Here is the fourth installment in Mr. Lewis’s epic series of articles, Gradually, Then Suddenly.
Since the early days of Bitcoin, there has been a constant stream of content deriding the network’s “wasteful” energy consumption. To begin, this argument is flawed: Bitcoin miners pay market rate for electricity consumed, which by definition means the energy is not wasted. If there was a better, more economically productive use of the electricity, the electricity would be bid up and consumed by that use case. If Bitcoin miners were somehow receiving electricity at below market rates, consuming electricity that would otherwise be used more productively, then Bitcoin would be causing a wasteful deadweight loss to society. But alas, this is not the case!
Furthermore, let’s not forget that nearly 75% of electricity consumed by Bitcoin miners comes from renewable energy sources, making it by far the greenest industry in the world.
But more importantly, the Bitcoin-wastes-energy line of thinking is the trope of observers who only look at first-order effects and are unable to see higher-order or knock-on effects. This article dives into how Bitcoin’s energy usage provides the security required of a global, digital, sound money, and this is actually a bargain despite the cost.
Disavow yourself of Bitcoin energy FUD, and read the article below!
Here are a few of my favorite quotes:
” Economic stability depends on the function of money and bitcoin provides a more sound monetary framework which is why there is no more important long-term use of energy than securing the bitcoin network.”
” Now, many sitting comfortably in the developed world will look at Venezuela and think, “it could never happen here,” but that ignores all first principles. Whether it is well understood or not, the market structure of the Venezuelan bolivar or the Argentine peso is identical to that of the dollar, the euro or the yen. The Fed, the European Central Bank or the Bank of Japan may be better at managing stability (for now), but it does not change the fact that the underpinnings of all fiat currency systems are the same.”
” Some energy input is required for everything that we consume in our daily lives. The coordination of those energy inputs is dependent on the reliability and stability of the money we use.”
“It is not that we should sacrifice electricity that could otherwise power homes; instead, it’s that we will never have the electricity to power those homes if we do not have a reliable monetary system to coordinate economic activity and marshal resources. In practice, bitcoin will not practically compete for the same energy resources that fuel the basic productive and consumptive functions of our economy (not zero sum); instead, bitcoin’s function as a currency system will ensure that those very energy needs can continue to be fulfilled.”
Enjoy!