Flipping Proof-of-Work’s Energy Consumption Narrative

CoAuthored by Matt McKibbin of Decentranet and Timothy Lewis of Atlas Cloud Enterprises and DNA Fund

Ask a layperson about their feelings on bitcoin energy usage, and you’re likely to get one of two strongly-held opinions:

On one end, folks who may think of themselves as optimists consider mining energy costs as minimal as America’s Christmas tree light usage.

On the other, self-styled realists insist bitcoin mining is using more energy than the entirety of Ireland, and left to grow rampantly, will be responsible for environmental apocalypse.

Image courtesy of Bitcoin Magazine (Table last updated February 26, 2017)

However, the energy that powers mining isn’t going to ruin the planet. In fact, more mining could save it.

By incentivizing the mass usage of cheap, clean power, mining can stimulate the growth of a more sustainable and efficient energy-production infrastructure.

Satoshi Nakomoto’s first gift to society was disintermediating centralized banks and financial institutions.

Their second gift is incentivizing clean, sustainable energy production — which will help our planet stick around for a little bit longer.

An Upswing In Sustainability

Bitcoin mining, like all other economic activities, is subject to fundamental economic laws of supply and demand. As the price of energy goes down, the cost of production of bitcoin through mining increases, increasing supply. As interest in cryptocurrencies rises, entrants both old and new placing new demand in bitcoin increases its price. It stands to reason a decrease in production costs will correlate directly to increased usage.

Consider Moore’s law, named after Gordon Moore, co-founder of Fairchild Semiconductor and Intel, which predicted innovations in computing that ultimately spurred the consumer electronics revolution as far back as 1965. Since then, the number of transistors in a dense integrated circuit continues to double approximately every two years. The increased speed of these digital electronics resulted in technological and social change, productivity, and economic growth.

In addition, Swanson’s law observes that the price of solar photovoltaic modules — AKA solar panels — tends to drop by 20 percent when demand doubles. At present rates, costs halve about every 10 years.

And now, according to a new report from Bloomberg, “the cost of installing solar panels at big solar farms and on rooftops will drop 60% to an estimated average of around four cents per kilowatt hour by 2040.”

Image via Wikipedia

As a result, it’s predicted that 15% of the world’s electricity will come from solar panels by that same year.

A Bounty on Clean Energy

Overall, wind and solar are now the cheapest forms of energy on the planet. Geothermal and hydroelectric are also becoming more popular — with the added bonus that users don’t need to deal with storage issues.

Image courtesy of R Street

So how do these changes in our energy sector connect to cryptocurrency? Through mining: green energy is simply more cost effective. Cost effective equals lower energy production costs. And lower costs means more money.

For miners, that’s a big deal.

Electricity can be 30–70% of their total costs of operation. Therefore, it stands to reason that they would want to use the cheapest energy available on their quest for the $200,000 bitcoin bounty.

We feel that the bitcoin revolution could ignite a surge of innovation in the clean energy field. But don’t take our word for it. As Bill Tai says in a Medium post:

“A virtuous cycle is beginning. The more electricity that is needed at scale, the clearer it is — that green is the best economic alternative. As such, the more likely it is that incremental energy production infrastructure that will be built going forward MUST be green to be competitive, and that these new sources of electricity will provide cheaper energy for all consumers across all uses.”

In fact, this shift is already happening.

According to Bitcoin Magazine, one miner moved their entire GPU farm across the U.S. because the hydroelectric power in the Pacific Northwest was cheaper. On the other side of the world, miners take advantage of the plentiful geothermal and hydraulic power of Iceland. Sure, these might not be the most exciting places to live — but the savings make up for that.

Mining Moving Forward

One issue with green energy is that it’s harder for storage batteries to hold. Extra energy typically dissipates or isn’t stored properly. Yet with bitcoin, that excess can go towards mining and building a larger energy infrastructure.

The timing is perfect, because the energy grid in the United States is pretty unstable at the moment. Large sections are taken down at once, and the entire system is hackable. Increased mining means that the grid will start to become less centralized — and therefore more stable.

In fact, decentralized energy communities already exist. In some areas, trash from overflowing landfills is being converted into power. That waste energy is supporting the community, and the excess goes into maintaining the worldwide financial ledger.

Essentially, those people are burning garbage to create money. Magic.

Well, what if a town is setting up solar panels? Do they start their own mining facility next door? Believe it or not, there’s an easy starting point. P2P energy production for solar is made possible with companies like Powerledger, which empowers consumers to trade electricity with each other.

The Sun Exchange is another option in Africa, which gives free energy installations for solar panels. Users can channel the excess energy into mining.

As these industries grow closer, more options will pop up — creating ample opportunity for individual entrepreneurs.

The Gift That Keeps On Giving

If the upward swing in green energy usage continues, we predict that coal and fossil fuels will become a thing of the past. Instead, global energy production infrastructure will be built for clean fuels. The reason isn’t just because it’s the right thing to do. In reality, it’s because they’re more cost effective — which is exactly what makes this change sustainable, and creates a compelling incentive to make the sometimes painful switch.

Since money talks, we believe that there will be massive growth in efficient energy production. It’s simply economics.

Want a future where the norm is clean energy?

Hop on the bitcoin bandwagon.

Shout to Timothy Lewis for coining the phrase, “Satoshi’s Second Gift”