Bitcoin is a sustainable currency in Europe
Recently, we have been tragically exposed to the thought process of a certain Eero HeinÃ¤luoma, a Socialist Member of the European Parliament. While it does not appear that there is currently a proposal to ban bitcoin mining, it is safe to assume that such a proposal is only a matter of time.
The war on reality
The brilliant idea of ââMr. HeinÃ¤luoma is to “stop the use of the underlying technologyâOf Bitcoin, which means prohibiting proof of work. This ill-informed position is of course followed by a call for cryptocurrencies to move towards a more âclimateâ consensus in the form of proof of stake.
Does it matter even if we repeat for the thousandth time that proof of work is Bitcoin’s fundamental breakthrough, securing the neutral and predictable monetary policy that is so sorely lacking in today’s fiat infested world? It doesn’t seem to matter to these people; it is as if they are waging a war against reality.
When government action crusaders like Mr. HeinÃ¤luoma get down to business, the facts fly out the window. They have to sell a great story. And the story in the context of bitcoin mining is that it’s bad for the environment and someone should do something, which means the government should ban it, as it usually happens.
The good news is that Bitcoiners have some facts on their side.
According to the Bitcoin Mining Council (BMC) of Michael Saylor and his Second Quarter Bitcoin Global Mining Data Review, here are the recent discoveries on the nature of bitcoin mining:
- The energy mix of the members of the Bitcoin Mining Council, who constitute approximately 32% of the global Bitcoin hash rate, consists of 67% of sustainable electricity generation (sustainable defined as: renewables plus nuclear plus carbon with net carbon credits) .
- The above metric is then extrapolated to roughly 56% sustainable energy use for the entire bitcoin mining network.
Previous estimates on the proportion of renewable / sustainable energy in bitcoin mining vary between 39% (Cambridge University Study) and 73% (Coinshares study). Unlike the BMC report, these two studies do not include nuclear energy or carbon offsetting in their calculations. In total, around 50% sustainable energy seems plausible, especially when you understand the incentives involved: miners naturally look for the cheapest source of energy, which is often unused renewable energy (hydro, solar, wind). during peak hours) or so-called stranded energy, such as flared natural gas from oil rigs.
So how does the European Union compare to Bitcoin, in terms of sustainable energy?
According to official energy statistics from Eurostat, the European Union uses 15% in renewable energy and 13% in nuclear energy, for a total of 28% in sustainable energy production.
That’s much less than Bitcoin’s 39% lower estimate in renewables (which excludes nuclear) and half of BMC’s estimate of 56% (which includes nuclear).
Bitcoin mining is much greener than the entire European Union.
What is good is that if for the European Union, the increasing share of renewable energies is reached thanks to a top-down, politically motivated program, which comes to huge costs and increased network instability, for Bitcoin, it’s just a natural result of economic incentives. Bitcoin is an environmentally friendly side effect, without anyone having to push it.
Put Frankenstein’s Monster to Rest
As podcaster Marty Bent points out, no renewable / sustainable energy relationship will appease the powers that be. Even if bitcoin were mined exclusively with hydropower, solar, gas flares, and volcanoes, it would still be criticized for being wasted energy. It is not a question of energy statistics, but rather of perceived legitimacy. Politicians and other fiduciary maximalists simply need to portray bitcoin as useless and harmful, and they’ll use any narrative that does the job, whether it’s wasted energy, terrorist financing, drug trafficking, software. malicious, inequality or any other FUD.
The truth is, bitcoin is a troubling reflection on the fiduciary establishment. Contrary to hundreds of predictions, bitcoin is thriving after 12 years of existence, with a country already adopting it as legal tender with others watching it, and users can make global, instant, and near-free transactions (via the Lightning Network) despite many claims of bitcoin scalability.
Bitcoin is the money Europe deserves after 20 years under a slapped currency regime that has been disintegrating from the start. The euro was introduced in 2002 and had already gone through a major crisis in 2008, when Greece had to be bailed out. The problem was that the single monetary policy acted as a huge subsidy to fiscally irresponsible countries. Greece, with others PIIG, was a risky country to lend, but the single monetary policy allowed these countries to obtain artificially cheap credit. The result was that the country went bankrupt when interest rates rose during the financial crisis. Since German banks were the main creditors of the Greek government, the whole project had to be bailed out so that the euro zone did not collapse, less than a decade after the creation of the euro.
Since then, the entire euro area has been kept on zero-rated life support. The perpetually easy money policy has had a disastrous effect on the public finances of member countries. To initially adopt the euro, candidate countries had to meet the Maastricht criteria, one of them being to keep public debt below 60% of the country’s gross domestic product.
This is what the measure of debt to GDP looked like at the end of 2020:
The euro area is made up of nineteen countries. Twelve of these countries would no longer pass the Maastricht debt / GDP criteria, and would not meet the “mandatory” Stability and Growth Pact conditions.
But the biggest joke of all is that Greece’s public debt is now almost the same price as German bonds – meaning it apparently doesn’t carry more risk than German bonds, even though the country practically went bankrupt a decade ago and is living up to its debt ears.
This is not a criticism of Greece or any other country in particular. The politicians in these countries just follow the incentives. And the incentives for YOLO are to go into massive debt. Why not? The market doesn’t care, from what you can see on the bond spread chart. He doesn’t care because of the moral hazard effect: Greece has already defaulted and been bailed out. Current monetary policy is even looser than it was ten years ago, if at all.
As some feared during the introduction of the euro, the euro functions more like an Italian lira than the German mark. This was inevitable, as artificial political constructs like the eurozone must necessarily respond to weaker members, lest it collapse quickly.
The euro thus creates zombie countries and zombie economies, where all that matters is free credit to keep the show going. But all debts have to be settled in the end, one way or another – either through cascading bankruptcies or through total dilution of existing euro holders (aka hyperinflation).
It seems that it is the euro that has a sustainability problem.
And the powers that be seem to be aware of this. When conventional monetary policy tools like interest rates are exhausted, central bankers have to get creative. With current fiat money, negative interest rates or helicopter money are unfathomable. This is why the Orwellian digital euro is actively being developed by the European Central Bank.
Of course, the digital euro does not change the trend of monetary policy. In Bitcoiner parlance, this would rightly be called a shitcoin: a centralized and unpredictable monetary policy with an unlimited cap, based on proof of authority, premised, authorized and perpetually monitored. This may prolong the life of the Frankenstein monster that is the euro by a few years, but such an abomination will not survive long nonetheless. And I hope that the whole premise of a fiat money regime will die with it.
[T]The energy needs of the [digital euro] infrastructure would be negligible compared to the energy consumption and environmental footprint of crypto-assets, such as bitcoin.–BCE
And that is precisely the problem: fiat money can be created out of thin air. The energy requirements may be negligible, but so is the long-term value.
No competition in the Fiat Land
If environmental concerns were fair, bitcoin mining would be warmly welcomed in Europe, as bitcoin mining enables the economical use of otherwise wasted energy sources and has the potential to stabilize the grid using the occasional overproduction of energy. renewable energies. As has been argued by many times more.
The real intention here is more prosaic: to protect one’s own territory. The monopoly of money is sacred to the state and must be protected, especially when it cannot defend itself. Already central bankers are losing the battle of ideas – just check the comments on any recent tweet from the International Monetary Fund, Bank for International Settlements, Federal Reserve, or European Central Bank; you will be hard pressed to find a single positive answer. Attempts to tarnish Bitcoin’s reputation with false environmental concerns may be a distraction for some time, but they will not solve the underlying problems of the euro.
Europeans will witness an increasingly stark contrast in the years to come: ever more desperate attempts to save the monetary union and an ever more reliable monetary policy from Bitcoin. The smear campaign will continue and will likely be much more hostile than it is today. Hopefully the audience will be able to distinguish fact from fiction and embrace solid money on their own, despite the official narrative.
This is a guest post from Josef TÄtek. The opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.