The Myth of Renewable Bitcoin

Bitcoin has a reputation for being environmentally unfriendly. Mostly this is, <a href="https://medium.com/@joshgans/why-economists-dont-like-bitcoin-c0f0bcba17d9" rel="noopener">as I argued previously</a>, because (a) it uses lots of electricity and (b) that people don’t think this is a good use for that electricity. But, recently, the focus has been on the type of electricity. For instance, Elon Musk, who previously embraced Bitcoin as a payment option for Tesla, backed away given the ‘brand confusion’ associated with promoting environmental friendliness when Bitcoin was not. Musk’s view is that it is not the electricity per se but the type of electricity that is at issue. At a conference in 2021, <a href="https://www.cnbc.com/2021/07/21/elon-musk-says-tesla-will-likely-start-accepting-bitcoin-again.html" rel="noopener ugc nofollow" target="_blank">he remarked</a>: <blockquote> It looks like bitcoin is shifting a lot more toward renewables and a bunch of the heavy-duty coal plants that were being used…have been shut down, especially in China … I want to do a little more due diligence to confirm that the percentage of renewable energy usage is most likely at or above 50% and that there is a trend toward increasing that number. If so, Tesla will most likely resume accepting bitcoin. </blockquote> In other words, if Bitcoin runs on renewables (solar, wind, geothermal) it will be back in Tesla’s good books. The intention is to make Bitcoin non-carbon polluting. But will such a shift actually do that? Or will it just look like it is doing that? There’s a difference. <h2>Some Bitcoin Electricity Facts</h2> Let’s begin by looking at some Bitcoin electricity facts. This week Tyler Cowen and Alex Tabarrok released <a href="https://marginalrevolution.com/wp-content/uploads/2022/05/Cryptoeconomics-Modern-Principles.pdf" rel="noopener ugc nofollow" target="_blank">the new chapter of their economics textbook on Cryptoeconomics</a> (it is a great introduction to the whole sector by the way). They provide a brief overview of the “energy problem.” <blockquote> At a bitcoin price of around $40,000, the bitcoin network computes about 200 million trillion hashes per second or 200 quintillion hashes per second! That’s a lot of computing power and no one wants the results of these quintillions of hash computations. The computations are wasted or [at] least not used for any purpose other than securing the bitcoin network. </blockquote> <a href="https://joshgans.medium.com/bitcoin-and-renewables-f4d0fa763674">Learn More</a>