Greenpeace is Coming For Bitcoin
Will Bitcoin "Change the Code?"
The climate activist organization, which dates back fifty years, has set it sights on Proof-of-Work crypto mining. And Bitcoin.
A $1 million advertising campaign, cutely named “Change the Code, Not the Climate,” will push major institutions to persuade Bitcoin to adopt the “Proof of Stake” protocol. Ethereum, the world’s second-largest cryptocurrency, recently completed the “merge” to the Beacon blockchain, effectively switching to a Proof of Stake method. The move for Ethereum will reportedly result in a reduction of energy usage by 99.95%.
“Ethereum has proven it’s possible to take the leap and change its protocol to a less electricity-intensive method by switching to proof of stake and dramatically lowering its energy use and the greenhouse gas pollution associated with dirty protocols like proof of work. It’s time bitcoin and its biggest investors take similar steps to reduce its heavy reliance on dirty electric grids and cheap fossil fuel energy sources – or risk being the cryptocurrency of the past.” - Ken Cook, President, Environmental Working Group.
It’s easy to see why the move is attractive to some. And why groups are pushing for Bitcoin, the largest crypto coin, to follow suit.
Greenpeace and The Environmental Working Group are reportedly trying to influence Fidelity, BlackRock and Jack Dorsey’s Block to move Bitcoin to Proof of Stake. Such a move could result in even greater energy savings than that of Ethereum.
NOTE: Proof-of-stake (POS) was created as an alternative to Proof-of-work (POW), the original consensus mechanism used to validate a blockchain and add new blocks.
While PoW mechanisms require miners to solve cryptographic puzzles, PoS mechanisms require validators to simply hold and stake tokens. (Investopedia.com)
Isn’t it a No-brainer?
Switch to Proof of Stake, save 99% of the energy consumption. Why not?
Greenpeace has already declared Ethereum’s switcheroo very successful. It occurred on September 6th. Of this year. So actually, the jury is still out.
Proof-of-Stake is generally seen as an improvement over Proof-of-Work because it doesn’t require much hardware or energy consumption. However, it has a tendency to centralize and concentrate token ownership with large holders. Its security guarantees are therefore weaker than Proof-of-Work.
And there you have it. A tradeoff between the security of the network and energy usage.
Arguments for Proof-of-Work
Bitcoin mining currently uses massive amounts of electricity. That can’t be disputed. So the argument against POW is pretty clear. But when you look a little deeper, things aren’t so clear. Here are some facts about Bitcoin’s POW that don’t usually get much attention, from the one and only Michael Saylor, Chairman of MicroStrategy:
Bitcoin Energy Utilization: Bitcoin runs on stranded, excess energy, generated at the edge of the grid, in places where there is no other demand, at times when no one else needs the electricity.
Bitcoin vs. Other Industries: Bitcoin mining is the most efficient, cleanest industrial use of electricity, and is improving its energy efficiency at the fastest rate across any major industry. Metrics show 59.5% of energy for bitcoin mining comes from sustainable sources, and energy efficiency improved 46% year over year. No other industry comes close.
Bitcoin vs. Other Cryptos: The only proven technique for creating a digital commodity is Proof of Work (bitcoin mining) deployed in a fair, equitable fashion (i.e. no pre-mine, no ICO, no controlling foundation, no primary software development team.
Bitcoin Value Creation & Energy Intensity: Approximately $4-5 billion in electricity is used to power & secure a network that is worth $420 billion, and settles $12 billion per day ($4 trillion per year). The value of the output is 100x the cost of the energy input. This makes Bitcoin far less energy intensive than Google, Netflix, or Facebook, and 1-2 orders of magnitude less energy intensive than traditional 20th century industries like airlines, logistics, retail, hospitality, & agriculture.
Bitcoin & Carbon Emissions: 99.92% of carbon emissions in the world are due to industrial uses of energy other than bitcoin mining. Bitcoin mining is neither the problem nor the solution to the challenge of reducing carbon emissions. It is in fact a rounding error.
Bitcoin & Environmental Benefits: There is an increasing awareness that Bitcoin is quite beneficial to the environment because it can be deployed to monetize stranded natural gas or methane gas energy sources. (See last week’s Newsletter!)
(From “Bitcoin Mining and the Environment,” by Michael J. Saylor, 2022.)
So Will Bitcoin and its POW Protocol Survive?
No one can predict how this war will play out, but there are certainly a lot of factors in favor of Bitcoin maintaining its POW protocol. Most of all, mining is using an increasingly larger percentage of energy from renewable sources. That’s huge. In addition, all the lobbying in the world can’t necessarily make Bitcoin’s big players make any changes to the technology.
Gridlock may ensue on this issue for a while. Stay tuned.
And thanks for reading. This is a big issue for Bitcoin. Please share this newsletter.
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Issue No. 75, September 23, 2022
Rick Mulvey is a CPA, crypto consultant, and frequent contributor to Bitcoin Magazine. He writes about all things Bitcoin, and yells at the Yankees and Giants. He also runs marathons and makes wine, neither professionally.