The Myth of Renewable Bitcoin

Why pushing Bitcoin towards renewables is unlikely to help anything

Nick Humphries / Carbon emissions

It looks like bitcoin is shifting a lot more toward renewables and a bunch of the heavy-duty coal plants that were being used…have been shut down, especially in China … I want to do a little more due diligence to confirm that the percentage of renewable energy usage is most likely at or above 50% and that there is a trend toward increasing that number. If so, Tesla will most likely resume accepting bitcoin.

At a bitcoin price of around $40,000, the bitcoin network computes about 200 million trillion hashes per second or 200 quintillion hashes per second! That’s a lot of computing power and no one wants the results of these quintillions of hash computations. The computations are wasted or [at] least not used for any purpose other than securing the bitcoin network.

You will sometimes read that bitcoin uses as much electricity as a small country. That’s true but it’s mostly a reflection of how cheap electricity is. At a price of $40,000, bitcoin spends on the order of $10 billion on electricity annually. $10 billion in spending is less than the world spends on toothpaste ($30 billion), much less than the United States spends on cigarettes ($80 billion), and considerably less than the U.S. federal government spends in one day ($18.65 billion). $10 billion is about the same as the United States spends on Halloween costumes every year. $10 billion isn’t negligible and bitcoin’s resource cost rises with the price of bitcoin, but $10 billion isn’t earthshaking.

Even though the total resource cost of bitcoin isn’t enormous, the per transaction cost is high relative to other payment systems. Visa, for example, can process transactions for about 16 cents per transaction. In contrast, as we write this chapter, the typical bitcoin transaction has a social cost of about $130.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Joshua Gans

Skoll Chair in Innovation & Entrepreneurship at the Rotman School of Management, University of Toronto and Chief Economist, Creative Destruction Lab.