Here’s why bitcoin miners won’t opt for a more climate-friendly alternative
Fewer and fewer people use bitcoins for digital payments. Nevertheless, bitcoin transactions consume more energy than ever – the same quantity like all of Thailand. With a carbon footprint equivalent to that of the Czech Republic (about 114 million tons per year), bitcoin negates other climate gains.
Global adoption of electric vehicles, for example, is estimated to have avoided 50 million tonnes of CO₂ so far. That’s less than half of bitcoin’s issuance for a single year. And the problem is getting worse. The growth of bitcoin mining powered by fossil fuels outpaces greener alternatives, driving bitcoin’s carbon footprint to inflate fivefold in just two years.
But, according to campaign groups green peace and the Environmental Working Group, all of this can be easily fixed with a simple bitcoin software update. Their campaign, called Change the code not the climatelaunched recently and calls on Bitcoin software developers to transition the network from its currently useless transaction verification system to a more climate-friendly alternative.
The switch, they pretend, would reduce bitcoin’s carbon footprint by 99.9%. But that’s unlikely to happen soon – and here’s why.
Proof of waste to proof of stake?
Bitcoiners do not trust bankers, tax specialists and other intrusive intermediaries. Because there are no banks with bitcoin, the task of keeping the books in order is entrusted to a worldwide network of specialized computers. Owners of these computers compete for accounting duties in exchange for transaction fees paid by network users. They also receive some newly minted bitcoins as a thank you.
This competition is known as Proof of Work (PoW) mining. It works like an ever-expanding game of hungry hippos. The more players that join the contest, the harder each hippo has to work to win anything. If a new hippo with green intentions joins the game, everyone at the table has to work harder. Players powered by coal in Kazakhstan or fossil gas in Texas, then spit out additional smog.
The higher the price of bitcoin, the more dirty hippos are willing to waste coal and gas until their costs equal their reward. So, proof-of-work is proof-of-waste. And it’s wasted on purpose: Bitcoiners call this inefficiency “the feature, not the bug”.
Greenpeace hopes the bitcoin community can learn to love proof-of-stake (PoS) instead. With the network running on PoS, bitcoin accountants would have to stake a prescribed minimum number of bitcoins as a security deposit. If they validate fraudulent transactions, they lose their bet. This deterrence keeps the network secure.
A number of blockchains, including Cardano, EOS, and TRON already use a PoS system, where token holders vote for the most qualified block producers. While bitcoin currently uses millions of mining computers, these PoS networks typically maintain a cluster of around 20 machines using a relatively tiny amount of power, taking turns to receive accounting rights.
For bitcoin, coding these changes would be straightforward. Greenpeace says only 30 people — the biggest mining companies, exchanges like Coinbase and Binance, and code developers — would need to agree to the switch to PoS.
But that ignores the fact that everyone would need to run the upgraded software. On average, to successfully mine bitcoin once a week, it takes paying around US$1.8 million (£1.4 million) on hardware. Most miners are protective of these investments and cautious about modifying the software code that secures their earnings.
For this reason, Chris Bendiksen, a commentator on cryptocurrency website CoinShares, estimates the probability of Bitcoin switching to PoS to be 0%. “There is no appetite among Bitcoiners to destroy protocol security by making such a move,” he says.
Bitcoin is no stranger to coding dead ends. An amendment to address intermittent congestion issues and stabilize transaction fees has been proposed in 2016. While a relatively simple fix, the change has divided the bitcoin community, with the vast majority continuing to support the slower and more expensive status quo.
Even if some users were willing to give up PoW, the original bitcoin network would continue in one form or another. This PoW version would retain the PoW name, branding, super rich followers and polluting miners. The PoS offshoot could end up as another disappointing experience.
Fight against crypto greenwashing
Many Bitcoiners mocked to the Greenpeace campaign. After all, much of the financing of this marketing mission comes from billionaire venture capitalist Chris Larsen, co-founder of cryptocurrency rival Ripple.
Larsen’s Ripple was also an original member of the UN-backed Crypto Climate Accord, an organization convened in April 2021 to promote more sustainable cryptocurrency trading. In response, prominent bitcoin advocates created the Bitcoin Mining Council – a public relations group aiming to “defend bitcoin against uninformed and hostile energy critics,” like Larsen.
Retaliation campaigns bitcoin advocates are on the rise and their greenwashing seems to be winning. The European Parliament has recently rejected an invoice to ban PoW mining across the EU. The British government has also fears an exodus of crypto trading talent to other financial hubs.
Research I led to suggest that effective regulation of bitcoin will not come from appeals to charities. A globally coordinated ban, led by governments, is likely to prove the most effective solution.
This article from Peter Howsonlecturer in international development, University of Northumbria, Newcastle is republished from The conversation under Creative Commons license. Read it original article.