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The criticisms I'm about to levy do not apply to every cryptocurrency. I'm only criticising the cryptocurrencies that involve high energy usage per transaction. Proof of X based cryptocurrencies where X is work, storage or some other energy-intensive process fall into this category. But I'm mostly referring to proof of work. I'm excluding proof of stake cryptocurrencies because proof of stake does not cause considerable energy usage per transaction. I'm still including non-blockchain cryptocurrencies that employ proof of work and use a high amount of energy per transaction. From now on I'll use the word "cryptocurrency" to mean only those in that high energy consumption group without further explanation.
What counts as "high energy consumption" is up for debate. But even in conservative estimates, the cryptocurrency with the highest market cap, Bitcoin, still uses enough energy per transaction to power the average American home for 1 to 2 months. At a few transactions per second, that adds up to more energy usage than some countries. We can argue all day long about what counts as "high energy usage", but Bitcoin is clearly far past that point.
There's no question that it's unsustainable. It's an unreasonable amount of energy for a single transaction. Nobody should be apologizing for Bitcoin. Ethereum, Dogecoin, Bitcoin Cash, Litecoin, Monero and many other cryptos also have completely atrocious energy usage. At least, they would if they were more popular. Ethereum seems to be moving to proof of stake though. I expect it to be off this high-energy list within a year. But for now, it remains on the shitlist.
Too often I see crypto enthusiasts making excuses for crypto's extreme energy usage. So let's consider the two most common excuses I hear.
By far the most common retort I hear to complaints about proof of work's energy usage is that the energy isn't wasted. This retort is so poorly thought out that it saddens me to hear it. In the trivial sense that proof of work accomplishes something, the energy isn't wasted. But it's extremely inefficient compared to proof of stake and some non-blockchain based cryptos. There just isn't a good reason not to use proof of stake when the energy consumption difference is so enormous.
It feels almost patronizing that I have to explain this, but the energy is obviously wasted because the same job can be accomplished using several orders of magnitude less energy. It's irrelevant that proof of work for instance secures the blockchain when there are much greener ways to have the same security. Here's an analogy: Imagine time were the precious resource rather than energy. Proof of work would be akin to cutting the lawn with scissors versus a lawn mower. No one in their right mind would say the scissors are fine because they eventually get the job done. In the same way, no one in their right mind should be saying energy is well spent on proof of work blockchains.
The scissors analogy isn't even that good because in reality proof of work is probably still orders of magnitude more wasteful energy-wise than cutting the average lawn with scissors would be time-wise. Don't quote me on that though. Anyhow, I think I've made my point about proof of work and other resource heavy mechanisms for securing the blockchain wasting energy.
Crypto enthusiasts also like to point out that the centralized banking system uses more energy. It takes a lot of energy to operate the banks' servers, move cash from one place to another, operate ATMs and process and verify the transactions. Therefore cryptocurrency isn't really worse than standard centralized banking everybody already uses, right?
I see why crypto enthusiasts want to compare cryptocurrency to centralized banking in terms of energy consumption. Their head is in the right place. It makes sense because cryptocurrency is supposed to replace centralized banking or at least serve as a legitimate alternative to dealing with the banksters.
The problem, again, is that this is a very poorly thought out argument. For starters, centralized banking and cryptocurrency isn't a fair comparison to make. They serve completely different functions in society right now. Centralized banking can offer loans, insure your savings in case of a breach, generate interest and a dozen other vital services cryptocurrencies can't or don't offer. On top of that, fiat currency fulfills 2 functions of money that crypto doesn't:
1. It's a good medium of exchange because transaction costs don't have out of control fees and transactions happen relatively quickly.
2. It's also a good store of value because the price doesn't have massive fluctuations.
For those reasons it's not exactly fair to compare the energy consumption of cryptocurrency with centralized banking. They fulfill completely different roles in society. Just to demonstrate how ill thought out this excuse is for cryptocurrency's energy consumption, let's ignore the different societal roles of crypto and centralized banking. Even if it did made sense to compare the two, without hesitation I can tell you that centralized banking uses less energy per transaction than some of the most popular cryptocurrencies.
I've seen several pro-cryptocurrency articles online embarrassingly promoting that cryptocurrency uses less total energy than centralized banking, making cryptocurrency the greener "alternative". Even if that were true, it would be irrelevant. What matters is the energy consumption per transaction, not total energy consumption. I can tell you without even checking the numbers that centralized banking does not require the energy of the average American home over a whole month just to perform 1 transaction.
In conclusion, the argument that crypto is greener than centralized banking is fractally wrong.
So far we've established that cryptocurrencies have a real energy consumption problem, that it's not greener than centralized banking and that the technology to fix it (proof of stake) is well-established. The question is then, until such time as the problem is fixed, should you use crypto?
Of course it's fine to use cryptocurrencies that don't have the energy problem. All proof of stake cryptos should be fine. I myself use Session, a messaging application based on Lokinet nodes incentivized by Oxen, a proof of stake cryptocurrency. I see no energy-related ethical problem with Oxen or the dozens of other proof of stake cryptos out there.
For cryptocurrencies that have the high energy consumption, it's a different story. I can already hear some of you objecting "But I just use the currency! I don't do any mining. How am I doing any harm?". The issue there is you're still encouraging mining by participation. When you use cryptocurrency, you validate its usefulness which gives it value which incentivizes more miners to mine for block rewards. This makes you part of the problem.
With that said, cryptocurrency is the only way to transact online in a truly anonymous, private, peer to peer way. The centralized payment processors don't even come close to the privacy and freedom cryptocurrencies offer. Are you expected to just stop caring about your financial privacy and freedom in favor of energy efficiency?
You could try using only proof of stake cryptos. But, for the most part, those aren't accepted as payment and how are you going to acquire them to begin with? Most of the time you have to exchange a high energy consumption coin like Bitcoin for a low energy consumption crypto which defeats the purpose. Besides, proof of stake cryptos aren't even private. So there's already one major benefit of using crypto gone. The market for green cryptos just isn't there yet.
We seem to have hit a "hard conflict" as I would put it in my post about Integrated Activism. I recommend reading that as it may help understand where I'm coming from in this post. Anyway, I'll borrow a quote from that post here:
"...you are going to run into situations where two or more social issues are in a "hard conflict" and there's no easy way to respect them all. What you have to do in situations like those is to figure out your priorities." - Me, Integrated Activism
In this case, the social issues at conflict are privacy and freedom versus energy consumption. You can either keep your economic privacy and freedom or not encourage a system which wastes obscene amounts of energy. But you can't currently do both. Perhaps once Ethereum, the 2nd most popular cryptocurrency, transitions to proof of stake it will become more feasible to do both, minus the privacy of course. For reference, I talk about this exact solution explicitly in Integrated Activism under the "Clever Solutions" header. However, at present, it's not possible to maintain both freedom and privacy and energy efficiency. So I return to the same question I posed earlier. What should you do in the face of this conflict?
Well unless you've been living under a rock for the past 30 years, you know that climate change poses an existential threat to life on earth. In order to avoid climate mayhem, we need to cut down our energy consumption. Avoiding using cryptocurrency is a good way to do that. So I recommend you avoid using cryptocurrency wherever possible. But I'd like to break it down a bit more than that.
Small website owners specifically should not accept cryptocurrency donations from high energy consumption currencies. This is why I've removed my crypto donation addresses from the about page of this blog. I feel that I can no longer justify including them on my blog with the extreme energy consumption they use. Including them in the first place was a mistake. Small website owners like myself are also unlikely to receive sizeable donations. So, in practice, it doesn't make much of a difference choosing not to accept crypto donations.
I still accept donations via Liberapay. I will start accepting crypto donations again only for Ethereum after it switches fully to proof of stake. It'll be popular enough that someone looking at my website might have Ethereum they want to donate and it'll be fully independent of extreme energy consumption coins. Therefore I see no reason not to accept it in the future.
I encourage all small website owners to follow in my footsteps and reject cryptocurrency donations until Ethereum switches to proof of stake, and then accept only Ethereum until more popular coins make the switch. I expect Ethereum to make the transition within a year, so I shouldn't be without crypto donation options for long. It's not worth it to list all the other relatively unknown proof of stake cryptocurrencies out there on my blog. I probably won't get any donations from them anyways and it's extra work.
I am disappointed to see Luke Smith's landchad website promoting cryptocurrency to small website owners. I support the goals of the website in getting more people an online existence independent of social media, but Luke should at least mention the caveat of extreme energy consumption in the crypto article. Either that or outright take down the posts about accepting cryptocurrency. I plan on contacting him about this after publishing this post.
As I mentioned in my post on Integrated Activism, I have observed the cryptocurrency space largely ignoring the effects that crypto has on energy consumption, instead focusing only on privacy and freedom. In that post, I referred to this myopic focus to the detriment of other important social causes as "tunnel vision". Landchat.net is also guilty of this. It makes no mention of energy consumption at all. The crypto community needs to do better for environmentalists.
But what if you don't run a small website? What about a large website that regularly receives crypto donations? What about other internet services? What if you heavily rely on crypto donations? What if you pay for online services using crypto?
I recognize and respect the argument that there's no other alternative to crypto, therefore it's socially important for freedom and privacy. I also understand we're in the middle of an existential crisis that is climate change and if we don't become more conscious about our energy use, freedom and privacy won't matter because there won't be humans to possess those rights. Honestly, where to draw the line is not quite clear for me.
Imagine you were to live in an increasingly repressive country where protests were being shut down and funding to activist groups blocked. Cryptocurrency might be important for environmentalists getting organized. I'm not here to tell you not to use cryptocurrency under any circumstance. But if you're just accepting donations for a small online blog or making unnecessary online purchases with crypto, you should stop. In the general case, crypto should only used when there's absolutely no other option, if at all. That is, if you care about a livable planet.
So that's the best argument I have for why you should avoid using cryptocurrency as much as possible, at least until greener alternatives make themselves available. I get what it's like to be excited for the technology. I'm extremely excited for what's to come. I see a lot of promise in its future and I'm cautiously optimistic. We should consider all relevant social concerns, not just freedom and privacy. And we shouldn't ignore the environmental problem just because the technology is still developing.
The very first thing environmentalists bring up when I mention cryptocurrency is the energy consumption. They are much happier to criticize it than crypto enthusiasts which makes sense. Most of them don't have a stake in it at all. They don't use it for anything. As someone who cares deeply about the environment and economic privacy and freedom, I believe I've struck a reasonable compromise by recommending avoiding cryptocurrency as much as possible right now. As much as I love crypto, I can't deny that it's having a disastrous environmental impact. Us crypto geeks need to think more carefully about how it affects the environment rather than recklessly promoting it everywhere we can.
The future is not bleak though. The 2nd most popular cryptocurrency plans on switching to proof of stake soon. The technologies are improving all the time. I hope more cryptos will follow Ethereum's example switching to proof of stake, especially Monero. The technology is there. Just wait a little longer until there are more energy efficient cryptocurrencies in popular usage. Then you can start participating and feel good for being environmentally conscious too.
1: Integrated Activism
2: About page
Unless otherwise noted, the writing in this journal is licensed under CC BY-SA 4.0.
Copyright 2019-2021 Nicholas Johnson