It's a mistake to link Bitcoin's energy consumption to its price, says Nic Carter

Key facts:
  • Nic Carter estimates that Bitcoin is responsible for 50 megatons of CO2 emissions per year.

  • The energy used by Bitcoin is 15 times less than that of global automobile traffic each year.

“Many people mistakenly believe that most energy consumption is actually a function of the price of bitcoin (BTC). But, of course, that energy is known to be used by the miners.”

Such assertion corresponds to Nic Carter, general partner at Castle Island Ventures, during his intervention in the series of talks on the demystification of Bitcoin at The B Word

conference that re held last July 21, 2021.

The also co-founder and chairman of the board of Coin Metrics, mentioned the fact that, historically, the vast majority of Bitcoin’s energy expenditure is derived from the issuance of new BTC units. Miners

are compensated in two ways: one is through the issuance of new units and the second is through the fees users pay for processing transactions. It has been shown that the issuance of new bitcoin units has dominated their revenue.

Carter referred to the energy consumption by bitcoin miners

. In this regard, he clarified that, according to the data he manages, they use about 0.25% of the world’s electricity annually.

The entrepreneur estimates that Bitcoin is responsible for 50 megatons of carbon dioxide emissions per year, or about 1% of global emissions. He noted that Bitcoin’s energy footprint is 12 times smaller than the devices installed in U.S. homes and is 15 times smaller than the electricity lost in transit globally each year.

“Bitcoin is not a country, but an industry

Carter, in his talk, sought to dismiss the comparisons that are usually made between Bitcoin’s energy expenditure and that of some countries:

I think comparisons at the industry level are much more illuminating than at the country

level.

Because Bitcoin is not a country, but an industry that provides monetary collateral and transactions. Therefore, accept the fact that Bitcoin consumes some energy which compares to that used by copper mining, zinc mining and gold mining. Gold is known to be a means of storing your wealth outside the banking system and outside the state. So is Bitcoin, which has completely different qualities from these other monetary systems. So, to the extent that Bitcoin is recognized as having utility, its energy consumption becomes much more manageable into something we can feel more comfortable with.

Nic Carter, general partner at Castle Island Ventures. <img width=”590″ height=”308″ src=”//www.w3.org/2000/svg’%20viewBox=’0%200%20590%20308’%3E%3C/svg%3E” alt=” /> For Nick Carter, general partner at Castle Island Ventures, bitcoin miners consume about a quarter of 1% of all the world’s electricity. Source: thebword.

Great migration of China’s miners reduces Bitcoin’s carbon footprint

During his talk, Carter touched on one of the topics of the moment, which is the case of Bitcoin mining in China. As this media outlet has reported, the Asian country has restricted the activity

in its territory.

Carter mentioned that China has the cheapest hydroelectric resources on the planet, which is why there was a high concentration of miners there. That, as a consequence, led to a large part of Bitcoin’s hash rate

(45%, Carter said in his lecture) coming from that nation.

“That hash rate came, in large part, from carbon burning, especially in the Inner Mongolia region and Tingjiang Province, at certain times of the year,” the young entrepreneur said. According to him, the energy matrix of these two jurisdictions is between 60% and 70% coal burning. In other words, almost half of Bitcoin’s hash rate

was dominated by provinces that are major consumers of fossil fuels in China.

Carter referred to the large migration of Chinese miners

after the restrictions. He mentioned that, as a consequence, the use of electricity from burning coal for Bitcoin mining was significantly reduced. Carter: Bitcoin processes between USD 10 and 20 billion in final settlements and stores around USD 600 billion. Source: thebword.

According to the businessman’s estimates, Bitcoin miners in China will have withdrawn from this territory by 2024 to move their operations to other countries. That estimate is shared by other analysts, as has

been reviewed CryptoNews.

Bitcoin provides genuine transactional monetary utility

In the executive’s view, Bitcoin has a claim on some of society’s resources in the same way that gold does. According to Carter, we need to work on improving Bitcoin and not fork it into other cryptocurrencies or try to make changes to the code.

Carter said that users want to be assured that their transactions will be settled, that they will be final and that nothing will change after the fact. This, according to him, justifies the power consumption.

He explained that the number of people who consider this network relevant is not small: “Bitcoin processes between USD 10 and 20 billion in final settlements and its market capitalization is USD 600 billion”.

The entrepreneur compared the accounting method of wet clay, which dates back to 3,000 BC, with the Bitcoin blockchain. He recalled that, in the first case, accounting relationships were inserted into wet clay, which was then exposed to the sun to dry, and once it was dry, that relationship was encoded forever. On the other hand, he said, something similar happens on the Bitcoin blockchain. Transaction records are unalterable.

In his view, bitcoin provides genuine monetary transactional utility in a way that is quite different from other such systems, and this is often overlooked. When Satoshi Nakamoto devised bitcoin in 2008 and then created it in 2009, he threw out this conundrum: “how am I actually going to distribute units of this product to the world at large?”

Nakamoto, in Carter’s words, could have solved it by emailing bitcoins to his friends, but that wouldn’t have been a fair or credible way. Therefore, the method he chose for this was proof-of-work (PoW) in which, effectively, you have to expend energy and computational resources.