How bad is Bitcoin for the environment? (Bonus: A beautiful chart of how far the US Dollar has fallen!)

The answer is, net net not too bad and probably better than the alternative/status quo. If you want to find out more, please read on.

In this post (https://thrivingwithinterest.blogspot.com/2021/05/testing-patience-crypto-correction-is.html) I highlighted the key reasons I felt caused the Bitcoin correction of the past 2 weeks. The Tesla about turn and environmental concerns over Bitcoin's energy consumption were amongst them. These are obviously tied at the hip, and to be honest have been a cause for concern for quite a while now. As a result, I thought it might be a good time to revisit those concerns and examine a bit more the question of "how bad is Bitcoin for the environment?"

It has widely been reported that Bitcoin mining uses as much energy as Argentina:

While this is probably true and certainly headline grabbing, it also only shows 1 side of a multifaceted situation. Although Bitcoin touts itself as providing anonymity, this part of it is very transparent for everyone to see. As a result, those looking to focus on the negative aspects of Bitcoin's energy consumption have an easy target. Ok, so this is a problem and if people truly want to help create lasting change they need to vote in politicians who can write laws an impose restrictions/costs on these sorts of activities. I readily concede a goal here. For those keeping score, we currently have Bitcoin Evangelists 0 - Detractors 1.

But what about the other side of the coin? It is safe to say that Bitcoin's adoption creates positive externalities as it helps accelerate the transition to clean energy usage. Mining Bitcoin is like any other business, revenues are offset by costs. As the price of renewable energy falls (wind and solar prices have plummeted by over 70% over the past decade), miners will undoubtedly turn to those are their primary source of power. This is business 101, all else being equal, if you reduce your expenses your profits will increase. As storage capacity of renewable energy improves, it is almost certain that more miners will turn to these alternative sources to power their operations. Unlike many existing players/governments which have an incentive to stand by the fossil fuel industry, Bitcoin miners don't have a horse in the race and will naturally go to where they can save on costs. VAR calls this a goal for Bitcoin, so the score now stands at 1 - 1.

What about the US Dollar (and to a lesser extent the Euro and other fiat currencies)? Obviously the key pillar that Bitcoin is trying to displace is the entrenched financial system that is based on centralization of power in the hands of a few big players (both public and private banking institutions). The largest of them all is of course the global banking industry and the US Dollar. Time for a little history lesson here...

Almost exactly 50 years ago (August 15, 1971 to be exact), President Nixon called an end to the Bretton Woods system and said that US Dollar would no longer be redeemable for gold. The fiat currency system was born. That led to a sharp fall in the price of a dollar, which has continued to this day.

In an effort to halt the slide of the US Dollar (clearly it hasn't worked, but imagine being in the mid 1970s rather than in 2021), the US government managed to convince oil exporting nations of the Middle East to use the US dollar as the key currency for oil transactions and to finance a widening US deficit by buying treasuries. Saudi Arabia agreed to this exchange and soon enough other OPEC nations joined forces. Their fortunes were now tied to the US dollar. The rest is history... Despite some attempts in the early 2000s to have the Euro be used as a key currency to conduct oil transactions, this alternative has remained a relatively small portion of all oil related trade. If one is to accept that the oil industry is not very environmentally friendly, then it seems clear that Bitcoin wins again here. Updated score: Bitcoin Evangelists 2 - Detractors 1.

With this in mind, it is clear that many of the foreign policy decisions the US government makes (think back to the War on Terror after 9/11 for one) are largely based on what is economically advantageous for the US. Given that the fossil fuel industrial complex has an outsized say in public policy thanks to the millions of dollars pumped into lobbying efforts, it is not a stretch to say that the the US dollar has probably been a lubricant to the continued focus on dirty industries while simultaneously slowing down the growth and expansion of clean energies. Once again, it appears that Bitcoin can be a leader in tipping the balance back in favor of the development of alternative resources. This won't happen overnight, but a gradual shift should occur over the years to come as Bitcoin's acceptance, usage and eventual dominance grows. Final score:

Bitcoin Evangelists 3 - Detractors 1

I am happy to hear any alternative storylines and rebuttals. For more information please read the excellent “Uncovering the Hidden Cost of the Petrodollar” by Alex Gladstein for a much more in depth look into the environmental cost of the US dollar:

https://bitcoinmagazine.com/culture/the-hidden-costs-of-the-petrodollar