My bet’s on Bitcoin

JAMES EARDLEY is a Freo resident who studied multi-media design in England before working as a graphic designer, photographer and videographer. He was also an early Bitcoin adopter and enthusiast, and in this week’s THINKING ALLOWED he says our journo’s concerns about the technology’s energy use (“Toxic transaction,” Herald, July 27, 2019) are misguided.

ONE of the most common, but misguided, criticisms of Bitcoin is it’s energy consumption.

It seems that every few months, some new report is penned stating that Bitcoin uses the same amount of electricity as a small European country.

However, demonising Bitcoin on such grounds is highly reductionist and such criticisms are more fear, uncertainty and doubt (FUD) than actual facts.

Electricity around the globe is gradually getting greener (while Australia still insists on opening new coal powered plants) and renewables technology improves every year.

The shift from fossil-fuel-intensive Bitcoin mining operations based in China to those harnessing geothermal power or hydroelectricity is clear evidence that those running the equipment to secure the Bitcoin network are keen to increase profit margins by turning to these vast, largely untapped, and ultimately renewable energy sources.

Seventy four per cent of the world’s Bitcoin mining is now from renewable sources.

Compare this to how the Federal Reserve and national banks operate.

Buildings, manufacturing plants, machinery, and many other things all need constructing and operating to create a system that enough people will trust in for it to be of any use whatsoever.

This is bad enough. However, there is a hidden environmental cost of the current financial system that is rarely considered – the cash itself. Around 7.4 billion bank notes were produced last year in the United States alone.

In 2018, US taxpayers paid $800m to manufacture US dollars, $24m to transport them, $14m for quality assurance and $7m for counterfeit deterrence

The above figures remind us that it’s a downright inefficient system.

Despite the $800m spent on just the manufacture of new money, there is still an estimated $3b in counterfeit bank notes circulating around the globe.

People rarely consider that they actually fund the very fiat system that slowly (or sometimes rapidly) depletes the value of their labour over time.

The Federal Reserve doesn’t foot the bill, the taxpayer does. By contrast, taxes don’t pay for Bitcoin miners and the Bitcoin network doesn’t need external funding.

The users and the system itself pays for the security and trust is ensured mathematically – it doesn’t need to be bought.

Bitcoin costs taxpayers nothing. There are zero counterfeit Bitcoins.

Technology gets more efficient over time. It always has. Bitcoin mining will inevitably get more efficient too, and already is, thanks to operations tapping into hydro power in Canada and geothermal energy in Iceland.

The annual consumption of power from Bitcoin mining is 8.27 terawatt-hours per year. Nevertheless, this number is actually only an eighth of what data centres in the US consume annually, and the global production of fiat currencies stands at 11 terawatt-hours per year.

Gold mining burns a staggering 132 terawatt-hours per year. What’s more, these numbers don’t even include the massive amount spent on vaults, banks, security systems and more to keep the physical cash and precious metal safe.

In fact, Bitcoin consumes less energy than its non-digital equivalents.

Let us be clear, Bitcoin cannot be stopped and it will revolutionise the way we all live. It doesn’t just solve the issue of an antiquated monetary system, run by Keynesian economists who believe that spending is the only way to a healthy economy. It will disrupt many industries; money is just the first (obvious) one.

Since abolishing the Gold Standard in 1971 the world’s currencies have been floating aimlessly, pegged to nothing and printed at will by our governments, devaluing the money in our pockets and reducing its purchasing power even further.

We need a return to sound hard money, giving financial sovereignty to the people. Separating currency from the state is revolutionary and in this digital age, when all the boomers are replaced by millennials and zoomers, my bet would be on Bitcoin.

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