“Change the Code, Not Climate”: Will the Fight Over Bitcoin Make a Difference?
2022.04.10 07:41
“Change the Code, Not Climate”: Will the Fight Over Bitcoin Make a Difference?
Environmental activist groups including Greenpeace USA, as well as the CEO and co-founder of Ripple (the company behind the XRP cryptocurrency) have joined forces to campaign for a code change to Bitcoin as a consequence of its environmental impact.
With environmental concerns rising, changing Bitcoin in a way that it uses less energy may well sound like the go to solution, but what other changes might that potentially bring to the network?
Campaigning for a Change to PoS
The initiative, called “Change the Code, Not the Climate,” is running advertisements in major media outlets and publications such as the New York Times, Politico, and The Wall Street Journal in order to persuade the Bitcoin community to modify the network’s existing code.
At this time, Bitcoin runs using a Proof of Work (PoW) consensus algorithm, which requires miners to solve complicated problems to validate transactions and issue new currency. Campaigners are advocating a change away from this to the less energy-consuming Proof of Stake (PoS) mechanism.
“We are in this campaign for the long haul, but we are hoping — particularly since Bitcoin is now being financed by entities and individuals who care about climate change — that we can compel leadership to agree that this is a problem that needs to be addressed,” Michael Brune, the head of the campaign, said to Bloomberg.
Switching to Proof of Stake could result in Bitcoin’s energy use being cut by 99%, according to some estimates. Bitcoin’s major rival, Ethereum, the industry’s second-largest cryptocurrency, is already making the switch to the algorithm to make it lighter and more climate-friendly. Moreover, it proves that such a switch is viable to implement.
“Now, with Ethereum changing, Bitcoin really is the outlier. Some of the newer protocols – Solana, Cardano – are built on low energy,” highlighted Chris Larsen, the CEO and co-founder of Ripple, when speaking to Bloomberg.
The U.S. is among the major crypto mining countries, alongside China, and Russia. There has been increasing frustration among some communities in the U.S. that have found themselves hosting Bitcoin miners and dealing with secondary issues such as excessive noise. When China banned crypto mining last year, many miners moved their operations to the U.S.
Electricity Usage
According to the Cambridge Bitcoin Electricity Consumption Index, the Bitcoin network uses approximately 136 terawatt-hours, more than entire countries like Norway and Ukraine. Bitcoin’s share of the world’s total yearly electricity consumption is 0.68 %, and this figure has increased almost tenfold in the past five years alone.
Despite the massive electricity consumption of the Bitcoin network, there are different approaches that can be taken. Unlike other industries, Bitcoin mining is relatively mobile, and in their quest for cheap, abundant energy sources, miners can set up new facilities fairly quickly almost anywhere in the world, including in the most remote areas.
As a result, Bitcoin miners can tap into so-called ‘stranded’ energy assets that cannot easily be put to productive use by other industries. In this case, Bitcoin miners do not compete with other industries or residential users for the same resources, instead soaking up surplus energy that would otherwise have been lost or wasted. T&D electricity losses in the USA reach 206 TWh, which could power the entire Bitcoin network 1.5 times.
One solution to heightened electricity demands would be to search for renewable energy resources. The same could be the case for miners, who are constantly searching for cheap energy, which renewable sources often prove to be.
In 2021 The Bitcoin Mining Council released research results for over 32% of the current global Bitcoin network, finding that participants were using electricity with a 67% sustainable power mix. Based on that data, the total sustainable power mix could be as high as 56%, making Bitcoin mining one of the most sustainable global industries.
Why Does Bitcoin Need PoS? Or Does It..?
The Ethereum network’s switch to PoS seems to have laid the path for Bitcoin. However, the two networks have very different profiles. It was essential for Ethereum to seek out ways of making its network lighter and faster, as its general purpose is to serve as a smart contract platform, for which it needs high bandwidth to process complex transactions.
On the other hand, Bitcoin doesn’t make smart contracts, and the asset’s price and supply have given it a role as a reserve currency. By introducing the lightning network to the ecosystem, the network already addressed the questions of scaling and congestion.
The miner community, as well as investors, remains skeptical about the possibility of changing Bitcoin’s consensus model. Jason Deane, the chief Bitcoin analyst at Quantum (NASDAQ:QMCO) Economics, explained to Yahoo Finance that removing Proof of Work would be to remove the very essence of Bitcoin and render it worthless.
“Miners fully understand the value of what they do and the fact that a large part of Bitcoin’s underlying value is rooted in the linking of money with the laws of thermodynamics. Removing this aspect of the mechanism also removes its value as a truly independent network since the ‘low energy’ alternative isn’t really an alternative in terms of security and independence,” he said.
The complex issue also factors in other concerns. While the environmental credentials of PoS are impressive due to its energy efficiency, the approach has yet to be proven on the scale that Proof of Work platforms are.
“The only blockchains to date which have achieved what can be characterized as a level of mainstream adoption are both Proof of Work blockchains (Ethereum and Bitcoin). Proof of Work is the only consensus algorithm that has had its security battle-tested at scale and safely stored over $1 trillion in value, in the case of Bitcoin,” Garrick Hileman, the head of research at Blockchain.com explained to Business Insider.
Proof of Stake tends toward centralization, and moving from PoW would expose BTC to unnecessary centralization risks. There is no real limit on how much crypto a single validator can stake in certain Proof of Stake cryptocurrencies, and in practice this means that PoS systems may very well evolve to being just a few stakers controlling the system, just as with the traditional financial systems.
On the other hand, though PoW is considered decentralized, Bitcoin has three mining pools controlling almost 50% of the Bitcoin network’s computational power. Moreover, as costly as it is to mine individually, it is largely being carried out by massive industrial entities. On top of this, PoS is markedly more secure from 51% attacks.
Rivalry?
Larsen denied that the “Change the Code, Not the Climate” campaign is anti-Bitcoin.
“If I was concerned about Bitcoin as a competitor, probably the best thing I could do is let it continue on this path. This is just an unsustainable path,” he asserted.
Larsen further revealed that the decision to fund the campaign partly came due to him feeling that investors may turn away from Bitcoin unless changes are made, adding he wants to see both Bitcoin and Ethereum succeed.
However, the motives of the campaign were called into question due to the position of Ripple’s XRP as a rival to Bitcoin, with the head of a major crypto research platform calling Larsen “Judas”. Thousands of crypto enthusiasts on social media have shared their disdain for the campaign, and the Bitcoin community at large sees the change as unrealistic.
No one entity controls Bitcoin, so any proposed change to its blockchain protocol must be voted on and agreed to by the entire community to be passed. But even were that to happen, it would not kill the current Proof of Work mining model.
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