Environmental Impact

This is perhaps the most common criticism of Bitcoin, alleging that Bitcoin mining is damaging the environment. You'll find many "scientific" reports showing that Bitcoin's carbon footprint is larger than, say, the Netherlands. Or that Bitcoin creates more "e-waste" than the Netherlands.

Why is the Netherlands the benchmark for how much electricity a technology is morally allowed to consume?

The problem with these arguments is that they're entirely disingenuous and false. Bitcoin mining operates on electricity -- electricity -- as in, zero emissions. Truth is, Bitcoin mining is consuming far less electricity than electric vehicles, phones, televisions, washing machines, and pretty much all consumer electronics (all of which also use more electricity than the Netherlands).

Mining equipment does not require cobalt nor any rare earth metals found in electric vehicles, smartphone batteries, and other consumer electronics. As such, and unlike these other technologies, there is no slavery in the Bitcoin supply chain. There is no strip mining and environmentally destructive practices that leave large patches of earth uninhabitable. And Bitcoin's "e-waste" is demonstrably benign compared to smartphones, solar panels, and especially electric vehicles. To pretend otherwise is either shamefully naive or unscrupulously evil.

It all seems a bit odd to focus on the ethics of Bitcoin mining while ignoring, say, rampant child slavery in Congo's cobalt mines (which you personally support when buying an iPhone or Android), or the overthrow of Bolivia's government to maintain access to cheap lithium, or any of the disastrous strip mining operations necessary to make modern batteries. There are real concerns with the environmental impact of modern technology and the morality of supply chains -- focusing on Bitcoin is demonstrably wrongheaded and hypocritical.

The very devices critics use to complain about Bitcoin's energy usage are far more guilty of environmental damage and morally repugnant supply chains than Bitcoin mining.

Disingenuous arguments aside, is there environmental impact from Bitcoin and Bitcoin mining, and if so, is the benefit of Bitcoin worth this environmental impact?

Monetizing electricity

Bitcoin mining directly monetizes compute power. If you have a cheap source of electricity, and access to affordable ASICs, then you can make money mining Bitcoin. This simple set of incentives is unlike any in human history -- the business of Bitcoin mining is pure engineering, literally revenue earned directly from engineering. All other businesses require indirect means of revenue generation, typically in the form of customers or clients paying you money. In this case, it's direct -- if you create and propagate blocks, then you earn money. Bitcoin miners have no clients, no invoices, no accounts receivable. They either mine blocks, or they perish.

This unique set of incentives monetizes any and all electricity sources -- favoring sources that were otherwise not monetizeable. For the first time in human history, power need not be generated to support existing human settlements, but instead, humans are directly monetizing power for profit. This is why we're seeing off-grid mining, where the miners are finding and developing sources of electricity that are otherwise not monetizable to the existing grid.

This includes flared gas, abandoned coal, and excess hydro, wind, and solar. As a result, Bitcoin mining can be done in environmentally positive ways that increase grid stability, as well as increasing the reach of the grid itself. However, the economic game theory of Bitcoin is zero sum and adversarial. Profitable electricity sources can and will be rendered unprofitable over time, potentially leading to abandoned facilities and ghost towns.

Boom to bust (and back)

Like the small towns that would appear and prosper during a gold rush only to be abandoned later, Bitcoin mining will have this same effect at power generation facilities. However, unlike gold mining, where gold can be strip mined, leaving the town in ruins, Bitcoin mining cares only about ongoing electricity generation. Given cheap enough electricity, the miners will come.

While this sounds more stable than gold mining, in practice, the miners will leave as easily as they come. Imagine a small town forming around a hydro-electric powered Bitcoin mining facility. Tens of thousands of machines, and hundreds of jobs arrive at this location. A local economy forms, and for awhile things are good -- until there's a cheaper source of electricity and those same miners move. Perhaps some miners stay, but due to the cost disadvantage, they will likely go bankrupt in a few years.

The only way for this town to survive the zero sum Bitcoin mining game is to offer cheap enough electricity. Perhaps the small town expands the hydro-electric facility and even sells electricity at a loss -- all in the hopes of revitalizing the local economy. And maybe this works for a time, but eventually, they'll likely be priced out, because mining is still zero sum.

In this process of boom and bust, what are the environmental impacts? It's easy to focus on the success stories, and there will be many, but what about the failures? Will mining not incentive reopening coal plants only to abandon them in far more reckless means than would have happened otherwise?

For every environmental success of Bitcoin miners cleaning up toxic coal from a previously abandoned coal plant or consuming gas that would have been flared, are we not simply creating that same problem all over again due to the adversarial nature of Bitcoin mining economics? The incentives are entirely on finding cheap enough power to mine and propagate blocks. There are no incentives to do so cleanly -- unless of course the will and want is there to do so.

Will and want

For a civilization that is currently in the midst of continuous war over oil, and a global slave labor campaign to strip mine the earth for batteries and solar panels -- completely lacking the self awareness to recognize the abject evil and environmental damage this is causing -- I am not left with much hope that our modern civilization is in any position to fix any of the environmental issues that we proclaim to care about; let alone the comparatively benign effects Bitcoin mining.

I have no doubt that many people will pretend to be virtuous while turning a blind eye to the despicable evils that power their electric vehicles and modern living standards. Attempting to make Bitcoin a scapegoat is unfortunately inevitable, pretending Bitcoin is the problem rather than their own support of child slavery and human rights abuses in cobolt mines, or the strip mining that leaves the land uninhabitable. Perhaps, in a wiser and more contemplative future-civilization we will take these issues seriously and work to solve them.