Debunking Myths: Bitcoin vs AI's Real Environmental Impact
In a world of emerging technologies, Bitcoin and Artificial Intelligence (AI) often find themselves on opposite ends of public perception. Bitcoin is frequently portrayed as an energy-hungry villain, while AI is regarded as an industry savior or ultimate performance enhancer. But beneath the surface, both technologies are energy-intensive, each with its own environmental implications and challenges that are not often discussed.
As AI’s influence rapidly extends and Bitcoin’s role in global finance solidifies through increasing mass adoption, the time has come to look beyond headlines and examine the real implications of these two energy-based technologies. This article seeks to unravel the complexities, mitigate the FUD (fear, uncertainty, and doubt), and provide a deeper understanding of Bitcoin and AI's energy footprints.
Bitcoin: A Fraction of Global Energy Consumption
In December 2017, sensational headlines predicted that Bitcoin would consume the world’s energy by 2020. This apocalyptic forecast, widely circulated by mainstream media and bolstered by flawed and negligent reports, failed to materialize. The World Economic Forum featured similar captions, as various organizations cited the same sources.
As we stand in 2024, Bitcoin’s energy consumption is nowhere near the predicted catastrophic levels. According to the University of Cambridge, Bitcoin’s current annual energy consumption is under 100 terawatt-hours (TWh). Even during its peak usage during the first half of 2021, Bitcoin’s consumption remained under 150 TWh. To put this in perspective, the world’s total energy consumption surpasses 176,000 TWh annually. This means that Bitcoin consumes less than 0.1% of global energy, which leaves it as a mere rounding error in the grand scheme of things.
So, while Bitcoin’s energy consumption is often compared to that of entire countries, such comparisons are misleading without context. Many companies, including the more well-known ones like Google, YouTube, Facebook, Amazon, and even household appliances like clothes dryers, consume more energy than the Bitcoin network.
According to electrical engineer and macroeconomic analyst Lyn Alden, the cruise industry uses a comparable amount of energy to Bitcoin yet garners far less scrutiny. To grasp the Bitcoin network's importance, people should remember that it serves over 100 estimated million users, providing a global financial service valued in the hundreds of billions of dollars and access to international transactions for unbanked citizens – especially from developing nations. It is also regarded as a financial instrument that allows one of the soundest monies available, if not the hardest digital asset currently in existence. It has been compared to digital gold and has been the best-performing financial asset in the last 15 years. In today's fiscal dominance landscape, Bitcoin’s non-inflationary feature that enables technology to preserve value is something to consider as the dollar continues to lose purchasing power through inflation and taxation. Also, Bitcoin´s energy consumption must be weighed in light of the utility it provides, which is far higher than what the network asks for in return.
The Bitcoin network also has a very advanced inherent feature programmed in its code, making it responsive to energy inflows. The network is designed to become more energy-efficient over time through its halving mechanism, which incentivizes Bitcoin miners to optimize their operations. Halving is an event where the reward for mining new bitcoins is cut in half, meaning miners receive 50% fewer Bitcoin payments (rewards) for verifying transactions. This is the only way Bitcoins are created and go into the market. This means that the halving decreases over 50% the rate at which new bitcoins are created every four years, lowering the network´s overall energy consumption in the long term.
Furthermore, the development of Bitcoin scaling solutions like the Lightning Network for micropayments has significantly increased Bitcoin’s per-transaction energy efficiency. This layered approach to scaling imitates traditional financial systems, ensuring that Bitcoin’s energy expenditure remains proportional to its utility.
The Myth of Bitcoin’s Environmental Harm
Critics often focus on Bitcoin’s energy intake without considering the source of that energy. The reality is that a substantial portion of it comes from renewable or otherwise wasted energy. Unlike most energy consumers, Bitcoin miners can mine in remote locations where energy is abundant, cheap, and underutilized. For instance, as explained in this thorough report on Bitcoin mining by Lyn Alden, hydroelectric power stations often produce excess energy during off-peak hours, which would otherwise go to waste. Bitcoin miners can tap into this surplus, converting what would be wasted into securing the monetary network that has never been hacked.
In 2018, Nic Carter, Fidelity’s first digital asset analyst and later founding partner of Castle Island Ventures, explained Bitcoin´s energy usage clearly: “Imagine a 3D topographic map of the world with cheap energy hotspots being lower and expensive energy being higher. I imagine Bitcoin mining being akin to a glass of water poured over the surface, settling in the nooks and crannies, and smoothing it out”.
The efficient management of energy resources from the Bitcoin network is abundant and highly promising. The Bitcoin Mining Council has also documented the gradual shift toward renewable energy. This industry group collects and publishes data on the energy sources Bitcoin miners use. Their findings consistently show that Bitcoin mining uses up to 63% renewable energy and helps stabilize the grid in countries like the United States and Canada. This helps fight the narrative that Bitcoin is inherently environmentally harmful. Instead, it demonstrates that when correctly managed, Bitcoin can contribute to an efficient use of energy resources.
The Convergence of Bitcoin and AI: A Symbiotic Relationship
AI’s growing energy demands have created a highly favorable set of circumstances for Bitcoin miners. Many Bitcoin mining companies are diversifying their operations by leasing their facilities to AI companies. This partnership makes sense on multiple levels. Bitcoin miners already have the infrastructure needed to support energy-intensive operations, including access to cheap power and cooling solutions. For AI companies, partnering with Bitcoin miners offers a way to scale their operations quickly without building new facilities from scratch.
One example of this trend is Core Scientific, a major Bitcoin mining company that recently emerged from bankruptcy. In June 2023, Core Scientific announced a partnership with AI startup CoreWeave, agreeing to host over 200 megawatts of GPUs (graphics processing units) used for AI training. This partnership reflects a broader trend of AI companies making aggressive offers to use Bitcoin mining facilities, recognizing the value of the infrastructure that Bitcoin miners established years ago.
However, this convergence also comes with unease over energy consumption levels. As more Bitcoin miners turn to AI for more stable profits than Bitcoin mining, the combined energy demands of both industries could put additional strain on the electrical power grid. Some jurisdictions like Texas have already implemented long waitlists for large data centers to connect to the grid, and this trend is likely to continue. Also, the increased competition for energy resources could increase energy prices, making electricity more expensive for consumers and businesses. If this increased fossil fuel-based sources meet energy demand, it could lead to greater carbon emissions, accelerating climate change and environmental degradation.
AI: The Energy-Intensive Future of Technology
Bitcoin’s energy usage garners negative media coverage to this day, while AI’s high-level energy consumption is less frequently discussed, largely because it is a newer technology. However, its energy demands are beginning to receive more public scrutiny. Developing and operating AI systems, particularly large language models like ChatGPT, require vast computational power. This power, in turn, demands significant energy. For example, according to a recent Goldman Sachs report, a single ChatGPT query uses ten times more energy than a standard Google search. This query´s energy consumption is equivalent to turning on a 60-watt light bulb for about three minutes.
The AI space is expected to grow at a 37.3% Compound Annual Growth Rate (CAGR) from 2024 to 2030, according to Forbes data. Also, larger businesses are twice as likely to adopt and deploy AI technologies. Currently, over 50% of companies in the US with more than 5000 workers are using AI.
The expansion of AI and steady Bitcoin adoption raise important questions about future energy expenditure. While we have learned Bitcoin’s energy use is a small fraction of global consumption and sourced from renewables at more than 50% and increasing, AI’s energy demands grow at an alarming rate, and renewables like solar, wind, and hydro may not be sufficient to meet this demand. This has led tech giants like Microsoft to explore alternative energy sources, such as nuclear power, to solve their energy needs. Still, the majority of AI data centers continue to be powered by non-renewable energy. Despite the efforts from the tech behemoths, AI's growing power needs are causing delays in retiring fossil fuel plants.
The shift toward more energy-intensive industries has led to renewed discussions about the need for a balanced energy portfolio. Experts argue that combining renewable energy, nuclear power, and even traditional fossil fuels will be necessary to meet the growing demand. However, this approach will require careful consideration of the long-term environmental effects. Climate activists are even concerned that AI could lead to the development of new fossil fuel power plants.
Bitcoin and AI: The Battle for Our Planet’s Future
Bitcoin and AI are unquestionably emerging as major players in today's energy-intensive digital landscape. This mandates a thoughtful, nuanced perspective when addressing their energy expenditure and technological requirements for the future.
As already stated, the key distinction between the Bitcoin protocol and AI lies in their energy sources: AI data centers rely heavily on fossil fuels, whereas Bitcoin mining primarily utilizes renewable energy. However, it still uses fossil fuels but to a much lesser extent. It is important to note that the Bitcoin network launched in 2009, whereas major AI technologies like ChatGPT emerged about a decade later. Bitcoin’s built-in halving mechanism, which reduces energy consumption over time, makes it more energy-efficient than AI. In contrast, AI's infrastructure continuously expands with no predictable limits in sight or energy-optimization protocols. Ultimately, AI systems could benefit from adopting energy strategies similar to the Bitcoin protocol.
A positive outcome in the future of these technologies will depend on their ability to innovate and adapt to the energy standards that the world needs and opts for. For Bitcoin, even if it has a much better way of seizing stranded energy than AI, this means continuing to optimize energy efficiency through further expansion of renewables to maintain the secure and decentralized network. For AI, it means finding sustainable ways to power data centers and ceasing fossil fuel dependency without compromising product performance. Ultimately, the aim must be to harness the potential of both technologies while avoiding negative environmental impact, eradicating carbon emissions once and for all.
As we move forward, it will be key to foster open dialogue and collaboration between industry stakeholders, policymakers, and the public. The decisions made today will shape the trajectory of these assets for the coming decades. From a human perspective, the rapid expansion of AI as a performance-enhancing tool and Bitcoin as a decentralized, public monetary system prompts reflection on which societal values shall ultimately prevail.
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