis when considering bitcoin’s long term value for society.

A bitcoin will never be brought into circulation costing more energy to produce than it is economically valued by society. There are no distorted incentives in place for that to happen. A vast majority of bitcoin in circulation today were mined by the year 2016. In fact there were about 15 million bitcoin in circulation by the start of 2016. The total cumulative energy spent by the bitcoin network by that point in time is estimated to be about 10TWh of electricity over the course those first 7 years. So the network mined about 15 million bitcoin with an estimated economic value in today’s dollars (~$74,000/BTC) of about $1.1 trillion. The average cost of electricity generation is approximately $60/MWh depending on the source of generation. The average cost of 10TWh of electricity through 2016 is about $600 million. This means, that as of today, the bitcoin network was able to mine in the first 7 years, $1.1 trillion of economic value that is infinitely reusable by any citizen of the world for an energy cost of just $600 million. This is bitcoin’s cost of capital. This is a one-time energy cost. Bitcoin will never again need to spend energy, regardless of bitcoin’s price, for this bitcoin to merely exist. To transact with it in the future merely requires transaction fees that have almost no energy overhead to pay miners to continue producing blocks. This is unprecedented efficiency in our economy today and it is one of the reasons why, as an environmentalist, I see great promise in bitcoin’s benefits for humanity.

As bitcoin continues to get adopted world-wide, the value that humans place on bitcoin will continue to grow. The energy cost as a means to continue to mint what scarce bitcoin there is left to bring in to our world will continue to be justifiable based on the idea that this energy usage will provide more economic value to the world at today’s energy costs without requiring future generations to continue to waste energy producing something for the umpteenth time.

To put it simply, our children’s’ children will be able to transact with bitcoin that was mined today at today’s energy prices for transaction fees at tomorrow’s energy cost with almost zero overhead. I can’t be more excited about this prospect as an environmentalist that seeks sustainable design ideas that we can pass on to future generations.

Critics argue that bitcoin’s energy expenditure is not justifiable based on today’s transaction costs when compared with other means of transacting in our financial world today. This misses the fact that bitcoin’s energy use today isn’t expended so the bitcoin network can facilitate transactions, but is instead expended to produce something that humans can choose to value and transact with for many years into the future. “Choosing”, is the key word here. People can either choose to value bitcoin for what it is or not. People can choose to value bitcoin as a network that offers everyone the freedom to transaction with other humans anywhere in the world without discrimination. If they do continuously choose to value bitcoin, as humans have increasingly done over bitcoin’s lifetime, then its production costs will continue to fall in relation to the economic value it will provide. If humans stop valuing bitcoin for what it is, then its energy expenditure ceases and bitcoin’s total lifetime greenhouse gas emissions are a blip on the radar of human’s total cumulative emissions as bitcoin fades into the technology history books.

§Saving for our Environment

This leads me to my final point. I feel people will continue to realize and understand the benefits that bitcoin can provide humanity. In today’s economic climate, we measure economic success through our economy’s gross domestic product (GDP). If humans are to successfully seek a sustainable world, we must transcend using GDP as a measure of economic and societal success. The infatuation with GDP leads humans to a “consumption above all costs” mentality. With GDP, it doesn’t matter what we’re producing for society, so long as we’re producing. With more and more people understanding the benefits of saving money in bitcoin, it means less money that is being spent on consumerist goods in our economy. Since every economic output is energy and resources being spent, this means that money saved in bitcoin directly results in money and energy not being spent toward consumer goods elsewhere in the economy.

When discussing the energy costs of bitcoin today, this fact is often overlooked when it comes to saving money in general as a means to foster sustainability. The truth of the matter is we need more savers and less consumers in the world today. We also need a savings vehicle that doesn’t just shift capital to corporations to use to fund further production for the sake of it. Bitcoin is that savings vehicle. Bitcoin is teaching people all over the world the value of saving money. It doesn’t matter how selfish or altruistic one’s reason for saving is. At the end of the day money that is set aside for future use results in less energy being expended today. Not only is that financially healthy behavior, it is also environmentally healthy. At a time of climate emergency, this is imperative for humans to understand; especially those in developed nations that make up the most of today’s biggest consumers and polluters. Expanding consumption does not align with meeting our climate goals. Our politicians have failed us by ignoring climate change for decades and our expansive monetary policies today continue to pursue an ever rising GDP at the expense of our environment. Governments and central banks are using expanding monetary balance sheets to pay for over $4 trillion in fossil fuel subsidies worldwide all while publicly saying they are concerned about climate change. While there is much work ahead for humans to achieve sustainable solutions that don’t harm our planet’s climate, painting bitcoin as something in opposition to those efforts is an injustice.

Bitcoin, by many measures, is a solution that will provide us a truly sustainable monetary network that the world’s citizens can rely on for savings and transacting without anyone else being able to dilute that savings as a means of forcing economic expansion (i.e., energy use) elsewhere. Nobody is without “carbon sin” in today’s world, but portraying bitcoin as the greatest carbon sin is the ultimate scapegoating and distraction at a time when we need real solutions. My hope is that you’ll come to see that bitcoin can become a part of that solution.