Fewer and fewer people are using bitcoin for digital payments. However, bitcoin transactions are using more energy than ever – the same amount as the whole of Thailand. With a carbon footprint equivalent to the Czech Republic (about 114 million tons per year), bitcoin negates other climate gains.
It is estimated that global consumption of electric vehicles, for example, has prevented 50 million tons of carbon dioxide so far. This is less than half of bitcoin’s emissions for one year. And the problem is getting worse. The growth of “mining” of bitcoin powered by fossil fuels is outpacing eco-friendly alternatives, causing the carbon footprint of bitcoin to swell fivefold in just two years.
But according to campaign groups Greenpeace and Environmental Working Group, all of this can easily be fixed with a simple Bitcoin software update. Their campaign, called Change the Code Not the Climate, was launched recently and calls on bitcoin developers to switch the network from its currently wasteful transaction verification system to a more climate-friendly alternative.
They claim that the switch would reduce Bitcoin’s carbon emissions by 99.9%. But it is unlikely to happen soon – which is why.
Proof of wasted proof of stake?
Bitcoin makers do not trust bankers, taxmen, and other intrusive intermediaries. Since no banks have bitcoin, the task of keeping the books straight is given to a global network of specialized computers. The owners of these computers compete for bookkeeping tasks in exchange for transaction fees paid by network users. They are also getting a few newly minted bitcoins as a thank you.
This competition is known as Proof of Work (PoW) mining. It works like a hungry hippo game that is constantly expanding. The more players join the competition, the more work each hippopotamus needs to win anything. If a new hippo with green intentions joins the game, everyone at the table has to work even harder. Players powered by coal in Kazakhstan, or fossil gas in Texas, blow off extra smog.
The higher the bitcoin price, the more filthy hippos are willing to waste coal and gas until their costs equal their reward. Thus, proof of work is proof of waste. And that’s a waste by design: Bitcoins call this inefficiency “the advantage, not the bug.”
Greenpeace hopes that the Bitcoin community can learn to love Proof of Stake (PoS) instead. With the network running on PoS, bitcoin custodians will need to share a set minimum amount of bitcoins as a security deposit. If they validate fraudulent transactions, they lose their stake. This disincentive keeps the network secure.
PoS is used by a number of blockchains, including Cardano, EOS, and TRON, in which token holders vote for the most qualified block producers. While Bitcoin is currently used by millions of computers for mining, these POS networks typically keep pools of about 20 machines that use little power, and they take turns getting bookkeeping rights.
For bitcoin, the coding of these changes will be obvious. Greenpeace claims that only 30 people – the largest mining and exchange groups such as Coinbase, Binance and code developers – will need to agree to switch to PoS.
But this ignores the fact that everyone will need to run the upgraded software. On average, mining bitcoin successfully once a week requires about $1.8 million (£1.4 million) to be spent on hardware. Most miners protect these investments and are conservative when it comes to modifying the program code that guarantees their earnings.
For this reason, Chris Bendixen, a commentator for crypto site CoinShares, puts a 0% chance of Bitcoin moving to PoS. “Bitcoin has no desire to destroy the security of the protocol by taking such a step,” he adds.
Bitcoin is no stranger to inertia in coding. An amendment to fix intermittent congestion issues and stabilize transaction fees was proposed in 2016. Although a relatively minor fix, the change divided the Bitcoin community, with the vast majority continuing to support the slower and more expensive status quo.
Even if some users are willing to abandon PoW, the original Bitcoin network will survive in some form. This Proof of Work copy will keep the name, brand, chubby pupil and polluting miners in the Proof of Work. Forking PoS may end up being just another disappointing experience.
Another PoW heavyweight network, Ethereum, has been promising to switch to PoS since birth. But this migration has been around the corner for several years.
Starting a PoS network from scratch is another option. But there is already a cryptocurrency BitcoinPoS. Aside from the early wave of interest, it has attracted quite a few supporters.
Read More: Bitcoin Isn’t Going Greener: Four Environmental Myths About Cryptocurrency Debunked
Addressing the phenomenon of green laundering of cryptocurrencies
Greenpeace’s campaign has been ridiculed by many bitcoin makers. After all, a large part of the funding for this marketing mission comes from billionaire capitalist Chris Larsen, co-founder of rival digital currency Ripple.
Larsen’s Ripple was also an original member of the UN-backed Crypto Climate Accord, an organization that met in April 2021 to promote more sustainable trading in cryptocurrency. In response, prominent bitcoin advocates set up the Bitcoin Mining Council — a public relations group that aims to “defend bitcoin against uninformed and aggressive energy critics,” such as Larsen.
Some argue that governments in Europe and North America should follow China’s lead and ban Proof of Work mining.
Reprisals from bitcoin advocates are on the rise, and their green wash appears to be making gains. The European Parliament recently rejected a bill to ban Proof of Work mining across the EU. The UK government also fears that crypto-trading talent will migrate to other financial centres.
My research suggests that effective Bitcoin regulation will not come from charitable appeals. A globally coordinated ban, led by governments, is likely to be the most effective solution.
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