It’s a given that governments dislike things that challenge their authority. Cryptocurrency, and Bitcoin in particular, is a case in point.
One of the charges thrown at crypto’s feet – aside from it being a tool of the lawless, weird, and generally unacceptable – is that it’s an energy hog that threatens to speed humanity into a climate apocalypse.
To put it mildly, that’s bunk:
One of the starkest arguments against bitcoin is based on a logically flawed argument that its energy use will increase in a linear fashion as it becomes more widely used. Critics take the total amount of energy usage by bitcoin miners and divide that into the current number of transactions to arrive at a per-transaction cost. They then project that per transaction cost into the future. “A single bitcoin transaction,” warns [Massachusetts Sen. Elizabeth] Warren, “uses the same amount of electricity as the typical U.S. household uses in more than a month.”
But this analysis is fundamentally wrong, says Nic Carter, a partner at Castle Island Ventures who has written a series of influential articles about bitcoin and energy. “They devise this per transaction energy cost figure. And then they extrapolate bitcoin’s transactional load to hundreds of billions per year.”
In fact, as the bitcoin network grows to support more transactions, it doesn’t require additional energy, just as the Federal Reserve Building’s electricity bill doesn’t increase with every ATM withdrawal. The electricity consumed by mining isn’t used to power individual transactions; it’s used to power the foundation layer of bitcoin’s monetary network, which can then be extended almost infinitely. “Bitcoin transactions and bitcoin’s energy use are not really correlated,” says Carter. “An additional marginal transaction doesn’t really add much energy outlay to the bitcoin system.”
But it’s essential to the larger narrative that anything outside the state’s direct control is evil:
Bitcoin opponents such as Elizabeth Warren are now invoking arguments that whatever size bitcoin’s energy footprint ends up being, it’s still too much. She has said that the rule-bound computation involved in bitcoin is “useless.” The claim that mining is useless is the essence of the government’s attack on bitcoin because it’s this component of the system that most directly challenges state power. The work being carried out by this global computer network is what allows bitcoin to be controlled by mathematical rules instead of human actors vulnerable to government or corporate control.
Unsurprisingly, the alternative cryptocurrencies that meet the approval of Warren and other politicians always lack this specific quality. “Bitcoin,” says Castle Island Ventures’ Nic Carter, “is a vote of no confidence in the monetary and financial system that exists today, a pretty exclusionary system where we are extremely beholden to the opinions of half dozen individuals that all think the same way.”
Carter stresses that bitcoin is based not just on a non-inflationary monetary rule but on one that is non-discretionary, meaning no central bankers or elected officials can monkey with the supply. “There’s no central banker that can come in and alter the rules and privilege one certain set of society at the expense of another. That is the core of the movement here,” says Carter.
Who benefits is beside the point. Currencies operating outside the state’s control threaten the state, and more importantly, its massive, and massively corrupt, favor factory.