The Bitcoin network consumes more electricity than 159 individual countries including ireland, a new report by CBS revealed. In contrary to most claims, bitcoin’s massive consumption of electricity is a positive aspect of the cryptocurrency, as it provides more security value to the network.
Proof-of-Work is Important For Bitcoin
Earlier this year, in a response to JPMorgan CEO Jamie Dimon’s baseless condemnation on bitcoin, security expert John McAfee stated on CNBC’s Fast Money that bitcoin is a better store of value and a currency than all fiat currencies including the US dollar, because of its decentralized nature and the resources required to generate or produce new bitcoins.
“It costs $1000 to mine 1 bitcoin. What does it cost to print US dollar? which one is the fraud?,” said McAfee.
Bitcoin famously utilizes the proof-of-work (PoW) consensus protocol to confirm transactions on its network and produce new bitcoins until the Bitcoin network’s 21 million supply limit is met. PoW consensus protocol is a crucial aspect of bitcoin because it provides more security value to the bitcoin network and the currency itself.
While the authorities behind centralized monetary systems and currencies like the US dollar can opaquely manipulate the supplies of currencies through inflation, the production of bitcoin is completely transparent and mathematical. For this precise reason, Apple co-founder Steve Wozniak explained bitcoin is a better store of value than both gold and reserve currencies such as the USD.
“There is a certain finite amount of bitcoin that can ever exist. Gold gets mined and mined and mined. Maybe there’s a finite amount of gold in the world, but Bitcoin is even more mathematical and regulated and nobody can change mathematics,” said Wozniak at the Money2020 conference.
The transparency and security value of the Bitcoin network that allowed the network to evolve into a robust store of value played a critical role in leading the adoption of major multi-billion dollar hedge funds, investment firms, and investment banks this year, as more financial institutions have begun to acknowledge and adopt bitcoin as a safe haven asset and a currency.
For Bitcoin, Switch From PoW to Proof-of-Stake is Not Necessary
Highly regarded security and bitcoin expert Andreas Antonopoulos addressed the criticism against bitcoin’s massive consumption of electricity on November 19, in a response to a statement made by cryptocurrency podcast Epicenter host Brian Fabian Crain.
Crain claimed that the removal of the PoW consensus protocol is “urgent,” given that the electricity consumption of bitcoin has surpassed that of many countries. “Getting rid of Proof-of-Work is urgent: If Bitcoin was a country, it would have 65th highest in global energy consumption. 1 single transaction consumes as much energy as 9.6 US households for an entire day,” said Crain.
In response, Antonopoulos noted:
“Um no. Immutability is not a waste of energy. Christmas lights are a waste of energy.”
For other public blockchain networks like Ethereum that demand significant amount of data to be processed per second to support large-scale decentralized applications, the migration from PoW to proof-of-stake is inevitable and necessary. But, for networks like bitcoin that solely operate as robust stores of value, a switch of consensus protocol from PoW to PoS is simply not needed.
Featured image from Shutterstock.
Last modified: May 20, 2020 9:18 PM UTC