Strategy analyst at National Grid US “Mackaymiller” (I am not sure if some of that Twitter handle is a first name) has some questions for Bitcoin supporters.
Let’s take these one at a time.
In answer, I would like to point out that any kWh coming from solar Bitcoin mining displaces exactly one kWh from other sources. How much of that is from fossil fuel depends on the mix in the country in question, but in most countries there is still a lot of fossil fuel in the mix. That in turn means that of course using solar energy for Bitcoin mining displaces fossil fuel, just as with any other use of electricity.
This is only different if you would want to dispute people’s right to use electricity for any purpose they want, including Bitcoin mining. Obviously you could make the exact same point for any other form of electricity use. Let’s take electric vehicles powered by solar panels to show this.
“Why use all that PV to displace fossil fuels when you could just throw it away on running cars? People should ride a bike instead.”
In other words, using solar energy for Bitcoin mining instead of something else does displace fossil fuel, except if you stop Bitcoin mining in the first place.
Which leads to the second question.
Indeed, Bitcoin by design requires a lot of energy per transaction. My last estimate was that Bitcoin uses around 10 kWh of electricity on average per transaction.
That’s a spectacularly inefficient way of running things. Obviously one could save a lot of energy by just sticking with database transactions instead of proof of work.
But this is the only way known to build a trustless system, a payment system that does not rely on any trusted entity. And it is the most energy-efficient way to build that system. Competition between miners is brutal, and their largest cost factor is electricity. They can’t afford to waste any energy.
Bitcoin has a market cap of $62 billion at the time of this writing. Does “Mackaymiller” want to keep all the people supporting Bitcoin from doing so because he personally believes the energy effort is not worth it? That’s not how a market-based economy works. Producers offer electricity, consumers use it for whatever purpose they want.
Of course anybody is free to try finding a more energy-efficient way to build a trustless system. I hear that the Ethereum project wants to use a “proof-of-stake” system instead of proof of work. I don’t think this will work, but what do I know. Maybe it does. In that case, this kind of blockchain technology would save energy.
In contrast, simple databases are not a valid replacement for Bitcoin. They do something completely different. It would be like asking people to ditch their electric car and ride a bike instead. That would save energy, but would not keep the service offered.
Also, one of the points of Bitcoin mining as a source of electricity demand is that you can build your project anywhere. You don’t depend on a grid, since the work comes to the electricity, not the other way round.
This is a great way to start solar projects in remote locations without grid access, or in locations where your friendly local electricity company refuses to give you grid access for one reason or other.
That in turn means that Bitcoin mining as a use case for solar energy can help to accelerate the transition to renewable energy with this particular advantage over a grid solution. If you understand this, you will see that solar Bitcoin mining doesn’t only displace fossil fuel as with all other electricity use, it can contribute to doing so faster as without having that particular option.