Can We Measure Bitcoin’s Impact on the Environment?

0:01This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18+. lululemon's new drop of daily essentials feels like a deep breath of fresh air breezily is a collection of drapey pants shorts and tanks designed to mix and match with your wardrobe as the weather warms up it's all made in our lightweight stretchy swift fabric throw on these everyday staples after practice and bring an airy feel to your daily moves shop the breezily collection now at lululemon.com what does bitcoin have to do with the environment There are so many articles these days and headlines and tweets about Bitcoin as this environmental hazard.

1:01Elon Musk is tweeting about it. The price of Bitcoin is falling. There are so many things happening around Bitcoin right now. The whole thing is kind of confusing to me. It's kind of hard to wrap your head around what this digital Internet object, what does this have to do with like trees and the ocean and the environment? Like, where is this overlap happening? My big picture question here is exactly how bad for the environment is Bitcoin? This is a really hard question to answer and in order to unpack it and get a little bit of a better sense of what is going on here, I called up Nick Carter.

1:34He is a founding partner at Castle Island Ventures, which is a firm that invests in cryptocurrency infrastructure. He's thought about this a lot and he even wrote an article for HBR recently about this very topic. Nick's going to give us his take on how exactly Bitcoin consumes energy. you know, can we really measure its impact on the environment in any precise way? And what can we do to make this whole crypto industry more sustainable? Could you start, Nick, by explaining to me the relationship between Bitcoin, this digital object and the physical world? Yeah, that's a great question. Bitcoin basically works by making the ledger entries costly.

2:09To create a new entry to that ledger, you have to prove that you have incurred a genuine computational cost. Because this is actually a very considerable computational cost, it means that there are physical costs associated with that. So energy to power the computation. And that's where the real world comes in. That's where mining comes in. What does that actually look like in the physical world? Well, miners basically draw energy from the grid or from even non-grid sources. and they power these machines that are called ASICs, application-specific integrated circuits. So these are rectangular machines.

2:51They're kind of this size. Typically miners mine at scale. So imagine shipping containers full of thousands and thousands of these machines stacked next to each other. They are doing a single piece of computation over and over and over again. The machines are incredibly loud. So if you've ever been to a mine, it's this high-pitched, deafening wine. So it's incredibly unpleasant, really, to actually have, you wouldn't want to mine in your living room. The vast majority of Bitcoin mining operations are industrial. They'll be drawing several megawatts of power. They will be in typically big warehouses, and they'll pull in fresh air, run them through the miners, and then vent this hot air out the other side.

3:40And so it becomes a heat management problem. And then, of course, you have to have a predictable energy source. It sounds like my laptop sort of in the middle of the workday, just overheating and being super loud.

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4:38Find Oli Sleep Solutions for the whole family at Oli.com. That's O-L-L-Y dot com. Except, you know, like 130 decibels kind of thing. Yeah, almost like an actual mind in some ways. Can you explain to me the controversy kind of around Bitcoin as it relates to the environment? Bitcoin produces this budget to miners of around$20 billion annualized. Miners will burn a lot of real world resources to acquire those Bitcoins. It's a competitive free market. And this manifests in the consumption a lot of energy in real world terms. this means that Bitcoin itself has grown to consume probably a third to a half a percent of the world's total electricity production.

5:32What other industry is comparable to Bitcoin in terms of energy spent? I would say it's in the same league as, for instance, the resources and energy apportioned to the extraction of gold, for instance. Bitcoin actually might be slightly higher now. When it comes to this kind of growing concern about Bitcoin as it relates to the environment, where do you think that the discourse is lacking right now or needs to be a little bit more nuanced? Yeah, I think it's totally legitimate to be concerned about Bitcoin's energy footprint and its carbon outlay. The discourse, I think, has been weak. and in particular it's been plagued by these simplifying assumptions.

6:19So for instance, it's kind of not that difficult to determine Bitcoin's actual energy outlay. But then to go from energy consumption to carbon emissions, that's a real difficult challenge, right? Because you have to determine what kind of energy sources are being used to produce the electricity. There's a lot of uncertainty involved in that. We don't really know where all these miners are operational. We know a good chunk of them are in China. If you actually look at the four provinces where mining is popular, two of them are very coal-powered, two of them are very hydro-powered. And so there's considerable heterogeneity.

7:01We know that Bitcoin mining accumulates in these places where there's an excess or stranded energy, like Sichuan and Yunnan, where there's very abundant hydro resources, which are otherwise not reaching the grid. So there is a lot of malleability in terms of the energy mix the miners are using. And that is the thing that you have to triangulate to guess at the actual carbon output, the climate externality of the system.

7:34Do you think that a lot of the criticism around this issue is stemming from like a fundamental skepticism in Bitcoin's value? When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero?

8:13This is a job for Indeed sponsored jobs. This episode is brought to you by State Farm. Listening to this podcast instead of doom scrolling? Smart move. Another smart move? Getting help from one of State Farm's 19 ,000 local agents when you choose to bundle home and auto. Bundling, just another way to save with the personal price plan. Prices are based on rating plans that vary by state. Coverage options are selected by the customer. Availability, amount of discounts and savings, and eligibility vary by state. The fact that, you know, maybe some critics don't believe in its value in the real world, and so any amount of energy consumption is too much.

8:53Absolutely, yes. I mean, there's plenty of industries that consume a lot of energy that critics of Bitcoin take advantage of. But the reason they're sort of okay with that energy outlay is because they see the utility of that system. So everyone's pretty much okay with the existence of air travel because they take advantage of it, even though it has a gigantic carbon footprint. Now, Bitcoin is this dematerialized thing that is not tangible and it's not even really perceptible. What is the utility of Bitcoin that critics of it aren't seeing in your view? So Bitcoin is relevant to the extent that your local monetary and financial system doesn't function that well.

9:42So in the US where laws are respected, where we have extremely stable capital markets, where the currency isn't actively being debased that much. People aren't as worried about the confiscation of their wealth, either explicitly or through inflation or debasement. That's only a small fraction of the world. Most of the world's population actually does live in a largely inflationary or authoritarian environment. They might deal with capital controls. They might deal with expropriation with a banking system that doesn't work. or a bank system which is plundered by the government from time to time.

10:24These issues that Bitcoin is designed to abate.

10:32You did acknowledge at the top of the conversation that the environmental concerns are legitimate and it's just a matter of getting more precise about the carbon footprint of Bitcoin. What changes would you recommend? As far as the industry itself, I think Bitcoin miners should engage in self-regulation and disclose the nature of the energy that they're using. I think as we're seeing this transition from largely unaccountable Chinese miners to more accountable U.S.-based miners, we actually will see more of this because U.S. capital markets are increasingly coming with sort of political and ESG dictates.

11:19And as a consequence, I think we will see these US miners being more proactive in terms of disclosure. You can reconfigure your grid to produce abundant renewable energy, which I think should obviously be the end goal of all of this. Bitcoin consumes the energy that's available to it. And if those energy sources are, you know, non-renewable, I think we should be thinking more carefully about the grid itself, as opposed to trying to stigmatize certain uses of energy. Ultimately, the climate crisis goes far, far beyond Bitcoin. It's more of a question of, can we construct and arrange the grid in such a way that we're producing abundant green energy?

12:05And that's not ultimately a Bitcoin question. That's just a societal question. Nick, thanks so much for chatting with me today. This has been really helpful. Thank you. My pleasure.

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