Therefore, bitcoin miners are not opting for a more climate-friendly alternative

Fewer and fewer people are using Bitcoin for digital payments. Nevertheless, Bitcoin transactions consume more energy than ever before – as much as all of Thailand. With a carbon footprint equivalent to that of the Czech Republic (around 114 million tons per year), Bitcoin negates other climate gains.

Global adoption of electric vehicles, for example, has so far avoided an estimated 50 million tons of CO₂. That’s less than half of Bitcoin’s issuance for a single year. And the problem keeps getting worse. The growth of fossil fuel-powered bitcoin mining is outpacing greener alternatives, quintupling bitcoin’s carbon footprint in just two years.

But according to campaign groups Greenpeace and the Environmental Working Group, all of this can be easily fixed with a simple bitcoin software update. Their campaign, dubbed “Change the Code Not the Climate,” recently launched, urging Bitcoin software developers to transition the network from its current wasteful transaction verification system to a more climate-friendly alternative.

The switch, they claim, would reduce Bitcoin’s carbon footprint by 99.9%. But it’s unlikely to happen anytime soon — and here’s why.

Proof of waste to proof of proportion?

Bitcoiners don’t trust bankers, tax officials, and other meddling middlemen. Since there are no banks with bitcoin, the task of keeping the books is delegated to a global network of special purpose computers. The owners of these computers compete for accounting duties in exchange for the transaction fees paid by network users. They also get some newly minted bitcoins as a thank you.

This competition is known as Proof of Work (PoW) mining. It works like an ever-expanding game of hungry hippos. The more players enter the competition, the more work each hippopotamus has to do in order to win something. When a new hippo with green intentions comes into play, everyone at the table has to try harder. Players running on coal in Kazakhstan or fossil gas in Texas will then emit additional smog.

The higher the bitcoin price, the more dirty hippos are willing to squander on coal and gas until their cost of doing so matches their reward. So proof of work is evidence of waste. And that’s waste by design: Bitcoiners call this inefficiency “the feature, not the bug.”

Greenpeace hopes the Bitcoin community could learn to love Proof of Stake (PoS) instead. If the network runs on PoS, Bitcoin’s accountants would have to deposit a prescribed minimum number of Bitcoins as collateral. If they validate fraudulent transactions, they lose their stake. This deterrent keeps the network secure.

A number of blockchains, including Cardano, EOS, and TRON, already use a PoS system, where token holders vote for the most qualified block producers. While bitcoin currently uses millions of mining computers, these PoS networks typically maintain a gathering of around 20 machines that consume a comparatively tiny amount of power, taking turns to gain accounting rights.

code blocker

For Bitcoin, coding these changes would be easy. Greenpeace claims that only 30 people — the biggest miners, exchanges like Coinbase and Binance, and code developers — would need to agree to move to PoS.

However, this ignores the fact that everyone would need to be running the updated software. On average, to successfully mine Bitcoin once a week requires spending around $1.8 million (£1.4 million) on hardware. Most miners protect these investments and are conservative when it comes to changing the software code that guarantees their profits.

Because of this, Chris Bendiksen, a commenter on cryptocurrency site CoinShares, estimates the chance of Bitcoin ever moving to PoS at 0%. “Bitcoiners have no interest in destroying the security of the protocol by taking such a step,” he says.

Bitcoin is no stranger to encoding standoffs. A change was proposed in 2016 to address intermittent congestion issues and stabilize transaction fees. While a relatively simple fix, the change divided the bitcoin community, with the vast majority continuing to support the slower, more expensive status quo.

Even if some users were willing to abandon PoW, the original Bitcoin network would continue in some form. This PoW version would keep the name, branding, super rich disciples and polluting PoW miners. The PoS offshoot could end up being another disappointing experiment.

Another heavyweight PoW network, Ethereum, has promised a move to PoS since its birth. But this migration has been around for a few years now.

Another option is to start a PoS network from scratch. But there is already a BitcoinPoS cryptocurrency. Apart from an early surge of interest, it has attracted few supporters.

Combating crypto greenwashing

Many Bitcoiners scoffed at the Greenpeace campaign. After all, much of the funding for this marketing mission has come from billionaire venture capitalist Chris Larsen, co-founder of rival cryptocurrency Ripple.

Larsen’s Ripple was also an original member of the United Nations-backed Crypto Climate Accord, an organization convened in April 2021 to promote more sustainable cryptocurrency trading. In response, prominent Bitcoin advocates formed the Bitcoin Mining Council — a public relations group aimed at defending “Bitcoin against uninformed and hostile energy critics” like Larsen.

Some argue that governments in Europe and North America should follow China’s example and ban PoW mining.

Bitcoin advocate retaliation campaigns are on the rise and their greenwashing appears to be winning. The European Parliament recently rejected a bill that would ban PoW mining across the EU. The UK government also fears an exodus of crypto trading talent to other financial hubs.

Research I lead suggests that effective regulation of bitcoin will not result from charity calls. A globally coordinated ban led by governments is likely to prove the most effective solution.

This article by Peter Howson, Senior Lecturer in International Development, Northumbria University, Newcastle, is republished from The Conversation under a Creative Commons license. Read the original article.

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