Bitcoin Mining, Distilled
Bitcoin Mining, Distilled
even our digital money doesn't grow on trees
Estimated reading time: 3 minutes, 37 seconds
What we’re pouring (poring) over: Bitcoin mining
How does a virtual currency have such a real impact on our earth?
Why is this a cool topic? Because Bitcoin mining affects the environment. Crypto is actually very low on my list of favorite things to talk about (I already hear way too much about it from the tech news cycle and I’m tired) but the environment is high on my list. I didn’t realize that Bitcoin mining was such a colossal waste of energy. Not just my energy! The world’s energy!
What to know about Bitcoin mining: Cryptocurrency is a decentralized virtual currency, and Bitcoin is one of the most popular. It’s simple enough for a regular person to use: buy Bitcoin (using your normal money) through an exchange like Coinbase. Voilà! You have a digital wallet.
But where does all this magical Monopoly money actually come from? The issue at stake is how we get Bitcoin. Like normal money, Bitcoin doesn’t grow on trees. It has to be “mined.” But not with a pickaxe.
For normal money, the government can just print it. Or your bank does an electronic transaction.
To mine Bitcoin, it’s a crazier process that you can read more about here: the system is designed to prevent fraud by allowing anyone to verify transactions by solving a math challenge. To unlock new Bitcoin, you have to first find a 64-digit hexadecimal number that contains the key to a new public transaction. Companies around the world are competing to unlock new coins by guessing the next magic number.
If this sounds like a Willy Wonka-esque treasure hunt, it is.
Bitcoin mining is like rolling dice. Imagine you’re at a casino and everyone playing has a die with billions of billions of sides. Let’s say the winner is the first person to roll a number under 10. Now let’s say you have a ton of powerful computers that can keep rolling the dice for you. The more computer power you have, the more guesses you can quickly make.
The catch is, the Bitcoin network is designed to make the game more difficult as more miners join. So if more people start winning faster, the game gets recalibrated to make it harder. This means there’s an arms race to have the fastest, most powerful computing resources. Entire warehouses of computers are racing to guess the right numbers. It used to be that you could sit at home and use your desktop computer to mine Bitcoin. Now, you’d be competing with massive mining entities that control the majority of the power.
To go back to the Willy Wonka metaphor, it’s like when Veruca Salt’s father has all of his employees systematically unwrapping candy bars to find the Golden Ticket, giving the Salts a major advantage over an average Charlie Bucket.
The problem: All of this computing uses a LOT of electricity. By a lot, I mean the process of creating Bitcoin to spend or trade consumes around 91 terawatt-hours of electricity annually, more than is used by Finland, a nation of about 5.5 million. And it’s coming from nonrenewable sources, like coal-burning power plants.
Just one Bitcoin transaction takes the equivalent of approximately 53 days of power for the average US household.
In addition to the sheer amount of energy consumed to run the computers (and keep the massive data centers from overheating) there is a ton of electronic waste since the Veruca Salts (Bitcoin miners) are constantly replacing their hardware.
What to do now with this information: I drafted this newsletter before the news broke that China banned crypto mining and trading. I had this actual sentence: “Well, the government can’t exactly do anything about it because the network is designed to exist without the government.” Apparently governments can intervene — but it remains to be seen whether it works.
In the meantime, this is the question for everyone who uses Bitcoin: Is Bitcoin worth its environmental impact?
How much do we actually value decentralized currency? Do we care enough that there’s no central authority managing a currency that we have to waste massive energy on it? I’m going to go with no, unless you’re trying to orchestrate ransomware attacks.
It seems odd that we would prioritize crypto in a time when we’re trying to reduce energy usage. Maybe there’s a solution, but in the meantime, you can always invest in normal money and normal stocks.
Go to the source:
Bitcoin Uses More Electricity Than Many Countries. How Is That Possible? (New York Times)
“Though Bitcoin mining might not involve pickaxes and hard hats, it’s not a purely digital abstraction, either: It is connected to the physical world of fossil fuels, power grids and emissions, and to the climate crisis we’re in today. What was imagined as a forward-thinking digital currency has already had real-world ramifications, and those continue to mount.”
Bitcoin’s Impacts on Climate and the Environment (State of the Planet)
Why Bitcoin Is Bad for the Environment (The New Yorker)
Hop Take
This week’s recommended beverage pairing
Mexicali Blues, Jagged Mountain
A Mexican lager brewed with blue corn tortilla chips! I loved it. It’s a light beer but you can actually taste the corn chips enough that it’s flavorful and a little sweet. We guzzled these at Jagged Mountain’s trivia night (Thursdays at 7:30 if you live around here!) and the gold color fit well with this week’s money/mining theme so here you go.
Open Tabs
Other random things I have on my reading list this week
Welcome to Dunkin' World (GQ): How Dunkin’ became not just a coffee, but a lifestyle. “Despite being a massive corporation, Dunkin’ is an overwhelmingly normal brand. The thing that makes Dunkin’ Donuts special is that there’s nothing all that special about it.”
Go for a Walk (The Atlantic): What one writer learned from a very boring 100-mile walk.
Tiffany has guarded its iconic blue color for decades. Now, anyone can buy it (Fast Company): An artist “stole” the color and now you can buy it in a bottle for $28. Tiffany has the trademark rights to use the color on its jewelry boxes specifically, but they can’t own a whole color!
Closing Out
Sometimes the technical topics like Bitcoin mining are my favorite to write about, because they’re such a challenge to read about. It’s easy enough convincing people to be interested in ghost towns, but not so easy for something like cryptocurrency.
Thanks for staying curious about the things that take a little extra thinking. And if you were bored out of your mind, don’t worry: every week is a new topic!
Cheers,
Alex
On tap for next week: Laugh tracks! Why did comedy shows start using them? And why did they stop? More in my next Distilled.