Many people take the energy consumption of their existing medium of exchange for granted. Credit
Bitcoin (and all cryptocurrency mining) uses a lot of energy. A common concern is that this will cause a lot of environmental damage by "wasted" energy.
There are a number of things to keep in mind about this:
- Green energy: Exact estimates are hard to ascertain, but what is certain is that a significant portion of the world's Bitcoin mining already comes from sustainable energy. A survey of 32% of Bitcoin miners was using about 67% sustainable energy, suggesting the entire network was about 56% green. That is nearly twice as sustainable as total US energy supply (30% green) and nearly four times as sustainable as Chinese energy supply (15%). Consider examples of renewable mining in Byron Bay, Australia or with volcanoes in El Salvador.
- Incentive for energy development: Bitcoin mining is more profitable the cheaper its energy supply - and the cheapest forms of energy are renewable. Therefore, Bitcoin is essentially providing a global bounty incentivising research and investment into sustainable energy at a scale that no government is close to matching. Miners don't need to be closely located to consumer urban centers, but instead can locate conveniently to renewable energy sources or places where emissions would otherwise be wasted such as flared natural gas.
- Economic growth: By creating a lower-friction, more free economy with cryptocurrency, world economic productivity will rise substantially. Even a 1% rise in global economic growth compounded over 20 years would be a huge acceleration of humanity's technological development and therefore discovery of new solutions to emission issues - not just in Bitcoin mining but across all industries.
- Reduction in banking emissions: Think of Bitcoin as (eventually) replacing all banking infrastructure in the world. Although it's not an exact analogy, Bitcoin is somewhat equivalent to the entire banking system if you took out everything in the banking infrastructure except the computer servers. Bitcoin does not need to pay for (or spend electricity and energy on) bank branches, office buildings, ATM machines, trucks to drive around physical cash or oil so that employees can drive to work, printing and fabrication of physical cash, product leaflets or any of the other things banks all around the world spend energy on. Bitcoin has some computer servers (just like the banks do), but nothing else. The elimination of every piece of bank infrastructure in the world provides a significant global energy and emissions saving which exceeds or offsets energy spent on Bitcoin mining. Obviously this argument does not apply as much in our current world where the banks continue operating, but as banking gets replaced by cryptocurrency it will become increasingly relevant.
- Utility: Just like video games, central heating, home lighting, dishwashing machines or any other energy-demanding technology - Bitcoin is providing utility to people in the world. The utility of a sound monetary system, free of financial censorship and government debasement is absolutely enormous (even if some people disagree). Bitcoin's utility alone can justify its energy expenditure, even before reference to the rest of this list.
- Eventually proportionate to utility: Bitcoin energy expenditure is currently NOT proportional to its transaction volume while the energy demands are boosted by the mining of fresh Bitcoins. That issuance is constantly declining though, and soon will fall to nothing. In the meantime, the more transactions Bitcoin supports, the more energy efficient per transaction it becomes. This is one reason why Bitcoin Cash BCH (focussed on scaling to the global reserve currency used by everyone on the planet) is superior to a limited "digital gold" model used by Bitcoin BTC. At global scale, and once the initial reward subsidy of Bitcoin has ceased, the amount of energy expended on Bitcoin mining will be exactly the amount supported by the transaction fees paid by users - in other words Bitcoin will take exactly the amount of energy that is justified by the consumer usage and global utility it provides.
The crippled blocksize strategy of BTC is inefficient and a horrendous waste, BCH is much more efficient. Some good analysis of this comes from Jonathon Silverblood.