The world’s first cryptocurrency, Bitcoin (CRYPTO: BTC), might actually be a force for good in solving climate change. At least, that is the case being made by a veteran of the industry.
Bitcoin has received a bad reputation for its high energy usage in recent years. Most of us have seen the headlines comparing the cryptocurrency’s network energy usage to entire countries. The bleak comparisons have enraged many climate activists at a time when emission reductions are paramount.
However, crypto veteran Ryan Selkis who is the founder of crypto research firm Messari, takes a polar opposite perspective.
Running the numbers
In his annual Crypto Theses for 2022 report, Selkis discusses how Bitcoin has become the centre of political and climate debate. The level of negative sentiment driven towards the cryptocurrency based on its perceived environmental costs was “as if Bitcoin were a bona fide toxin”, as Selkis described.
In contrast, the long-time crypto investor produced several reasons why Bitcoin has an important role to play in our clean energy future. These include:
- Bitcoin’s environmental impact should scale sub-linearly to its economic impact
- Bitcoin recycles energy
- Green energy stimulus
The first touches on the elephant in the room, which is how much energy Bitcoin might consume as it scales. The cryptocurrency’s Proof of Work (PoW) consensus model requires energy to be expended during the consensus process.
As Selkis points out, the Bitcoin network could consume up to 1% of the world’s energy if it were to grow to a $20 trillion asset. While this might seem diabolical, the opportunity is for crypto to automate the global financial services industry — which by Selkis’ figures amounts to 3% of global emissions.
Champions of recycling
Another way it could be considered a positive for the environment is the incentive structure for cheap (often wasted) energy.
Selkis says that Bitcoin miners are often attracted to stranded energy sources that otherwise go unused. Highlighting this, the Messari founder quoted research from Lyn Alden:
The University of Cambridge estimated that global flare gas recovery potential is 8x larger than the bitcoin network’s energy usage in 2021. In other words, virtually the entire Bitcoin network in its peak 2021 form could hypothetically be run off of stranded natural gas in the US, let alone the rest of the world.
Lyn Alden, Lyn Alden Investment Strategy
Bitcoin brings green future forward
Finally, the report drives home how the cryptocurrency could be used to “power clean energy investments”. Importantly, Bitcoin miners’ bottom line is predominantly an outcome of one variable — the cost of energy on a KWh basis.
For this reason, the network could be used to balance the demand for early-stage renewable developments. Conversely, Bitcoin miners could subsidize capital expenditure for renewable developments in low-income areas in exchange for energy rights.
In summary, Selkis suggests that perhaps Bitcoin is more of a hero than a zero in the fight against climate change. At the time of writing, the price of the original cryptocurrency is A$67,526.