Bitcoin is being used for digital payments by fewer and fewer people. Despite this, bitcoin transactions consume more energy than ever before, equaling the total energy consumption of Thailand.
Bitcoin is canceling out other climate wins with a carbon footprint equivalent to the Czech Republic (around 114 million tons per year).
Electric vehicle adoption, for example, is estimated to have saved 50 million tons of CO2 to date. For a single year, that’s less than half of bitcoin’s emissions.
And things are only getting worse. Bitcoin “mining” powered by fossil fuels is outpacing greener alternatives, resulting in a five-fold increase in bitcoin’s carbon footprint in just two years.
However, according to Greenpeace and the Environmental Working Group, all of this can be easily remedied with a simple software update to bitcoin’s software.
Change the Code, Not the Climate is their new campaign, which urges bitcoin software developers to switch the network’s current wasteful system for verifying transactions to a more environmentally friendly alternative.
They claim that switching would reduce bitcoin’s carbon footprint by 99.9%. But it’s not going to happen anytime soon, and here’s why.
Proof of Work mining
Bitcoiners distrust bankers, tax collectors, and other middlemen. Because bitcoin has no banks, the task of keeping the books straight is delegated to a global network of expert computers.
In exchange for the transaction fees paid by network users, the owners of these computers compete for bookkeeping tasks. As a thank you, they get a few freshly minted bitcoins.
Proof of Work (PoW) mining is the name given to this competition. It works like a game of hungry hippos that keeps growing.
The more people who enter the contest, the more work each hippo will have to put in to win anything. Everyone at the table will have to work harder if a new hippo with good intentions joins the game.
The higher the bitcoin price, the more coal and gas the dirty hippos are willing to waste until their costs and rewards are equal. As a result, Proof of Work is waste proof. Bitcoiners refer to this inefficiency as “the feature, not the bug.“
Instead, Greenpeace hopes that the bitcoin community will come to appreciate Proof of Stake (PoS). With a PoS network, bitcoin’s bookkeepers would be required to stake a minimum number of bitcoins as a security deposit. They lose their stake if they validate fraudulent transactions. This deterrent helps to keep the network safe.
A PoS system, which allows token holders to vote for the most qualified block producers, is already in use on a number of blockchains, including Cardano, EOS, and TRON.
While bitcoin currently employs millions of mining computers, PoS networks typically employ around 20 machines that consume a negligible amount of energy and take turns receiving bookkeeping rights.
Addressing crypto greenwashing
The Greenpeace campaign was ridiculed by many Bitcoiners. After all, billionaire venture capitalist Chris Larsen, co-founder of rival cryptocurrency Ripple, is funding a significant portion of this marketing campaign.
Larsen’s Ripple was also a founding member of the UN-backed Crypto Climate Accord, which met in April 2021 to promote more environmentally friendly cryptocurrency trading.
In response, prominent bitcoin supporters formed the Bitcoin Mining Council, a public relations organization that aims to “defend bitcoin against uninformed and hostile energy critics” like Larsen.
Some assert that European and North American governments should follow China’s lead and prohibit PoW mining.
Bitcoin supporters’ retaliatory campaigns are intensifying, and their greenwashing appears to be working. A bill to ban PoW mining across the EU was recently rejected by the European Parliament.
The UK government is also concerned about a talent exodus of crypto traders to other financial centers.
According to a study, effective bitcoin regulation will not come from charity appeals. The most effective solution is likely to be a globally coordinated ban led by governments.