Fewer and fewer people are using bitcoin for digital payments. Nevertheless, bitcoin transactions are consuming more energy than ever before – the same amount as the whole of Thailand. With a carbon footprint equivalent to the Czech Republic’s (around 114 million tonnes per year), bitcoin is cancelling out other climate wins.
The global take-up of electric vehicles, for example, is estimated to have prevented 50 million tonnes of CO₂ so far. That’s less than half of bitcoin’s emissions for a single year. And the problem’s getting worse. The growth of bitcoin “mining” powered by fossil fuels is outpacing greener alternatives, causing bitcoin’s carbon footprint to swell five-fold in just two years.
But, according to campaign groups Greenpeace and the Environmental Working Group, all this can be easily fixed with a simple update to bitcoin’s software. Their campaign, called Change the Code Not the Climate, launched recently and calls on bitcoin software developers to switch the network from its currently wasteful system for verifying transactions to a more climate-friendly alternative.
The switch, they claim, would reduce bitcoin’s carbon footprint by 99.9%. But it’s unlikely to happen soon – and here’s why.
Proof of waste to proof of stake?
Bitcoiners don’t trust bankers, taxmen and other meddling middlemen. Because there are no banks with bitcoin, the job of keeping the books straight is given to a global network of specialist computers. The owners of these computers compete for bookkeeping tasks in return for the transaction fees paid by network users. They also get a few newly minted bitcoins as a thank you.
This competition is known as Proof of Work (PoW) mining. It works like an ever-expanding game of hungry hippos. The more players that join the contest, the more work each hippo needs to do in order to win anything. If a new hippo with green intentions joins the game, everyone at the table has to work harder. Players powered by coal in Kazakhstan, or fossil gas in Texas, then belch out extra smog.
The higher the bitcoin price, the more the dirty hippos are prepared to waste on coal and gas until their costs for doing so are equal to their reward. And so, Proof of Work is proof of waste. And this is waste by design: Bitcoiners call this inefficiency “the feature, not the bug”.
Greenpeace hopes the bitcoin community could learn to love Proof of Stake (PoS) instead. With the network running on PoS, bitcoin’s bookkeepers would need to stake a prescribed minimum number of bitcoins as a security deposit. If they validate fraudulent transactions, they lose their stake. This disincentive keeps the network secure.
A number of blockchains, including Cardano, EOS, and TRON already use a PoS system, where token holders vote for the most qualified block producers. While bitcoin currently uses millions of mining computers, these PoS networks usually maintain an assembly of around 20 machines using a comparably minuscule amount of energy, taking turns to receive bookkeeping rights.
For bitcoin, coding these changes would be straightforward. Greenpeace claims that only 30 people – the largest mining outfits, exchanges like Coinbase and Binance, and code developers – would need to agree the switch to PoS.
But this ignores the fact that everyone would need to run the upgraded software. On average, to successfully mine bitcoin once per week requires shelling out around US$1.8 million (£1.4 million) on hardware. Most miners are protective of these investments and conservative when it comes to amending the software code that underwrites their winnings.
For this reason, Chris Bendiksen, a commentator at the cryptocurrency website CoinShares, puts the chance of Bitcoin ever moving to PoS at 0%. “There is no appetite among Bitcoiners to destroy the security of the protocol by making such a move”, he says.
Bitcoin is no stranger to coding stalemates. An amendment to fix intermittent congestion issues and stabilise transaction fees was proposed in 2016. Despite being a relatively simple fix, the change split the bitcoin community, with the vast majority continuing to support the slower, more expensive status quo.
Even if some users were prepared to ditch PoW, the original bitcoin network would continue in some form. This PoW version would keep the name, branding, super-rich disciples, and polluting PoW miners. The PoS offshoot could end up as just another disappointing experiment.
Tackling crypto greenwashing
Many Bitcoiners scoffed at the Greenpeace campaign. After all, much of the funding for this marketing mission comes from billionaire venture capitalist Chris Larsen, co-founder of rival cryptocurrency Ripple.
Larsen’s Ripple was also an original member of the UN-backed Crypto Climate Accord, an organisation convened in April 2021 to promote more sustainable cryptocurrency trading. In response, prominent bitcoin advocates established the Bitcoin Mining Council – a public relations group aiming to “defend bitcoin against uninformed and hostile energy critics”, like Larsen.
Retaliatory campaigns from bitcoin advocates are ramping up, and their greenwashing appears to be winning. The European Parliament recently rejected a bill to ban PoW mining across the EU. The UK government also fears an exodus of crypto trading talent for other financial centres.
Research I have led suggests that effective regulation of bitcoin will not come from charity appeals. A globally coordinated ban, led by governments, is likely to prove the most effective solution.
Source: The Conversation