Bitcoin uses more energy than Argentina. That’s the often-quoted main concern about Bitcoin attributed to research from Cambridge University. I’ve no reason to doubt the validity of that finding and I’m not a climate change denier, but neither am I troubled by it. I think it’s a good thing. Let’s dive into that and other Bitcoin worries:
1. Won’t Bitcoin energy use destroy the planet?
This is the big one and most often asked question from friends and family. I’m going to hand over to a great piece by Lyn Alden, as she does a fantastic job, taking a fact-based approach. It’s a long and deep read, but well worth it.
Bitcoin’s Energy Use Isn’t a Problem. Here’s Why
2. Nobody knows who invented it
Bitcoin was brought to life by someone naming themselves Satoshi Nakamoto. Nobody knows who they are, as they left the project after a few years. There are some concerns that Satoshi might have been a government agency in disguise or a bad actor waiting for the right time to pull the rug. I don’t think it really matters though. We don’t know who first invented the wheel, but the important thing is someone did, and it proved very useful. Bitcoin is open source, meaning anyone can view the code that runs it. It’s been analysed and pulled apart many times over and despite a few early hiccups, has run as designed for over a decade.
3. Nobody controls it
Exactly right. Decentralisation is one of Bitcoin’s key features. This is a massive positive, not a negative.
4. It’s unregulated
I ask the question back, why does it need to be regulated? If it’s totally open source, owned by nobody and you are free to use it, or not use it, as you see fit, then that shouldn’t require any regulation or protection. When talking about exchanges, where people buy, sell and store their Bitcoin, I can see the need for regulation more to ensure those exchanges are acting in a proper way and I can also understand how people might want some protection of their assets similar to how governments underwrite bank deposits. You can always hold your own keys though, rather than relying on a custodian. Then you have other cryptocurrencies or crypto assets, often called altcoins, which are very different from Bitcoin. They may also be open source, but more often than not, they are not truly decentralised, which can mean they fall under the description of a security and current regulation there can apply. Lastly, any crypto is liable to capital gains tax rules in the UK. Surely, if it’s taxed then it’s regulated to some extent already.
5. It can be manipulated
The value of Bitcoin measured in any national currency varies according to the market, and participants in any market can be influenced or manipulated. It happens in all markets for all things and Bitcoin is no exception. Many people try to influence the price of Bitcoin, whether that’s through positive/negative tweets from the likes of Elon Musk, or China banning Bitcoin for the 20th time, but the underlying protocol of Bitcoin doesn’t change. Every 10 minutes a new block of valid transactions are recorded and new Bitcoin is issued to the miner who validated the transactions according to the supply schedule. That has happened repeatedly, for 12 years, regardless of any attempted influence. Ultimately, that’s what gives Bitcoin value long term. I try to filter out the noise and headlines, they are attempts to influence the price of Bitcoin short term but longer term the value of the asset and network will win out and that is what’s important.
When I’ve had conversations around these topics with people, I’ve sometimes found the response to points I try to make, particularly around energy consumption, a simple “I don’t believe that”. Once upon a time, most people believed the earth was flat, some still do, I can’t help them.
Bit of news this week is that after recent events, I’m heading back to Unilever for 3 months to support the team. I’m thankful that I’m able to do that and that Unilever are supportive of me pursuing my other career path at the same time. As I’ve said before, awesome company and people there, although I’ll have to start adding standard disclaimers now about my views being my own and not that of Unilever.
Final thing, in case you missed it, Twitter enabled a tipping function last week using the Bitcoin network. It’s probably nothing.
Peace, love and Bitcoin.
Rob