Bitcoin is the poster child for the cryptocurrency movement, though it has many young siblings. Such currencies are an interesting case study in an inconsistency of modern thought; a juxtaposition or intersection of two new generations of thinking running off into the wild blue yonder, one taxing the proven energy infrastructure system with a voracious and growing appetite, while the other line of new-age thinking is trying to dismantle that very energy system.
We’ll focus on Bitcoin here because it’s the current heavyweight. Bitcoin was apparently created by someone named Satoshi Nakamoto, with an asterisk – the person may or may not exist. No one’s ever met him/her/them. Bitcoin took off after a 2009 white paper written by the tech-savvy poltergeist, and if you’re not a believer, here’s a burn for you from Mx. Nakamoto’s self: “If you don’t believe it or don’t get it, I don’t have the time to try to convince you, sorry.”
Regardless, I will remain in my court jester suit whenever discussing Bitcoin, and if you don’t like that, I don’t care. I don’t have to understand the whole weird structure (such as only 21 million Bitcoins will ever exist, 18 million have already been mined, and each new one gets harder to mine) to study the impacts. Bitcoin is the most visible symbol of cryptocurrency, which is often considered synonymously with blockchain, a ledger that records all transactions sequentially in an ever-growing chain. As you can imagine, as that chain grows in size, and as transaction volume increases, that ledger becomes a beast, which is particularly relevant for something like Bitcoin where ledgers are updated with every new transaction in the world (supposedly every node on the blockchain web is updated simultaneously for each transaction, which makes a mockery of the word “simultaneously”). Anyway, given the increased popularity of Bitcoin, the energy consumption to achieve this hocus-pocus is getting to be something else.
Take, for example, some semi-recent news (2019, which seems like a lifetime ago) that Bitcoin now consumes as much power as Switzerland. Big deal, you might say, Switzerland isn’t a world-class energy hog. We all know that Switzerland’s economy primarily consists of bankers – tiny, ill-tempered, dwarf-like creatures with pointed ears and teeth, and noses so long they droop from gravity. Oh, wait, sorry, that was Harry Potter’s bankers. What do they do in Switzerland again…Anyway, Switzerland, for a small country, does a lot of stuff, and its power requirements are not insubstantial at 58 Terawatt-hours per year. What’s a Terawatt in real terms, you might ask, and I’d say I have no idea, except that this total places Switzerland firmly in the top 50 global energy-consuming countries.
Furthermore, that was 2019 data. A Bitcoin tracking website maps out current estimated power usage in real-time and shows a present Bitcoin energy consumption rate of about 90 TWh per year. That is a staggering growth rate in a single year. If Bitcoin were a country, that power consumption level would make it the 35th largest. And as Bitcoin’s value grows, that power consumption number grows as well.
For what the world is getting from Bitcoin, its emissions footprint is massive – about 22 Megatonnes of CO2 per year. For reference, in 2018 the oil sands produced about 83 Mt of CO2, including upgrading (60 Mt without). Before getting too cranked up about the evil of the oil sands number, remember that oil sands output is about 3 percent of total global oil output, which is not insignificant. (And if you hate the oil sands, there are no statistics that will soothe you, so get lost.)
And what exactly is the world getting from Bitcoin mania? Pretty much nothing, for all that power. Per the BBC story, Bitcoin transactions are about 100 million per year, and the global financial system currently oversees 500 billion transactions per year.
Consider the implications of those numbers for power consumption and Bitcoin’s growth rate. Bitcoin processes .02 percent as many transactions as the global financial system and consumes more power than all but 34 countries on earth. What would the energy consumption look like if Bitcoin transactions made up 1 percent? Would Bitcoin energy consumption increase by 50 times? Well, if it even tripled, Bitcoin energy consumption would vault it to #13 in the rank of nations energy consumption, right beside Italy. If tripled, Bitcoin emissions would exceed that of oil sands production, and, assuming linearity, would still only account for .06 percent of financial transactions globally. And remember, Bitcoin’s energy consumption went from 58 TWh in 2019 to 90 this year.
From an emissions perspective, the kind that activists get apoplectic over, this is a train wreck of epic proportions. Imagine, in this day and age, introducing an imaginary currency with an apparent target market of dark web criminals and organized crime (a nice bunch that would greatly appreciate a currency that governments can’t do anything about, or track), with no redeeming social justice benefits of any sort whatsoever; one that creates a massive environmental footprint for no gain whatsoever; and one whose freewheeling ways will crash like a home-made jet the second it infringes on any government’s monetary policy. Of all the environmental progress and posturing that’s gone on in the past twenty years, Bitcoin has to be the most profoundly absurd, and yet its energy-swilling growth creates not even a Twitter-bashing from the activist crowd.
By the way, there needs to be some refinement of terminology. All currency is crypto these days, or at the very least digital. When was the last time you went home with your pockets stuffed with a freshly cashed paycheque? We don’t even get to do those street happy-dances that can’t be avoided when you find ten bucks on the ground. Cash machines are becoming relics, and no one wants cash anyway. I tried dumping a handful of dimes and nickels into a C-Train ticket machine and it threw them back at me, the little electronic message window asking if I was some sort of a smartass. I think. The global economic system would cease to function if money was a tangible asset. Negative interest rates, now the hallmark of some $17 trillion of global debt, wouldn’t exist in a world where currency was not electronic. Any transaction of any magnitude is electronic. You’ll buy a house and pay for it without ever handling a single dollar.
Anyway, Canada’s, and many other, governments are getting into the spirit, and pioneering a brand new currency. Let’s call it Grantcoin. Grantcoin is money conjured from nowhere, to be handed out to anyone that does anything that is geared to Canada’s climate pledges. As one market player noted, “As long as someone is investing in something positive, that’s the baseline.” Build it, and money will flow. Announce plans to build anything green, anywhere, and you will be up to your ears in Grantcoin before the angels stop singing. New, imaginary, money from nowhere. I’m not saying all the funded projects will be bad or ill-conceived – many will be fantastic, like methane reduction and tree planting programs. What is ludicrous though is the indiscriminate money-shovelling, a prime reason that Catherine McKenna has coughing fits and fainting spells when asked to account for billions in infrastructure spending. The second and third-order implications of many initiatives, together with the hamstringing of some basic industries (at the same time that many parts of the world are fortifying their own versions thereof, as in Russian/Middle Eastern oil production) are not mapped out or understood, and our federal politicians are utterly incapable of building a strategy that maximizes each region’s strengths. They could do that, but no one at the UN cares, so they don’t.
So where are we…mysterious new currencies are being invented by whoever wants; these new currencies intersect with reality only in terms of massive energy consumption; cryptocurrencies will drive up energy consumption at warp speed at the same time that Grantcoin is trying to drive down consumption elsewhere. We are creating money out of thin air to throw at anything that is deemed to be “good”, unencumbered by outdated economic consequences like efficiency or rate of return (if we were truly interested in reducing global CO2 levels, we’d be shouting from the rooftops, insisting the rest of the world convert from coal to natural gas, and the feds would be building 5 natural gas pipelines to the west coast to send to China, and they’d subsidize those gas sales to stop China from building a planned 250 GW of coal-fired power (yes, that’s how much is under development, and for context, in 2020, the US will add 20 GW of wind and solar in what has been a very strong year for that), and global emissions would be reduced just as the US did by switching to gas from coal, but that’s not deemed “good”). I can’t imagine what sort of tortured thought processes are required to reconcile those two trajectories, but then again I don’t hang out in Ottawa much.
There are good things on the horizon, like if Canada does plant 2 billion trees and if our fuel-providing companies are allowed to utilize such programs to help offset emissions. We will have to see on that one. As it stands now, Canada is hoisting a brave new flag into a very stiff north wind. Some people will be asked to hoist that flag for photo ops, to show the world the good we’re doing, and some will be asked to lick the pole, to show the world we’re making the bad guys pay. We are living through a new Soviet-Monty Python-Greenpeace time; fight it as you wish but as long as Canada’s political nerve center remains dedicated to international acclaim and not energy enlightenment, it’s all you’re gonna get.
If they don’t find it under the tree, you’re gonna hear about it…Pick them up a copy of “The End of Fossil Fuel Insanity” at Amazon.ca, Indigo.ca, or Amazon.com. Thanks for the support!
Read more insightful analysis from Terry Etam here, or email Terry here.
Featured image source: Coin Companion
