The Power of Rationalization or why Bitcoin stays a ⚡ hog

MVP, the Minimum Viable Product: you’re laser focused on solving one problem. Everything else is just a distraction. In regards of Bitcoin, the focus is clear: in 2007 our centralized monetary system had quite spectacularly crashed. Total doom was somewhat averted, some monetary were band-aids applied. And seemingly out of the blue falls a software protocol, which jumpstarts the Internet of Money from zero to 10.000 BTC for 2 pizzas to a multi trillion USD market.

4 years after the notorious pizza deal (with roughly 500 USD per BTC now worth a very nice 2 bed room apartment in Manhattan), I had a first look at BTC’s already notorious consumption of energy. Back then, 0.13 nuclear power plants were necessary to feed BTC’s Proof of Work consensus. CPU mining was already a thing of the past, Ethereum still on the drawing board, and Proof of Stake as a less energy hungry consensus model even more unproven than PoW back then.

Where are we now? Here’s the pizzas’ post crash valuation in June 2021. Think something between a fleet of super yachts, a sizeable island archipelago in the Caribbean, or a pre-owned space station.

So what about the power necessary to run the network? Ah, well …


https://hbr.org/2021/05/how-much-energy-does-bitcoin-actually-consume

Yes, this certainly sounds like a lot of energy. Or, in other words: it is. And, for the time being, will be. In a bit of a distant future, harvesting energy will be a virtually free commodity. But until then, energy conservation is where we’re heading. Because saving energy is a much quicker win.

Meanwhile, Harvard Business Review reiterates some of the standard arguments of some vocal Bitcoinistas. Mining uses more greener energy than average and its worth it anyways. Finally, the piece ends with a slight finger wagging:

What’s missing here? The alternative. While Ethereum is preparing for the big switch towards PoS, and newer chains like Cosmos, Polkadot, FLOW are live with PoS since their Genesis, the Bitcoin universe seems eternally stuck in its rationalization of being a massive stinker.

There’s three main line of arguments you might encounter:

  1. BTC is much greener than you think. And it’s even an incentive to invest into a green future.
    Let’s call this the Happy Rainbow Fallacy.
  2. Man made climate change is not a thing anyway. Therefore: nothing to worry about, please move on.
    This may be called the I am Right and You are Wrong syndrome.
  3. It’s worth it (and gold, FIAT etc use MUCH more energy).
    Here weg go: Whataboutism meets Low Self Esteem.

The Happy Rainbow at least kind of acknowledges that something may be off here. Yes, we use a lot of energy. But at least compared to let’s say the US average, the CO2 output is much less. Because many miners use green energy. That’s all very fine of course. But let’s put it like this: BTC are not the only scarce commodity. So is clean power equipment. Therefore, every green coin W/h equals a coal plant not converted yet. But hey, look here, the sky is pink and filled with winged unicorns.

I am Right and You are Wrong is an integral part of the fact free universe of climate change denialism, closely related to the “THERE IS NO VIRUS” plandemiacs and the chemtrail survivalists. If you listen to some of the godfathers of coinage, you get an idea that being a brilliant mathematician doesn’t prevent you from becoming a racist blubberhead on other affairs and unfortunately this kind of meme-DNA seems quite prevalent in the space.

Whataboutism meets Low Self Esteem. Yes, we know: the gold is DIRTY by default and what’s to love about the financial system. But maybe you didn’t get the question right? It’s not about the question “is BTC useful enough to put xyz extra tons of CO2 into the atmosphere” but “how do you plan to reduce your carbon footprint”.

Basically, all three line of arguments are based on is the following assumption: there is no alternative to PoW. Let’s not get into the religious wars around the technicalities of the issue. It’s not the year 2007 anymore and there had been quite some learnings and deployments.

But, unfortunately, a range of monetary iconoclasts of yesteryear have turned into functional conservations in regards of the vehicle they’re massively invested in, time- and moneywise.

This purely defensive position comes at a price.

The ESG Dilemma

How is startedHow it ended
When you value your company higher than your crypto holdings.

Bitcoin positions itself as Digital Gold, an immutable store of value, an investment asset where more and more institutional investors are moving in. But some institutionals are a bit hampered here. More and more legislation is now paving the way to funnel money into crypto assets. But the E in ESG (Environment, Social, Governance) is gaining much more weight as well. So being the unapologetic energy hog might be a bit counterproductive.

It’s just like why Musk did flip flop on BTC for TSLA. When the dirt coin story clashed with TSLAs clean knight in shining armour image, Elon became a Tesla-maxi.

Yes, being an unapologetic stinker is bad for business.

OPEX

Not to forget: energy is a cost factor as well. If you are a true monopolist by default (A.K.A. a true Bitcoin maximalist), OPEX is almost irrelevant. In any other line of business, it’s either you move it down – or you will be moved out.

Regulatory Achilles’ Heel

If you don’t clean up your act I tax you out of the game and here’s our CO2-neutral centralized Central Bank Digital Currency to play with.

But that’s the wheel of life: successfully rationalization away your weak points will be your final weakness.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s