Bitcoin and climate protection go together very well

Christian Sadrinna
7 min readJan 19, 2022
Photo by Markus Spiske on Unsplash

Key Takeaway

Bitcoin is based on a global infrastructure that already has a very pervasive penetration rate — on closer inspection, Bitcoin can be THE solution to steer social action in climate-friendly and sustainable directions. Reversing the neoliberal “more and more growth” narrative is a project of decades — and we are just getting started.

The question of whether Bitcoin is good, bad, or neutral for the climate first fundamentally requires asking about human and societal actions that are demonstrably “bad” for the climate: there is a very close correlation between

  • Growth of the money supply (EUR, USD, ..)
  • Growth of the earth’s population
  • Growth of fossil raw material consumption
  • Growth of modern lifestyles (e.g. meat consumption)

> Growth of CO2 concentration in the atmosphere

A doubling of the CO2 concentration from the pre-industrial value of 280 ppm to 560 ppm (parts per million) would, according to the current state of science, probably lead to a global warming of 3 °C. The increase of temperatures in such a short time in the history of the earth would then cause and accelerate “climate change” with all its negative consequences — no further details on this in order not to distract from the actual topic.

A further rise of the temperature can be slowed down by the reduction of the CO2 portion in the atmosphere (less CO2 = small rise of the temperature).

Conversely, this means that there are various levers that can be used to slow down or even reverse the expansion of CO2. The consumption of fossil resources, for example, is countered with the #energytransition. Veganism questions modern lifestyles and addresses ethical issues in the relationship between humans and animals. The world population is reduced in its number by epidemics á la COVID-19 — only the money printing orgies of the central banks somehow do not fit into the picture. Yet it is precisely the expansion of central bank balance sheets that has been THE fuel for global growth since the 1970s. Wouldn’t it therefore be advisable to reduce or even curb the increase in the money supply in order to prevent the global economy from growing excessively and to move in a more climate-friendly direction?

Yes, but … and there are many of them. Among many political, geo-political and strategic ones, however, one seems to me very simple: an abrupt stalling of money growth would be a brutal end with very great potential for massive unrest and chaos resulting in bankruptcies, livelihoods and poverty. The inflationary and classical money system (FIAT) gives exactly this incentive to put one’s money into circulation and to consume in order to generate further growth. Inflation is THE incentive to consume — since my money is already worth less tomorrow. If one corrupts the incentive, one corrupts the present system and the innumerable economic subjects whose business behavior builds exactly on this principle: sell, sell, sell! Here the worldly society has run into a dead end, which floods the world markets with plastic garbage and the attitude “buy and buy again” and has led decisively to an unstoppable growth of the CO2 concentration.

Another monetary system would therefore not have to be inflationary, but deflationary to prevent consumption: and that is exactly what Bitcoin is!

A system which, through mathematics (the most universal and recognized language in the world), decentralization and simplicity, has a deflationary character and, according to simple supply-and-demand mathematics, works as follows: 21 million Bitcoin (maximum quantity = limited supply) face a world population of 8 billion people — and why shouldn’t companies, animals or machines also be able to own Bitcoins? In short, a huge potential demand is matched by a limited supply. The only variable in play is the price, which inevitably tends to spiral upward until it reaches a final and stable price level. If in 2015 one could still buy an iPhone from a Bitcoin, in 2021 it is a Tesla and in 2030 a house. The time factor and the preference of each individual to forego consumption in order to acquire more and more essential things in the future is thus a hidden and built-in energy saver.

Provided this narrative becomes mainstream and FIAT currencies increasingly flow into the purchase of Bitcoin and are thus withdrawn from the regular economic cycle for superfluous consumption, the sooner Bitcoin can unfold its climate-friendly effect.

Holding Bitcoins (aka “HODL” — hold on for dear life) thus becomes not only a personal finance or portfolio issue, but is at the same time and rather a global revolution to inhibit consumption, through the incentive to be able to use the Bitcoins tomorrow for MORE.

Any use of Bitcoin for consumption purposes will then of course need to be well considered — an important feature to support sustainability, recycling or upcycling and to inhibit unnecessary (new) purchases: All certainly social behaviors that will have a positive impact in the fight against climate change.

But what about Bitcoin’s climate-damaging hunger for energy? The fact that the Bitcoin network requires energy to maintain security and process transactions is indisputable — and pure numerical comparisons are often frightening, for example that the network requires as much energy as the entire country of Norway.

Bitcoin is so “secure” (and therefore successful and accepted) precisely because — despite its digital nature — it has an inherent connection to the most primary form of our planet: energy. The fact that energy is always only transformed (from coal, from sun, from wind, …) and not arbitrarily producible, gives the network JUST when there is a lot of power consumption an almost unique security — a security of a decentralized nature, which means that no central state or organization can control so much energy at the same time … and thus cannot control the network. This energy security is the most important argument and the only real use case for Bitcoin — colloquially “digital gold” or “store of value”.

The pure view on the high power consumption is therefore only a one-sided and absolute view — relatively seen, the consumption is still “relatively” low in the face of its property. If we compare, for example, the energy consumption of the banking system (systems, servers, branches, paper money, …) or gold creation (mines, exports, storage, …) we are still talking about a fraction of that. Another truth about the myth of the “insatiable power guzzler” is that Bitcoin does not need more than a relatively small internet bandwidth and that “miners” and “nodes” (=active participants in the network) can do their work virtually anywhere in the world — and this also happens, above all, where the prices for energy are particularly favorable: For example, in Iceland. The fact that Iceland has huge “renewable” resources has made the country an important player in the Bitcoin network within a few years. In the last consequence, the Bitcoin network even causes a race to find cheap (renewable) energy. Already today, according to a study by Cambridge University, around 70% of the network’s computing power is sourced from renewable energy sources. This race stems from a simple but effective principle of Bitcoin: Active participants are rewarded with Bitcoin for the computing power they provide … but only if they are the first to succeed in a computationally intensive mathematical task in the internal network competition. Exactly for this, however, efficient computer hardware is needed in addition to the aforementioned cheap (and thus repeatedly said “sustainable”) energy. Here, the semiconductor industry — driven by demand from the Bitcoin sector — has made enormous progress. This knowledge of construction technology is also used in components of domestic PCs or smartphones, which in turn become more efficient (and greener).

Der “Stromverbrauch” wirkt absolut gesehen also hoch — allerdings ist “Energie” ein elementarer Teil zur Erzeugung von Sicherheit und Vertrauen im Netzwerk. Bei relativer Betrachtung ist die Energiebilanz sogar recht verhältnismäßig und der Bedarf wird vielfach nachhaltig erzeugt.

Conclusion

The pandemic was a good catalyst and has enormously accelerated digitalization in many areas — and interest in Bitcoin has also returned to the media spotlight, according to statistics from Google Trends. The global show of force around the containment of the pandemic will be followed by media fireworks around climate change — in tenor, the pandemic will then be (co-)justified by climate change and the population will be sworn in to a new era. A green, digital and anti-consumerist order in the center of which Bitcoin will play a decisive role. On the one hand, this deflationary system will ultimately favor the incentives to hoard (HODLn) and thus trim down the overheated consumption frenzy over the next years — on the other hand, Bitcoin’s role as a store of value (justified BY energy consumption) will play an essential role. The media smokescreens will unfortunately still spread many untruths for a supposed climate-damaging effect in the process — but this will not detract from the long-term realization that Bitcoin is an essential part of the solution (and not part of the problem).

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