Much has been written about how Bitcoin’s energy use is less carbon-intensive than its critics assume. Due to its high utilization of renewable and zero-carbon energy, this is true.
Much has been written about how Bitcoin’s energy use is justified by the economic outcomes it promotes. As Bitcoin provides people around the globe with an incorruptible tool for storing value, this is true.
Steven Lubka, a CoinDesk columnist, leads Swan Private, Swan Bitcoin's concierge service for high-net worth investors.
Much has been written about how Bitcoin’s energy use is tiny in the context of global energy consumption. Bitcoin uses less energy than electric clothes drying machines, so this too is true.
However, very little has been written about how Bitcoin’s energy use is actually good. In fact, energy use itself is good because humans benefit from using energy, and the more they use, the better.
I recognize that this is a controversial stance in today’s world of climate concerns. I sympathize with and share the view that maintaining a habitable planet is an important goal. However, the path to environmental security and the path to economic security is the same path: increased mastery over energy.
The reality of how humans innovate and accomplish important things is intimately tied to our control over energy. So do geopolitics and the matters of war and peace. Even our ability to mitigate the environmental impact is a function of how much control we have over energy.
The bottom line is this: Energy is the master resource of human civilization and we should always be aspiring to become better masters of energy.
Whether you support huge deployments of solar and wind energy, nuclear or even think we should actually use more fossil fuels, you should support humans using more energy in aggregate.
Why? The simple truth is that for us to get better at deploying, maintaining and improving your preferred method of energy production, we need to actually build more of that energy production!
Human knowledge does not only emerge in the vacuum of academia. Industrial knowledge emerges only when we actually build and operate things.
César Hidalgo, one of the foremost thinkers in the field of "economic complexity," finds that such knowledge only comes from direct experiential learning, not from universities and books. From praxis, not from theory.
In other words, the idea of a nuclear power plant built and run entirely by Ph.D.s who have never operated a power plant a day in their lives is a frightening notion.
This quickly leads one to the realization that accumulating productive knowledge requires those industries to, in the first place, exist, and in the second, to provide opportunities to advance our knowledge via continued operation.
We need productive knowledge to operate industries, and industries can only be operated if we have productive knowledge. It is an intimate dance of increments.
Inevitably, Hidalgo found that countries move from the products they already produce to new products which rely on similar productive knowledge.
Thus, in order to improve our ability to generate energy, we must first generate energy. The more energy we generate, and even one could argue the more diversity of energy we generate, the more opportunities we have to improve our productive knowledge.
Regardless of what form you think humanity's future energy consumption should come in, it is critical to admit that we will only become efficient proprietors of that form of energy by building and operating more of it. This then means that more capital should be devoted to these endeavors. Bitcoin (BTC) mining makes this possible through organic market incentives.
Some people see the allocation of capital for an energy transition as being the responsibility of government. However, if history has taught us anything it is that free markets are a modern miracle and are better at capital allocation than any central entity humanity has ever known. I do not intend to argue whether or not governments should have a role, or how much of a role in this process they should have.
No matter what views you hold on the role of government in our energy future, it is impossible to deny that real market incentives provide a massive advantage to the development of better, cheaper and more efficient energy technologies.
Additional capital that incentivizes more energy production is a virtuous cycle whose end result is more prosperity and greater knowledge regarding energy production. This inevitably also includes our ability to control how much carbon is emitted while producing energy.
Bitcoin is an ingenious force for allocating capital to the most efficient energy producers. Any miner who can secure cheaper energy can make a greater profit mining bitcoin than their competitors.
When new bitcoin miners come online using cheaper energy than existing miners, they actually make it more difficult for those other less efficient miners to continue to mine using their antiquated energy resources. The end result is a virtuous cycle chasing ever cheaper energy and making inefficient energy sources non-financially viable on the Bitcoin network.
Let this sink in for a moment: Bitcoin mining will provide the most efficient energy production facilities with added cash flow and will withdraw its cash flow from less efficient ones. This will accelerate the construction of efficient energy production sources and potentially also accelerate the cessation of inefficient sources.
Do you believe that renewables are the cheapest and most efficient energy to have ever been available to humanity? Then, hallelujah, bitcoin mining is the best thing to ever happen for renewables! For if renewables truly are the cheapest and most efficient energy then it is inevitable that bitcoin miners will use almost exclusively renewables (absent government subsidization of less efficient energies).
And what if you believe the mighty atom is the ideal energy source? What if you look up at the sun and intuit that if nature produces all of its energy via nuclear reactions, then it stands to reason that nuclear reactions are the most efficient way the universe has to produce energy. Once again, hallelujah! Bitcoin mining will be the best thing to ever happen to nuclear power! Let's get going and split some atoms!
Whichever view turns out to be correct, whichever one actually generates energy more efficiently, is the one that bitcoin mining will help the most in the long term.
The only way we will make any progress towards our energy future is by building, using, operating, repairing and improving our energy production knowledge, processes and resources.
The more energy we use, the more jobs there are working in energy and the more energy researchers and innovators that will be funded by the flows of capital throughout the world economy.
The amount of capital that is being invested in energy, even including the recent financing of renewables, has fallen precipitously over the last century as a percentage of total capital investments. How are we supposed to build our energy future if we aren't investing in it?
Rather than wait for some government to recognize this issue and centrally allocate capital, let's unleash the natural incentives so beautifully delivered by the Bitcoin network.
Growth, not de-growth
Using more energy is not at odds with environmental initiatives and it certainly isn’t at odds with civilizational and economic prosperity. No matter which future you want, it will require better mastery of energy, and Bitcoin helps build that future.
The biggest objectors to this view are those who think humanity needs to produce and consume less, sometimes called “de-growthers.” In other words, they believe we must engage in energy austerity – we must stop economic growth, and conserve our resources as much as possible.
Is it actually politically, economically and socially possible to engage in de-growth, considering our economy is built on steady economic growth? Is it fair to force economic stagnation on people around the world, especially those still using less electricity per day than my refrigerator?
De-growth is not a feasible political objective regardless of whether it is right or wrong, necessary or not. I don't believe that governments can get the world to support the policies needed to use less energy and less hope for their children to lead better lives than they did. It is a utopian pipe dream, not realpolitik.
No matter what views you hold on energy, climate change or economic growth, the single pathway available to human civilization is to solve the age old question of producing sustainable, abundant energy.
How do we produce energy cheaper, cleaner and more efficiently? How do we find new energy resources? How do we produce an abundant world for a vibrant global population?
Bitcoin’s energy use is part of the answer to these questions. Bitcoin helps us advance human energy mastery, which is a worthwhile end to pursue, as it is good for both human prosperity and our ability to minimize our environmental impact.