https://www.coindesk.com/podcasts/coindesk-podcast-network/comparing-bitcoin-visa-nic-carter

As I have replied to you before due to the high percentage of renewable energy used in the production of Bitcoin( some sources have it at 80%) Elon Musk could not in all consciousness continue not to use it.

Is the high energy cost of mining bitcoin and othercryptocurrencies damaging our planet? According to theIntergovernmental Panel For Climate Change (IPCC), our ever-growinghunger for energy comes with a huge price tag attached. The IPCC tellus the “scientific evidence for warming of the climate system isunequivocal” and that this trend is bad news for humanity.

The planet is warming, oceans are rising,glaciers retreating, the frequency of extreme weather events isincreasing and our oceans are acidifying. Scientists have concludedthat the major cause of this is the burning of fossil fuels whichrelease CO2 into our atmosphere.

For this reason, much has been made of therising energy consumption of bitcoin and other cryptocurrencies. Asreported by Alex Hern for The Guardian, as well as countless otheroutlets, “The power consumed by the entire bitcoin network wasestimated to be higher than that of the Republic of Ireland”. Intotal, bitcoin miners are estimated to consume around 8.27 terawatthours of energy every year. There is no denying that this is aconsiderable amount of power, but to place it in a wider context youmust first consider the total cost of old currency in terms of itsenergy and resource consumption.

The Fiats

Let’s be clear: when it comes toenvironmental impact, cryptocurrency doesn’t hold a candle to theecological wrecking ball of fiat currency. Fiat not only consumesmore energy in its birth than bitcoin mining (11 terawatt hoursversus 8.27) but fiat is doubly damaging at its death, when it mustbe destroyed by burning, releasing even more CO2 into the atmosphere.The lifespan of some fiat banknotes is only four or five years beforethey are removed from general circulation and burned. By comparison,a mined bitcoin is mined forever, without the need for refreshment orrenewal.

As for the raw material from which bitcoin ismined, it is pure energy. The energy cost of producing fiat is just asmall fraction of the overall resource expenditure. Banknotes andcoins consume huge amounts of raw materials and resources. Most fiatmoney is manufactured from cotton and linen although some ispolymer-based plastic. A 2010 study by Ahlers found that the printingof the U.S. dollar alone used 3,530 tonnes of ink, over 7,100 tonnesof cotton and 2,300 tonnes of linen. Waste products from itsmanufacture include a total of 2,720 tonnes of pulp and ink sludge.

Coins are no less damaging, typicallymanufactured the world over with metals such as copper and zinc.While fiat requires the manufacture of lumps of metal to divide notesinto smaller amounts, bitcoin only requires that you place thedecimal point in a different place. As far as environmentallyfriendly solutions go, there really is no contest.

Next, let’s examine the energy consumption ofbitcoin. While bitcoin mining does consume more energy than theRepublic of Ireland, it only uses 7% of the electricity consumptionof the state of Texas. In fact, the power use of bitcoin miningexpressed as a percentage of global energy consumption is only 0.13%.Since almost all of the cost of mining bitcoin is in energy, thesolution to carbon neutral bitcoin is in carbon neutral energy.Carbon neutral power already exists in the form of renewables andnuclear; it’s just a case of choosing it over coal and oil, asminers are, many of whom have set up camp close to sources of cheaprenewable energy.

The cost of bitcoin security and transport isalso highly favorable when compared to fiat. For the average person,securing bitcoin is as simple as remembering your key and password,and transporting is as simple as a button press or two. Compare thiswith armored vehicles, bank vaults, and ATMs for fiat. According toindependent research by RBR London, cash withdrawals from ATMs areexpected to rise by 6% annually in the developing world and 1%everywhere else. Continuing to blindly favor fiat currency will meanwe need to put many more vehicles on the road, burning more fossilfuel in the process. Another round scored in favor of crypto.

Production of the Euro

If you’re still in any doubt about thewastefulness of fiat as compared to cryptocurrency, simply take alook at this video showing the production of the 50-euro note. As youwatch the more than 20 stages of the manufacturing process shown,consider that thanks to Brexit the map of the EU in these notes isalready out of date.

In examining the currencies that do the mostdamage to our planet it quickly becomes clear where the blame lies.Bitcoin and its fellow PoW cryptocurrencies are not the problem —that dubious accolade goes to the dollar, pound, yuan, euro andrupee.

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https://blog.goodaudience.com/the-currencies-that-are-killing-our-planet-dda61576f18c

cbeci.org/

CambridgeBitchttps://oin Electricity Consumption Index

WhatBloomberg Gets Wrong About Bitcoin’s Climate Footprint

The comparison between Bitcoin and Visa's energy use, reachedseveral highly misleading conclusions, our columnist says.

Nic Carter

What Bloomberg Gets Wrong About Bitcoin’sClimate Footprint

Recently, Bloomberg published a piece calling Bitcoin an “incredibly dirty business.” It’s undeniable that the Bitcoin blockchain has a carbon footprint. Some bitcoins are mined with non-renewable energy, although plenty is mined with hydro, nuclear, or otherwise-vented natural gas, too. No one contests the externality of bitcoin, although the precise carbon footprint is debated. However, the article, by opinion columnist Lionel Laurent unfortunately relies on the flawed assumption that individual bitcoin transactions carry an energy overhead.

The question of bitcoin’s energy footprint is riven with misconceptions. Firstly, it’s a mistake to compare bitcoin to payment networks, and comparisons relying on relative energy use are spurious.

CoinDesk columnist Nic Carter is partner at Castle Island Ventures, a public blockchain-focused venture fund based in Cambridge, Mass. He is also the co-founder of Coin Metrics, a blockchain analytics startup.

Second, metrics like the “per-transaction energy cost” are misleading because transactions themselves do not cost energy; nor does bitcoin’s CO2 footprint scale with transactional count.

Bitcoin supporters and critics alike should understand how the protocol works, so the energy costs and externalities of the system can be honestly appraised.

Bitcoin and Visa: An apples-to-koalas comparison

In the Bloomberg piece, the author states:

One Bitcoin transaction would generate the CO2 equivalent to 706,765 swipes of a Visa credit card, according to Digiconomist’s closely-followed index, albeit with none of the convenience of plastic.

But the “energy exchange rate” methodology the author relies on is completely mistaken. Bitcoin transactions are not equivalent to Visa transactions. They are different in both form and substance.

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cently,Bloomberg published a piece calling Bitcoin an “incredibly dirtybusiness.” It’s undeniable that the Bitcoin blockchain has acarbon footprint. Some bitcoins are mined with non-renewable energy,although plenty is mined with hydro, nuclear, or otherwise-ventednatural gas, too. No one contests the externality of bitcoin,although the precise carbon footprint is debated. However, thearticle, by opinion columnist Lionel Laurent unfortunately relies onthe flawed assumption that individual bitcoin transactions carry anenergy overhead.

The question of bitcoin’s energy footprint is riven withmisconceptions. Firstly, it’s a mistake to compare bitcoin topayment networks, and comparisons relying on relative energy use arespurious.

CoinDesk columnist Nic Carter is partner at Castle IslandVentures, a public blockchain-focused venture fund based inCambridge, Mass. He is also the co-founder of Coin Metrics, ablockchain analytics startup.

Second, metrics like the “per-transaction energy cost” aremisleading because transactions themselves do not cost energy; nordoes bitcoin’s CO2 footprint scale with transactional count.

Bitcoin supporters and critics alike should understand how theprotocol works, so the energy costs and externalities of the systemcan be honestly appraised.

Bitcoin and Visa: An apples-to-koalas comparison

In the Bloomberg piece, the author states:

One Bitcoin transaction would generate the CO2equivalent to 706,765 swipes of a Visa credit card, according toDigiconomist’s closely-followed index, albeit with none of theconvenience of plastic.

But the “energy exchange rate” methodology the author relieson is completely mistaken. Bitcoin transactions are not equivalent toVisa transactions. They are different in both form and substance.

Subscribe to First Mover, our daily newsletterabout markets.

By signing up, you will receive emails about CoinDesk products andyou agree to our terms & conditions and privacy policy.

First of all, Bitcoin and Visa are fundamentally differentsystems. Bitcoin is a complete, self-contained monetary settlementsystem; Visa transactions are non-final credit transactions that relyon external underlying settlement rails. Visa relies on ACH, Fedwire,SWIFT, the global correspondent banking system, the Federal Reserveand, of course, the military and diplomatic strength of the U.S.government to ensure all of the above are working smoothly.

Any energy comparison must take the above into account –including the externalities from the extraction of oil, whichimplicitly backs the dollar. As those who make this comparisoninevitably fail to mention, the dollar’s ubiquity is partly due toa covert arrangement whereby the U.S. provides military support tocountries like Saudi Arabia that agree to sell oil exclusively fordollars. It’s worth noting that the grossly oversized U.S.military, whose presence worldwide is necessary to backstop theinternational dollar system, is the largest single consumer of oilworldwide.

Bitcoin transactions, by contrast, rely just on bitcoin. Bitcoinproposes a new monetary unit (also named bitcoin) and mediates itscirculation through the Bitcoin protocol, which is administered bynodes and miners. Bitcoin’s energy footprint is highly transparent,due to the accessible and highly integrated nature of the system.This provides fertile ammunition for critics who can easily estimatethe externalities of Bitcoin while insisting no equivalent ones existfor the dollar system. But the two systems are different.

Until Visa marshals its own private armies to keep the integrityof the dollar intact, the comparison will be a specious one.

Bitcoin is a full-stack monetary and payments system. Visa is athin layer within the international dollar system, wholly reliant onseamless interoperability of the rest of the payments and settlementpyramid. Until Visa marshals its own private armies to keep theintegrity of the dollar intact, the comparison will be a speciousone.

If you look at the actual characteristics of Bitcoin transactionsas compared with Visa, their differences are clear. While bothsystems transmit trillions of dollars of value per year, they do soin radically different ways.

In Q4 2020, Visa processed $2.4 trillion in payments volume via49.6 billion transactions. That gives us an average transaction sizeof $46.37. Bitcoin, by contrast, settled $397 billion (using CoinMetrics’ adjusted volume estimates) over the period and handled25.3 million transactions. The average transaction size for Bitcoinover the period: $15,719. During that time, there were eight distincttransactions worth over $1 billion. The largest among these settled amammoth $2.48 billion, given bitcoin’s price at the time.

And not only can transactions be very large, but they can directvalue to a number of recipients all at once. The largest-evertransaction in terms of payments contained 13,107 outputs. Undercurrent constraints, a Bitcoin transaction could theoreticallycontain up to 32,256 outputs. And of course, layered or sidechainapproaches which propose new trust models like Lightning, Liquid,RSK, and Stacks introduce the potential to batch thousands oftransactions and settle them on the base layer. A single Bitcointransaction can settle millions of lightning payments.

See also: Nic Carter – The Last Word on Bitcoin’s EnergyConsumption

So not only are Visa transactions generally much smaller thanBitcoin transfers, but they are different from an assuranceperspective. Bitcoin provides final settlement within a few blocks.This means there is no risk of transaction reversal. The paymentitself is integrated with the settlement – there is no distinction.Visa credit payments, by contrast, are designed to be reversible, ifneed be. This is why cardholders generally have the option of makingchargebacks within 90 days of their payment.

Much to the chagrin of some merchants, payments are not bundledwith settlement. Instead, the Visa payment process is a tangle ofdistinct authorization, clearing, and settlement steps. Actual finalsettlement happens on an aggregate net basis between merchants banks(who manage the accounts for card-accepting merchants) and issuingbanks (who manage the cardholder accounts) via ACH or wire transfer.This means that payments are bundled up and settled on an end-of-daybasis through utility-grade settlement channels. The individualpayments made when you swipe your card are several layers removedfrom the final flows of funds between banks.

These gigantic wire transfers that power settlement betweencardholder banks and merchant banks for Visa are the transactionsmost comparable to those of Bitcoin. The individual paymentshappening between Visa users and Visa merchants are unsettled IOUs.If you consider ACH and especially Fedwire transfers, theircharacteristics are much more akin to Bitcoin. Typical ACH transfersclear thousands of dollars, while your average Fedwire transfersettles millions.

Fedwire transfers are “push” rather than “pull” – bankaccounts have to be fully funded on the originating side for thetransfer to process. No netting occurs in Fedwire: it is what’scalled a “real-time gross settlement system.” Fedwire’scounterpart, CHIPS, which is used for international dollarsettlements, does include significant netting (checking if banks arepaying each other and only sending the difference). Unlike a check,or a Visa payment, you cannot reverse a wire transfer. This giveswires strong finality, and good settlement assurances (soundfamiliar?). And like Bitcoin, Fedwire processes a few hundred milliontransactions a year. In Q4, it averaged 550,000 txns per day. In thatperiod, Bitcoin averaged 824,000 daily payments in 305,000 dailytxns.

These systems scale with transactional size, not frequency. So ifyou’re going to compare Bitcoin to established transaction systems,compare like with like. (Note that SWIFT is not an apt comparison toBitcoin: it is a messaging rather than a settlement system andgenerally relies on third-party settlement through Fedwire or CHIPS.)

Bitcoin’s energy cost of transactions explained

Now we’ve established that Bitcoin transfers are much more akinto wire transfers, let’s consider the actual “cost” of Bitcointransactions. The quantitative assumptions made by Bitcoin critics –that transactions have a certain energy overhead – need to becontextualized.

Constructing a Bitcoin transaction, and getting the network toaccept it, costs virtually no energy whatsoever. What costs energy isgrinding through the nonce space to find valid blocks. Miners do thisbecause they are compensated primarily with the coinbase rewardof 6.25 BTC per block, which is defined in the protocol.Currently, miners collect about 15 percent of their total revenue of$40m per day in fees. But it’s important to decompose transactionfees and general revenue from creating blocks. Miners collect thatcoinbase reward regardless of whether they include transactions inblocks. On occasion, they mine empty blocks and collect that 6.25per-block reward regardless.

The individual payments made when you swipe your card are severallayers removed from the final flows of funds between banks.

The quantity of resources that miners are willing to spend onmining is purely a function of three variables: the price of bitcoin,the issuance rate and the fees transactors are paying to use thechain. Of those three, the first two matter most. As mentioned, feesare not a major source of revenue today. The system is naturallyequilibrating: If the price of bitcoin goes up or fees dramaticallyrise, miner margins expand, inducing existing miners to increasetheir expenditure or new miners to enter the market. Thus marginscontract to a level where mining is just barely profitable.

As defined in the protocol, the per-block reward is cut in halfevery four years. This reduces bitcoin’s issuance rate and thus theminer revenue. So, in the long term, miner revenue from issuance willdramatically contract. As 88% of all coins have been mined already,mining is structurally shrinking, not a growing industry. Academicprognostications of a climate-destroying feedback loop are thereforewildly off-base. While fees are expected to compensate miners in thelong term, it’s unlikely that users would stomach $1000 fees. In apurely fee-based system with $10 fees and, optimistically, 800,000transactions per day, miner revenue would total $2.9 billion per year– far less than the current $16.4 billion in annualized minerrevenue.

Thus most of the miner expenditure – and hence carbon outlay –from Bitcoin is due to largely invariant coin issuance ratherthan any variable that’s correlated to transactional intensity.This fact invalidates the “energy cost of transactions” metricthat critics like to promote. It is issuance that largely financesminers, not transactions. And because most coins have been issuedalready, Bitcoin’s future carbon outlay is likely to shrink. Thisis to say nothing of the energy mix that miners employ – and as weknow, renewables and otherwise-vented natural gas make up ameaningful component of the industry. According to the CambridgeCenter for Alternative Finance, 39% of Bitcoin’s energy outlayderives from renewables, with 76% of miners using renewables in somecapacity.

Therefore, comparisons to Visa and other payments systems shouldbe met with extreme skepticism. Bitcoin is a full-stack monetarysystem with no outside dependencies; Visa is a small part of the U.S.dollar stack that relies, among other things, on 11 aircraft carrierspatrolling the world’s oceans and enforcing dollar hegemony. Visapayments rely on a vast interconnected infrastructure of clearing andsettlement. Bitcoin transactions are natively final and settle rightaway – they are more comparable to wire transfers. The energyexchange rate comparisons must take these differences into account.