Bitcoin, Supersonic Flight and Christmas Lights
Perceived value determines whether something's worth the energy it uses
What’s valuable to you may seem worthless to me. Something that I choose to invest time, money and resources in, may seem like utter lunacy or a sheer indulgence to others. Value and worth is determined by perception and driven by our beliefs.
Take a few random examples:
Meat eaters believe that humans have thrived for millions of years as hunter-gatherers, and that we need to consume the flesh of animals to survive. They also love a juicy steak. Vegans abhor the notion of consuming animal products and feel that eating meat isn’t necessary or justified.
Those in favor of gun ownership believe that firearms are essential for personal protection, for hunting and for the maintenance of world order. Those who are against guns see them as a threat to human life and peace.
Environmentalists may object to the use of cars and aircraft for travel, viewing fossil fuels, plastic bottles or nuclear power with skepticism. Others may consider each of these things an essential aspect of modern life.
Across many aspects of life, we humans are prone to disagree whether various things have purpose, value, worth or utility depending on our perspective.
It’s collective agreement over the things that have value and others that don’t which determines what endures as a feature of life and what fades away.
I’ve been trying to examine this idea in more detail as a way of addressing the supposedly weak environmental credentials of Bitcoin and cryptocurrency.
Rather than trying to disprove the objections against Bitcoin on environmental grounds, I want to demonstrate why I believe it’s worth the energy it uses, given the value that it presents.
My thesis is that Bitcoin is the same as any other contentious thing that some people value and others dismiss - whether you believe it’s worth the energy it uses depends on whether you think it has vale and worth existentially.
Let’s start with something similar, to demonstrate the theory - supersonic flight.
Reach for the skies
I’ve been an aviation nut since childhood.
As a kid, no flight would be complete without a trip to the cockpit to visit the captain. Every year we’d go to the air-show at the local military air base and gaze sky-ward as jet fighters ripped past at high-speed and low-altitude. The sound of a passing plane or the smell of jet fuel would be enough to quicken my pulse by a few beats per minute. It still is.
While studying at university I worked a year-long internship with British Airways. Aside from the thrill of working in an office overlooking the runway at London’s Heathrow airport, I got the opportunity to take a few free flights. The most memorable of these was aboard Concorde - the iconic flagship of the airline, and the only supersonic airliner ever to endure. I took the evening Concorde to New York, overtaking three friends mid-air who were making the same trip on a 747!
Concorde was developed in the 1960s and 70s, a joint venture between the governments of France and Great Britain. It was Europe’s answer to the space race between the USA and the Soviet Union, and that dart-like aircraft was invented in an era before computer modelling. Its designers relied on ingenuity and creativity, their calculations made using a slide-rule rather than high-powered computers.
When it entered service (shortly before I was born) Concorde was an iconic symbol of speed and luxury. British Airways operated two daily flights between London and New York, with the journey taking three and a half hours - around half the time of a normal jet airliner.
Flying on Concorde was the preserve of the rich and famous - business people who were too important to take longer, and celebrities who were famous enough to justify the price of their ticket. On the day I flew on it, Uma Thurman was apparently seated in the first four rows. I may have walked past, oblivious to her existence her as I visited the cockpit on that flight - old habits die hard.
In July 2000 an Air France Concorde crashed shortly after takeoff, killing all passengers and crew on board. The fleet was taken out of service in October 2003 although the crash was just a catalyst for its retirement.
People were starting to question the cost - both financial, and of the noise and air pollution caused by the aircraft. Demand for air travel was diminishing after 9/11 and in spite of the ticket price ($8-$10k at that time) Concorde wasn’t making money.
It was grounded before Greta Thunberg was born, and yet even back then there were many who objected to it on environmental grounds. What could possibly justify the noise, the fuel and the exhaust fumes generated in the name of speed and luxury?
The justification was simply that Concorde passengers saw value in it. Whether that value was from saving precious hours in their day, or in feeling slightly better about themselves and enjoying the status and exclusivity, those who flew on Concorde believed it was worthwhile.
What’s valuable?
That’s the nature of value and worth, is it not?
Things have value because those who use them collectively agree that they do. They serve a purpose. They make us feel something. They allow other, bigger things to happen.
Value is in the eye (and ear, and heart) of the beholder, and others who share the same perspective.
The same was true of Concorde as is true of any other contentious thing, technology, pastime or practice.
Whether ‘non-believers’ agree or not, the existence of some things is justified and justifiable, by the existence of enough people who agree it’s valuable and is worth the cost, time, energy, resources or any other input that’s necessary to bring it to life.
And it seems that while we’ve lived without supersonic commercial travel for two decades, there are still plenty of people who see a need for it and value in it.
Enter Boom Supersonic.
Boom Supersonic
Boom are in the process of bringing supersonic travel back to our skies. It’s not a crackpot project from one of the world’s mega-rich, either. Boom is a legitimate aircraft manufacturer with committed orders from a number of commercial airlines for one or more of their aircraft.
Their mission is to make the world more accessible by overcoming the barrier of time. This will be achieved by building the worlds fastest, most sustainable supersonic commercial airliner - Overture.
Overture will leverage 50 years of innovation and advancement in propulsion technology, aerodynamics and materials since Concorde, to create a commercial airliner that’s twice as fast as any airliner flying today, but also sustainable and environmentally friendly.
If the world has managed without supersonic travel for 20 years, why do we need it now?
The answer is that for some people (for all of us in fact, although not everyone recognises it), time is the most precious commodity we have. A few hours shaved off a flight across the USA could be incredibly useful for business people. Multiple hours saved from flights between the USA and Asia, or Europe and Australasia could be genuinely world-changing!
That time saving is sufficiently important to enough people that it warrants the time, the money, the effort and the energy to make it a reality.
Boom will use a LOT of energy
Overture aircraft will use a lot of fuel to enable supersonic flight, but the company is using a lot of energy already, and has done ever since it was launched.
Aerodynamics are pivotal in delivering against the company’s mission and in days gone by, designs would be formulated in physical wind tunnels using scale models. Eventually, prototypes would be built and flown by intrepid test pilots who risked life and limb.
Instead of this, Boom is using high speed computer engineering to come up with the design. In a recent interview, Kathy Savitt - CEO of Boom - announced that over 100 million core hours of computing would be used to devise the most aerodynamic shape for the Overture aircraft.
No doubt Boom will be purchasing carbon offsets to compensate for this immense computing power usage. The point is that the expenditure of money and energy for the purpose of designing a luxury aircraft has been deemed worthwhile, since the end product is perceived as valuable and will have utility to those who want to fly in it.
The parallel between Boom and Bitcoin
Here’s where we get to Bitcoin.
The energy consumption of the biggest and best-known cryptocurrencies is often cited by skeptics and cynics who don’t understand how it works and don’t see the point of it. Their interest begins and ends with the headlines from mainstream media about how much energy it uses.
There are many aspects to Bitcoin’s energy usage, and counter-arguments to the common criticisms. But there’s another angle to it entirely:
If you believe that there’s a useful purpose to be served by Bitcoin, then its energy usage is justifiable and unimportant. Just as some see value in being able to shave a few hours off a journey from LA to Tokyo by flying supersonic, there are those who see value and merit in an alternate form of currency that’s decentralized, resistant to deflation and censorship, and which limits the reach and control of government over the monetary system.
As I’ve said already, value is in the eye of the beholder.
The ‘Bitcoin is killing the environment’ FUD
There’s an expression in Bitcoin circles — FUD.
It stands for Fear, Uncertainty and Doubt — the emotions commonly expressed regarding the many perceived downsides of Bitcoin, often by those who don’t believe in it, understand it or see a point in it.
As a relative newcomer to Bitcoin I’ve tried to empathise with these FUDs, by objectively exploring them rather than dismissing them or trying to provide arguments and evidence to the contrary. Bitcoin stirs emotional responses from both sides of the debate and as such, empathy seems more appropriate than belligerence or pig-headedness.
A quick search online reveals many estimates of the power used by Bitcoin and the decentralised network infrastructure that is responsible for mining it, storing it and facilitating its exchange.
Depending on which source you believe, Bitcoin uses:
The same energy as Switzerland or Argentina (according to the BBC) or
1% of the world’s energy (The US Senate Committee on Energy and Natural Resources)
An alternate perspective was offered in this 2019 tweet:
No matter what comparative measure you consider accurate or relevant, there’s little doubt that Bitcoin is energy-intensive.
Comparing Bitcoin to the energy used by an entire nation is certainly attention grabbing. But is energy consumed a significant measure for assessing the worth of something? Assuming so (for now), I’ll dive in deeper.
Let’s take a number from one of those articles above and assume that Bitcoin uses 58.93 Terra-Watt Hours per year.
How does this look compared to the following (when considering whether energy used is worthwhile):
According to the US Energy Information Administration, residential air conditioning in the US in used 235 Terra-Watt Hours in 2021, and commercial air conditioning used a further 153 Terra-Watt Hours. Combined, that’s 388 Terra-Watt Hours just to keep Americans cool at work and home. How about living in more temperate areas of the country instead, or simply putting up with being a little sweaty?
According to Forbes, Americans used 3.5 Terra-Watt Hours to power Christmas lights on their houses for the month of December, 2020. That’s around 5% of the annual energy used by Bitcoin just to heighten festive cheer - is that more important than enabling a sound monetary system that isn’t susceptible to mass-inflation caused by relentless money printing by central governments?
Hopefully you get my point? I’m not suggesting that we get rid of Christmas lights or air conditioning. Rather, the worth of those things is justified by the value they bring to those who use or benefit from them.
An office worker living in Arizona doesn’t want to sweat it out in the midst of summer any more than a family living in Florida wants to go without their Christmas lights as an essential part of the holidays.
Value is in the eye of the beholder (once again).
Is the energy used worthwhile or legitimate?
The fundamental question to answer then, is whether or not the energy used by Bitcoin is legitimate given the benefit that it offers? Can it be justified? Is it worthwhile when offset against the side-effects?
The answer will vary from person to person. It comes down to whether the individual believes that the ends justify the means.
Energy is used around the world for a variety of purposes — some that seem noble, necessary and universally beneficial and others which seem entirely wasteful, frivolous or nefarious. To debate each of these in strict isolation is almost impossible, for very few systems exist in true isolation from everything else.
Moral judgments aren’t useful in isolation
Consider the enormous manufacturing industry in China that caters to the global appetite for cheap technology and fast-fashion.
Moral debates can be had over whether these products are of genuine worth and value to humanity. We can consider the environmental impacts of the energy consumed in their manufacture and distribution around the globe, as well as their disposal when cheap products break or are discarded. There are many sides to the discussion, each of which is valid and relevant.
Things become even more complex when you consider the potential side-effects of closing down such manufacturing operations.
What might be the societal impacts of shutting down such manufacturers? Could the employees of those factories find new work or would they be consigned to poverty? What about the suppliers of raw materials and their employees? And the logistics firms downstream from the manufacturer?
It’s almost impossible to debate the energy worthiness of such manufacturers, no matter how trivial the products are that they produce.
The debate becomes even more morally and emotionally charged when we consider the manufacture of weapons, cigarettes, alcohol, chemicals and so-on. The debate over worthiness of energy consumed for these purposes barely scratches the surface alongside other considerations.
Bitcoin is an easy target
When it comes to Bitcoin, things are easier for the prospective critic.
Bitcoin is self-identified as decentralised and is fundamentally a stand-alone entity. The network of computers that sustains existing Bitcoin and mines new ones, are synonymous. The network is the entire ‘supply chain’ from Bitcoin mining to the end-users who invest in it or use it in transactions. This makes it easier to conceptually ring-fence the network and to then determine its energy usage.
The question is, are the many benefits associated with Bitcoin as an entity, worthy of the energy required to make it exist?
It depends on whether you buy-in to the notion that our current financial system seems to be broken. The benefits of Bitcoin as an encrypted digital currency, a store of value and a hedge against inflation caused by relentless money-printing by governments are well documented and seem self-evident. It’s still down to the individual whether those benefits justify the energy used.
I don’t have definitive answers, but how each person feels will determine their perspective on whether Bitcoin has value or not.
How bad is it, really?
The question of severity of its energy usage needs to be contextualised.
If we consider Bitcoin as a potential replacement (or at least, competitor) to a payment processor like Visa then it’s possible to make a relative comparison of its energy usage. Statista.com estimates the average energy consumption per transaction for Bitcoin to be 720kWh compared to 149kWh for 100,000 Visa transactions.
On the face of it - Visa 1, Bitcoin 0.
I originally thought that the apples-for-apples comparison between Bitcoin and Visa would consider the total power usage of the network and processing power associated with each. This might encompass data centres (for Visa) or the Bitcoin mining rigs and the network nodes for Bitcoin.
As Nic Carter points out in this definitive piece such a comparison would be like “comparing apples with koalas”. Carter points out that the two networks are fundamentally different in nature. As he puts it:
“Bitcoin is a complete, self-contained monetary settlement system; Visa transactions are non-final credit transactions that rely on external underlying settlement rails. Visa relies on ACH, Fedwire, SWIFT, the global correspondent banking system, the Federal Reserve and, of course, the military and diplomatic strength of the U.S. government to ensure all of the above are working smoothly.”
So in order to make the comparison, we need to agree where to draw the boundary. How much of the ‘system’ (in this case, the financial world order) is required to make the Visa system work as it should.
The cost of a single Visa transaction may be infinitesimally smaller than that of a single Bitcoin transaction if you look only at the Visa network itself.
But what if, as Carter proposes you also factor in the energy usage of everything else that’s needed to make Visa work? For Visa to be accepted as the conduit for exchange of conventional currencies, do we also need to include the very presence of the US military given that the “11 aircraft carriers patrolling the world’s oceans (are) enforcing dollar hegemony”.
The energy used by these alone must also be significant, and shouldn’t that also be factored into any comparison?
The comparison starts to seem less black and white when such factors are included in the debate. It doesn’t change whether or not Bitcoin consumes a great deal of energy but does it raise a question-mark over whether the true energy cost of conventional financial systems is inconsequential either?
How can the situation be improved?
Those who are skeptical of the validity and utility of Bitcoin are unlikely to believe its energy usage is valid, regardless of the evidence or arguments supplied. Debates over its energy consumption relative to other elements of the conventional financial infrastructure are also likely to fall on deaf ears.
A more helpful and persuasive response to concerns over Bitcoin’s energy usage may be to address how its energy needs can be fulfilled in environmentally friendly ways. This is where a genuine opportunity exists.
In the Stone Ridge Investments’ 2020 shareholder letter, CEO Ross Stevens tackled the issue of Bitcoin and it’s potential environmental impact. It was the first time I’d considered that Bitcoin has an opportunity to exploit green technology and renewable sources of energy to power the network.
This isn’t solely an opportunity for the future either — a 2020 study by the University of Cambridge highlighted that around 39% of energy used in Bitcoin mining already comes from renewable sources. This is likely to have increased as a percentage as a result of the mass-migration of Bitcoin mining out of China in 2021 after their government banned Bitcoin overnight.
Thanks to Bitcoin being entirely decentralised and without a need for its infrastructure to be geographically located near population centres, nodes and mining operations can easily be sited near to sources of green energy such as waterfalls, or in areas where wind or solar energy can be readily and cheaply harvested. It can also cope with a variable power supply and mining operations can run when excess power that cannot be stored or redistributed, is available (for example excess solar power generated in an area where there isn’t sufficient demand for it).
The energy doesn’t need to be transferred from where it’s generated to where it’s consumed either, since infrastructure can be added remotely to the Bitcoin network via high-speed internet connections or satellite links. This too makes it viable for renewable sources of energy to be utilised more easily to run the infrastructure.
The energy usage associated with mining (which has historically been intensive) will also diminish over time as Bitcoin reaches its in-built coin limit of 21 million. The rate of mining is slowing already in line with its halving schedule.
In time, more of the energy used sustaining Bitcoin’s operation will be used in transaction processing which may also in itself be more energy-efficient. Indeed, in his CoinDesk article Nic Carter points to this as a further reason why the carbon outlay associated with Bitcoin will diminish over time.
Such measures don’t reduce the energy usage (in the short term at least) but it illustrates that there are clear opportunities to make this usage less impactful from an environmental perspective.
Is it worth it?
We cannot afford to be complacent about any environmental issues, whether they arise from the use of technology for sustaining Bitcoin, our voracious appetite for electricity to power air conditioning or the use of technology to develop supersonic jetliners and the energy required to fly them. In each instance, humans have an obligation to ensure that we make best use of the world’s resources and consider the impacts and side-effects of what we do with them.
It’s easy to see why the environmental FUD around Bitcoin captures attention. The energy usage of Bitcoin is undoubtedly significant, whichever measure we choose to believe is accurate.
Like all such considerations the use of this energy and its side effects must be traded-off against the potential benefit and utility. The opportunities for Bitcoin’s adoption in replacing large parts of the financial establishment are significant, as is the opportunity to reduce energy usage over time, and to obtain more energy from environmentally-friendly sources.
If something is genuinely useful or valuable to society then demand will ensure that sufficient resources are directed towards bringing it about and sustaining it. This goes for Bitcoin, just as much as for enabling supersonic travel or providing adequate air-conditioning in the hottest parts of the world.
If you’re interested in buying some Bitcoin for the first time, but not sure how to go about it, check out my guide: