No hearing on bitcoin’s energy use is complete without Nic Carter
By Jim Harper
The House Energy and Commerce Committee’s Oversight and Investigations Subcommittee is reportedly going to investigate cryptocurrency’s effect on the environment. If there truly is such a hearing upcoming, Nic Carter must be a witness. Full stop.
It’s probably a function of my memory. I can’t think of a hearing given more advance notice than the one the oversight subcommittee is planning. My experience is that subcommittee hearings come at the behest of chairmen who want them done yesterday. In my time, we grabbed witnesses on the fly and surprised/delighted the regulated community with our immediacy.
Whatever the case, this hearing, potentially coming by late January, will go into “the environmental impact of cryptocurrencies, especially bitcoin mining,” according to three unidentified sources reached by news outlet The Block. Elsewhere it is reported that the committee “is drawing up a list of witnesses.”
Nic Carter. No source I know of is better informed and more enthusiastic about the topic. There are two versions of Nic: collegial debater with Bloomberg columnist Noah Smith, for example, and sick-of-your . . . nonsense with The New York Times. Read either or both linked pieces to get a sense of the many, many issues.
This is all a jumping-off point for how I structure the issues in my head as a nonexpert.
First, I think it’s important to grant the obvious and not skip past it. Proof-of-work cryptocurrency mining uses energy — kind of a lot. But to say “a lot” is not to say “too much,” a question that comes later in the analysis. Serious debate begins with the facts, and at a high level of abstraction “much energy use” is a fact.
But the meme that bitcoin or cryptocurrency uses as much power as one country or another, promoted by The New York Times last September, for example, deserves a bit of pushback on a couple of fronts.
One is that estimates of power usage in cryptocurrency mining are notoriously difficult. Mining rigs are rapidly changing to increase their efficiency. The standard method of inferring miners’ collective electricity use from the “hash rate” of networks relies on guessing what kind of mining equipment did the hashing. Cryptocurrency networks do not produce this data, so it must be surmised.
Other uses of electricity do not produce any comparable data at all. I don’t think it’s the strongest counterargument, but the energy and environmental cost of ATMs, banks, gold mining, and the Federal Reserve System get a pass because there isn’t even data from which you might roughly guess at the energy they consume. That slants the debate unfairly against cryptocurrencies.
A second pushback against the meme that bitcoin uses a country-worth of energy is to recognize the differences in what energy cryptocurrencies use. We are all inclined to think of energy as fungible, but a kilowatt-hour arriving at your house is very different from a kilowatt-hour in, say, Iceland. Around the world, there are many energy sources that are very far from users, at risk of being stranded and left unused. Enough energy far enough from other users might make it worthwhile to build an aluminum smelter. Bitcoin and cryptocurrency move to where the energy is cheapest; they don’t take from users in cities and parts of any country that face high energy costs, though they might create a floor on energy prices in some places. The energy-consumption profile of cryptocurrencies leans toward stranded energy and renewables.
There are yet other arguments that I rank somewhere from arguable to plausible. Bitcoin’s demand for energy may create economies of scale that renewables have so far lacked. If cryptocurrency mining can make wind farming profitable because it takes up the slack in usage when generation outstrips conventional demand, that’s actually huge. There is more along these lines, such as flare gas mining.
Once we have the uncertainties, the different consumption profile of cryptocurrencies, and even the pro-green potential of crypto in mind, we are ready to engage with the question of whether their energy consumption is “too much.” That is a question of values, and it reduces the debate to somewhat shopworn bones. Some folks prioritize human development, willing to risk costs to the environment. Others prioritize the environment. They want humankind to interfere less with the natural world. Whatever the case, and however organized, it is up to Nic to handle these matters at the alleged hearing. His task will be to act as a genteel debater even when opposing New-York-Times-like interrogators.
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