Bitcoin is actually a bargain

Henry

By Frank Karsten

“I’m not lazy, I’m energy efficient,” people sometimes joke. Bitcoin is the opposite of lazy and critics often complain about its high energy consumption.

It is estimated that all Bitcoin computers consume about 0.5% of the total electricity in the world, equivalent to the entire Swedish consumption, or all tumble dryers in the world. It is indeed a lot, but on closer inspection it turns out to be quite cheap.

Bitcoin’s energy consumption is not meant to be wasted. This is a deliberate way to keep the so-called Bitcoin miners in the system honest – these are the ones with computers who carry out the transactions and create new coins. The software is designed in such a way that a fraudster will have to invest a large amount of energy to falsify transactions. It has worked very well so far and no cheats have been successful so far.

Although Bitcoin is not a business and not for profit, today it is mainly commercial companies that mine Bitcoin by managing thousands of computers.

The total energy consumption is high, but about half comes from renewable sources. For example, the Russian company BitRiver is located right next to a hydroelectric power plant.

The special thing about miners is that they can do their work anywhere in the world, because they only need an internet connection in addition to energy. Because energy is such a large part of their total costs, they go to places where energy is cheap or where there is a surplus.

Energy suppliers usually produce more electricity than is needed because they cannot accurately predict demand. Bitcoin miners use those surpluses in exchange for favorable rates. For example, they inadvertently help stabilize the electricity grid.

They also utilize energy that would otherwise be wasted.

But in the end, the real question is whether Bitcoin costs more energy than fiat currencies like the rand and dollar. The rand and dollar were created by central bankers who simply type numbers into a computer. It requires virtually no energy. But the consequences of this “soft money” are extremely detrimental.

Central banks therefore keep interest rates artificially low and pump extra money into the economy. As a result, entrepreneurs borrow more than they normally would and invest it in things that are usually not very profitable at all. The result is an enormous misallocation of production resources, which is bad for both people and the environment.

Moreover, this artificial stimulation of the economy causes so-called ebb and flow cycles, where the economy expands enormously, only to collapse again.

Because fiat money allows governments to create money out of thin air, they can finance the most harmful things without raising taxes or borrowing. They can bail out reckless banks, finance foreclosures and wage wars for billions.

In the past, when countries still operated under a hard gold standard, a war party would step to the negotiating table as soon as the money ran out. But because countries can now print unlimited money, they can keep throwing bombs and grenades. The bill is paid by the citizen, who is faced with constantly rising prices as a result of this money creation. Hard money, like gold or Bitcoin, cannot be produced out of nothing. So it is a way to speed up peace.

Bitcoin brings a lot of good to the world. Because it is more stable in value than fiat money, it encourages people to save for hard times and thus provides them with financial independence. This ensures that governments waste less money and that the economy experiences fewer high peaks and deep valleys. This causes prices to fall instead of rising.

Bitcoin does indeed consume a large amount of energy, but it is ultimately much more efficient and environmentally friendly than the rand, dollar or euro. Hard money stimulates efficiency and fiat money stimulates an energy waste that is surely more than 0.5% of world consumption. So Bitcoin is actually a bargain!

  • Frank Karsten is the author of The Discrimination Myth (discriminationmyth.com) and co-author of The Democracy Beyond (beyonddemocracy.net).
  • Frank Karsten is the author of The Discrimination Myth (discriminationmyth.com) and co-author of The Democracy Beyond (beyonddemocracy.net).