This article is the first in a 10-part series on the Economic & Environmental Cost of Bitcoin. We will be revisiting my work from 2014, which had a look at the relative sustainability of Bitcoin compared to Gold, and the banking industry. We won’t be revisiting banking in this series, but we will revisit Gold.

Before we can get a good estimate of the economic and environmental costs of sustaining the Bitcoin Network, we need to understand several underlying principles & concepts, namely:

If you want a dense read, you can read the full report, which contains all reference links and citations. It’s important to note that data used in this series is from the end of July 2018 and things can change very rapidly when it comes to the hash rate growth of the network , and changes in mining technology and hardware prices — not to mention the market price of Bitcoin.

BITCOIN & ENERGY…
To understand the nature of Bitcoin and its ties to energy (spelled with a lower-case e), one needs to understand the concept and nature of capital-E Energy. Energy is the prevailing force in the universe — both Father Time and Mother Nature. It cannot be created or destroyed, only transformed from one state to the other. It is the finite but infinitely divisible, shape-shifting sole ingredient of the universe. Its force cannot be stopped, only harnessed through its good graces.

LET THERE BE LIGHT…
The Big Bang can be considered the “Birth of all Energy and Laws of Nature”. Bitcoin’s “Big Bang” was the mining of the Genesis Block and the setting in motion of the Laws of the Blockchain. Energy is split infinitely into units of lower-case energy and mass (calories, joules, pounds, kilograms etc.), just as Bitcoin is infinitely split into units of bitcoin — no mass, just energy. From here, the link between Energy & Bitcoin becomes evident when looking at Nature and Life, and the economic evolution of humans.

ENERGY, LIFE, AND THE ECONOMY…
At the most primal level, the instinct of Life is to survive. This is done by being efficient in obtaining and using energy in the form of calories from food. Energy is Life, and Life is sustained by energy. Plants get their energy from photosynthesis. Predators do this by consuming more calories than they use to hunt prey. In addition to covering base caloric needs from food, Human Civilisation has evolved to the point where we can transform Energy into a state of Power (fire, steam, coal, batteries, fuel cells, etc). This has taken us from cavemen harnessing fire to cook food millennia ago, to much more advanced energy technology from fossil fuels to renewable sources. Humans now expend their calories in the pursuit of currency and money to purchase their food calories, and to be consumers.

CURRENCY vs MONEY…
There are huge differences between currency and money. Money is finite, whereas currency is not. In abandoning the Gold Standard mere decades ago, our paper currency became backed by nothing but promises. Ever since then, the value of currency has tended to zero, and money to infinity. Currency violates the rules of Energy by being created out of nothing (aside from the comparatively infinitesimal energy used to print out currency). Disrespecting nature has led to dangerous levels of global wealth and income inequality, and widespread social and economic suffering. No form of life has defied Energy (i.e. Nature) and survived in the long term, and this has been the case for billions of years.

FIRST LIFE…
Cryptocurrency is the “Life” of money, of which Bitcoin was “first-life” — literally converting energy into money. It has evolved to keep meeting market needs, and sprouted a thriving cryptocurrency ecosystem. Bitcoin was designed to last as long as humans do, wherever they are in the universe with a communications link. Obviously, in the distant future, if humans have stood in the face of Energy and not harness it in a clean and renewable way, they will perish. Therefore, as we continue to advance technologically, the Bitcoin Blockchain will be a PERMANENT EMISSIONLESS STORE OF “MONETARY ENERGY” — money secured and proven to be both finite, and EARNED THROUGH HARD WORK (literally, “Proof of Work”), using massive amounts of energy in the process.

Join us again next week, where we will provide an executive summary of the series, and lay out the updates to our assumptions and data sources.

Bitcoin Evangelist. BEng MEngSc MBA