Changing Narratives: Bitcoin And Climate Change

Changing Narratives: Bitcoin And Climate Change

For many years, Bitcoin was widely considered a source of harmful carbon emissions. Now, that criticism seems to be evaporating in favor of the exact opposite.

Back in the last crypto market cycle, Bitcoin attracted harsh criticism for its enormous energy usage. As a proof-of-work crypto, the Bitcoin network is secured by thousands of miners all around the world. All of these mining rigs consume a vast amount of electricity as they compete to find the next hash: the answer to the cryptographic puzzle that will give them the right to add the next block to the blockchain and collect the rewards of new bitcoins and transaction fees.

By any reckoning, the amount of electricity required is enormous. Depending on whose figures you believe, it’s probably somewhere between 0.5% and 1% of all global electricity use, and about the same as a country like Argentina or Norway.

But not all electricity is created equal. In the past, Bitcoin miners have relied largely on dirty fossil fuels – particularly coal, back when a significant percentage of global hashrate was located in China. No more. Today, a large and growing portion of hashrate is powered from renewable resources such as wind and solar.

Unfortunately, that didn’t stop the mainstream media from perpetuating the old narrative of Bitcoin being a planet-killer – but now, finally, the tide may be turning.

A Shifting Landscape

Bitcoin’s reputation as a source of harmful carbon emissions arose a few years ago, as ASIC mining took off and the network’s energy usage soared. The best estimates were put out by the Cambridge Centre for Alternative Finance (CCAF), which published the Cambridge Bitcoin Electricity Consumption Index (CBECI).

It was reasonable, as far as it went – at least at the time it was first released. The figures were treated as authoritative and used by many mainstream publications. Cambridge, after all, has a certain academic cachet.

Unfortunately, as time went on, the shortcomings of the model became more pronounced. Bitcoin environmental analyst Daniel Batten has pointed out a number of these. They include the fact that hardware has become vastly more efficient over time, and the study over-represented older hardware. The Cambridge study also omitted the role played by off-grid miners (who almost by definition use clean power). In reality, the energy use figure is likely at least 25% less than claimed.

Not only does Bitcoin use significantly less electricity than first believed, but the electricity it does use is more likely than not to be sustainably generated. Miners naturally gravitate towards cheap power, which tends to be renewable. As a result, some 54.5% of electricity used by the network is sustainable, according to Batten’s figures.

In fact, Bitcoin mining is the cleanest major industry on the planet. It’s even cleaner than the EV industry. Moreover, it’s an answer to methane emissions and flaring, which are by-products of fossil fuel mining and huge contributors to climate change. Every bitcoin produced by capturing and converting methane into electricity, rather than simply flaring it, could save 6,000 tonnes of CO2.

Bitcoin also has the potential to help balance the energy grid. The problem with power generation is that it’s hard to get supply to meet demand. You can’t just flip a switch and turn off a whole power station when that electricity isn’t needed. But you can turn on and off a Bitcoin miner at short notice, soaking up or freeing up large amounts of power as required (which is exactly what happened in Texas, where miners turned off their rigs when temperatures plummeted unexpectedly low). Academic studies are now emerging about how Bitcoin mining might play an important role ensuring consumers have enough electricity when they need it.

Don’t Let The Truth Get In The Way Of A Good Story

Mainstream media, including such big (and supposedly impartial) names as the BBC have constantly trotted out the old figures. Greenpeace USA had gone on the record, using the Cambridge model to claim that Bitcoin used as much electricity as Sweden.

But as Bitcoin has gone mainstream and major financial institutions like BlackRock have led the charge for adoption, a new narrative has begun to emerge. While there are still some anti-Bitcoin stories around, based on the outdated figures, publications that were previously critical have been cautiously raising the idea that Bitcoin might offer some solutions, where it was once believed to be the problem.

The Financial Times, so staunchly TradFi, has been thawing its position. PwC has explored the potential environmental and social benefits of mining. A KPMG report even gave Bitcoin a positive ESG rating.

How has this change come about?

It makes more sense if you accept that the purpose of journalism is not to communicate facts to the public – at least, not primarily. The purpose is engagement. Eyes and ears mean revenues, and without revenues, no one will hear your news in the first place. News has to be entertaining, or shocking, to grab the attention, and the reality is that bad news generally sells better than good news.

Bitcoin as a bogeyman served this purpose well. Besides, it was a niche technology, pitted against the mainstream financial system. Misrepresenting it was good for TradFi. But then, as TradFi – specifically BlackRock and other trillion-dollar institutions – decided they wanted a piece of the pie, the media also needed to change their tune.

You can imagine how it might have happened. Realising that some of the biggest of Big Money names were coming out swinging for Bitcoin, many journalists and the publications they represent would be reluctant to go against them and end up looking stupid, or on the wrong side of history. And it’s not hard to imagine that behind the scenes, BlackRock has been feeding stories to news outlets, rehabilitating Bitcoin’s image as dirty tech and casting it instead in the role of a saviour.

The narrative of Bitcoin being an environmental liability has decisively changed, almost overnight. Watch closely, because journalists are also likely to experience a Damascus Road conversion about a few other misconceptions they have been happy enough to promote in the past.