Bitcoin’s growing energy problem: ‘It’s a dirty currency’
Think BTC is a Dirty Business? Consider the Carbon Cost of a Dollar
Bitcoin is coming under fire - again - for claims that Bitcoin mining is negatively impactful to the environment and Bitcoiners have to again, defend Bitcoin's share of global energy production. But before we discuss more on Bitcoin's carbon footprint, we must first take a look at its current best alternative - the US dollar or some like to call it - the PETRODOLLAR.
How The Petrodollar Came To Be?
- After the Vietnam War, the US was facing mounting inflation and their extravagant domestic spending habit wasn't helping at all either. So in the 1970s, President Nixon decided to default on the Bretton Woods agreement and end the convertibility of U.S. dollars into gold
- Meanwhile, in 1973, a war broke out between the Arab states and Israel. USSR was backing the Arab states while the US was backing Israel which made things really ugly
- The Arab states were pissed and caused OPEC to halt oil shipments to the US. As a result, the price of oil quadrupled and aggravated inflation and unemployment in the US
- In 1974, the US managed to strike a deal with Saudi Arabia to denominate oil prices in US dollar which laid the foundation for the Petrodollar
The Petrodollar Deal: Petrodollar Recycling
- The Saudis agreed to price oil in dollars and reinvest those dollar proceeds in US Treasuries - The global demand for the dollar increases which drives up its value
- In return, the Saudis would get preferential rates on purchasing US Treasuries and also advanced weapons and technologies from the US
- Since most oil-importing countries use US dollar to purchase oil, the US gets to call the shots on global trade and they can print as much money as they want without worrying about hyperinflation because there will always be a global market for dollars (for now)
The Carbon Footprint of USD
- While it's pretty much impossible to know the carbon footprint of USD, we do know that the US military is one of the main pillars in maintaining the dollar's reserve currency status
- The US military is the world’s largest institutional consumer of oil, using more than 100 million barrels per year for its ships, vehicles, aircraft, and various ground operations
- This generates the equivalent of 59 million tonnes of CO2 emissions
- There's also a carbon cost of running the global banking system, eg keeping the office lights on, the carbon emissions from employees commuting to work, maintaining ATMs etc
- They all require energy to produce. Add these all up and the USD is no way greener than Bitcoin
The latest calculation from Cambridge university’s Bitcoin Electricity Consumption index suggests that bitcoin mining consumes 133.68 terawatt-hours of electricity a year which is just below Malaysia at 147.21TWh. But it's all about efficiency and Bitcoin is wildly more efficient than the current system.
What all of this FUD is doing is essentially pushing the industry to come out with a more sustainable and greener way to power Bitcoin. For example, Bitcoin miners and fracking companies are already working together to use the waste gas from fracking to power miners.