Elon Musk: Crypto Leaders Need to Ensure the Bitcoin Boom Is Sustainable
Authors Rob Chang and Brittany Kaiser
Today, Elon Musk announced that Tesla’s purchases and transactions with Bitcoin would be paused until the network “transitions to more sustainable energy.” Though Musk is one of the blockchain industry’s biggest advocates, his criticisms of the Bitcoin network’s energy usage are joining a growing choir of voices pressuring industry leaders to take action.
Accompanying every large crypto boom, and the renewed financial industry and public attention it inspires, comes the hand-wringing about what this future of finance is ultimately reaping and wreaking. The litany of naysayers reflexively return to their list of talking points against blockchain technology: it is mostly used by criminals (false), it is too volatile to be trusted (also false, especially when comparing it to other more finicky and “trusted” legacy assets that can crash or boom at a moment’s notice), and most of all, bitcoin energy consumption is what will drive the inevitable climate change that will toast the planet and all of humanity with it (also false, and usually accompanied by hyperbole).
No less an authority than U.S. Treasury Secretary and former Federal Reserve Chairwoman Janet Yellen has once again joined the chorus, recently saying, “[Bitcoin is] an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering.” Unsurprisingly, the Federal Reserve does not seem to have published any figures on the energy costs of managing the U.S. dollar, nor have they opined on how they seek to manage energy consumption of the blockchain-based digital dollar they are reported to be introducing this coming summer.
Of course, while the headlines about Bitcoin’s energy usage isn’t a story nearly as old as time, it is an unsustainable argument that has been reductive, reused, and recycled since the earliest days of the Bitcoin hype cycle. In 2013, noted Bitcoin skeptic Mark Gimein provided some of the first foundations in this convenient argument that has been repeatedly deployed by Yellen and others:
Yes, Bitcoin and other cryptocurrencies that rely on mining computer hardware can use large amounts of energy, just as the 5 billion views of viral music video “Despacito” burned as much energy as 40,000 U.S. homes in a year. Bitcoin has probably financially liberated more people than “Despacito'' though, to be fair.
Still, energy consumption comparisons to the dollar or consumption of other digital content are no excuse for virtual currency’s usage of dirty energy. We have to do better and we know we will. Just as we are in the infancy of the digital finance future, we are also in the infancy of finding effective ways to offset and even circumvent the wastefulness of first-generation mining practices. To continue with that effort, leaders inside and outside of government and finance need to realize and address the problem effectively, not use it as an easy straw man to dismiss a booming industry that is quickly gaining global mass adoption.
Cleaning up legacy mining issues
To help solve the problem, we need to first recognize the true scope of the problem beyond the vaguely framed “staggering” amount of energy. According to a recent Cambridge University study cited by Decrypt, Bitcoin’s non-renewable electricity consumption is about 78.7 TWh, which is equal to 61 billion pounds of burned coal, electricity consumption for 9 million homes, or 138 billion miles driven by an average passenger vehicle.
For scale, it might be more helpful to think of Bitcoin as its own country, as long as we are comparing apples to oranges. Decrypt’s math also shows that Bitcoin consumes more energy in a year than the country of Argentina, making it a top 30 “country” for consuming energy. However, that’s not so bad if you consider how another Bitcoin metric compares to other countries: if you ranked Bitcoin’s $1 trillion market cap against world GDPs, it would rank an even higher 17th, between Mexico and the Netherlands. Recently, Deutsche Bank even noted that it could “no longer ignore Bitcoin, as it has become the third largest currency in the world by total value of circulation.”
Even so, we shouldn’t excuse these environmental downsides with the same vigor naysayers do to promote them. The industry has already started on the solution of creating significant offsets and surely there will be more to come. Crypto has two things going for it: its underlying efficiency-first math and a sort of innovation-based “law of attraction.” As Bitcoin and other cryptocurrencies become a more feasible way of creating both value and access to finance, it attracts more talent to not only innovate on the fundamental technology, but to also reduce its environmental impact and carbon footprint. One such area that the industry is focusing on is increasing renewable energy sources, which also provides its own cost benefits to miners. There is also no telling what effect next-generation blockchains or whole technologies like quantum will have on reducing the industry’s carbon footprint.
And full disclosure: at Gryphon Digital Mining, we are also working on this problem, finding partners to help create the world’s largest fully integrated pure-play Bitcoin miner with a zero-carbon footprint. We are using 100% renewable energy, not greenwashing with offsets for dirty energy usage, but of course open to options like carbon credits to make sure our overall operational carbon footprint is always neutral, if not negative.
We can’t do it alone
It is natural for politicians to critically engage with these issues, especially when they don’t come from a background in blockchain technology, or may not be well-briefed about the industry. If you have watched a congressional hearing with any Big Tech CEOs, you’ve seen the varying levels of digital literacy enjoyed by our leaders, some of whom struggle to keep up with the quickly moving innovation in emerging technologies like the blockchain industry.
It is much easier for politicians and bankers to reflexively look for the problems with blockchain technologies as a means of easily dismissing it, rather than realizing the public demand for digital assets, and finding solutions to make it more sustainable and less environmentally wasteful. While it might go against the natural instinct of some legislators and regulators to be open-minded to such innovations, it will best help the public interests they serve if they start the process of engaging with the industry and its real problems in earnest, such as the forward-thinking officials in the State of Wyoming who have engaged since 2017, and who have now brought tens of billions of dollars worth of digital asset businesses into the state’s economy.
Bitcoin, cryptocurrencies and other digital assets are in the midst of another global boom, so it is in everyone’s interest both inside and outside of the industry to make it more friendly to the environment. Blockchain is one of the most innovative spaces in all of technology, so we cannot wait for Elon Musk’s new solution, Kevin O’Leary’s investments, or a quantum breakthrough to solve the problem for us.
Rather than the crypto industry ignoring its carbon footprint problem, or legacy government and finance thinking it can dismiss, or regulate blockchain technology out of the economy, it will take real cooperation from both industry and public sector leadership to continue reducing our carbon footprint through demonstrably effective measures like increased investment and innovation in renewable energy sources. We still have time, but we need to focus on adding sustainable infrastructure to digital asset networks so that the industry’s continued carbon footprint is small, and not a reason for excess regulatory scrutiny. Only then can we rid the industry of the legacy baggage that currently holds us back, and continue to rapidly scale the building blocks of this technological and financial revolution.
About the authors:
Rob Chang is the CEO of Gryphon Digital Mining, former CFO of Riot Blockchain, and former Managing Director of Cantor Fitzgerald, widely regarded as a top commodities and mining expert.
Brittany Kaiser is the Chair of Gryphon Digital Mining, as well as a Director at the Blockchain Center Foundation, and is considered a global expert in blockchain technology and digital assets.