Green With Envy

Republished By Plato

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After the Merge, Ethereum’s energy usage will drop by 99.95%. Is there any hope for Bitcoin?

Green with Envy

Of all the things to look forward to in Ethereum’s upgrade to a Proof-of-Stake network (AKA ETH 2.0, AKA The Merge) one of the most important is surely the colossal downsizing of its carbon footprint.

According to Digiconomist, Ethereum’s current annual energy consumption is around 110TWh – the same amount of power used by the Netherlands. By contrast, one estimate puts Ethereum’s post-Merge energy usage on par with that of a small town. Add in scaling technologies such as sharding and it's expected that the network's energy-per-transaction cost could end up somewhere between 0.1-0.4% of Visa’s.

It’s a well overdue change and one that will shine a bright and not necessarily flattering light on Bitcoin’s ever more extravagant thirst for energy, represented here in this artist’s impression.

Bitcoin so hungry

Remember when China banned Bitcoin mining last year and the hashrate securing the network collapsed by 50%?

Well, it has well and truly left that bit of unpleasantness in the rearview mirror. At present the Bitcoin hashrate is hovering somewhere around the 200 exahash mark, an almost 20% increase on its pre-China ban high – which has led to a similarly impressive increase in its energy usage. By one count, Bitcoin now consumes around 0.6% of all the electricity in the world.

But the question remains: where is that energy coming from?

Into the light

While Bitcoin mining remained an almost exclusively Chinese concern, the industry’s carbon footprint was a black box whose contents could only be inferred through second- and third-hand data. Estimates of the share of renewable energy involved in the mix varied from 39-73%, which is the statistical equivalent of ¯_(ツ)_/¯.

There was hope that the transition to countries with better oversight – the US being a prime example – would both make the picture clearer, as well as drive the usage of renewable energy.

But early signs suggest that the proportion of renewable energy in the mix may have dropped 30-40% as the loss of China’s incredible abundance of hydropower makes itself known. Though again the picture is unclear: the CEO of mining giant Bitfury claimed in a Congressional hearing that Bitcoin mining’s energy mix last year was 58% sustainably sourced – better than the US baseline of 31%.

Greening the grid

Either way, there are reasons for optimism. For one, 100% renewable Bitcoin mining facilities are coming online in increasing numbers; see the recently announced joint venture between Tesla and Block.

Bitcoin mining, being a movable and flexible user of electricity, is also better able to chase low-cost power – namely, renewable energy. Miners can become vital baseload consumers, harvesting abundant solar during the day and then selling it back to the grid at night.

Some miners have entered into arrangements with local authorities that mean they go offline when power use is at its peak; there’s already evidence that arrangements like this can help stabilise power grids and reduce power loss.

This is a non-trivial matter: according to the Cambridge Bitcoin Electrical Consumption Index, the amount of energy lost each year to transmission and distribution issues in the USA alone could power the Bitcoin network 1.5 times over. (They also point out that the amount of energy lost to gas flaring – where natural gas leaks are burnt off – is 5 times Bitcoin’s current energy needs. Exxon wants Bitcoin miners to help out.)

For sure, this can feel like running a fan in the midst of a hurricane. As with all energy intensive industries, the problem won’t be solved until renewable/low-carbon energy abundance is the global norm.

But while we wait for that day to arrive, Bitcoin miners need to keep pushing for transparency, driving investment in sustainable power grids and harnessing alternative energy sources (I see you, El Salvadoran volcano). Bitcoin’s trade has always been disruption; energy may be its next target.

Luke from CoinJar

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Time Stamp: April 13, 2022