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How can Bitcoin a good long term investment, given one transaction is equivalent to carbon footprint of 986,125 VISA transactions?

If they use the Lightning network which takes transactions Off the Blockchain, wouldn't that defeat whole purpose of having ledger transaction?

https://digiconomist.net/bitcoin-energy-consumption/

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  • why is this voted down? I am trying to learn
    – mattsmith5
    Apr 17, 2021 at 20:09
  • How do we calculate the carbon footprint of a bitcoin transaction? For example: What is the carbon footprint of f96fa6b7c19e90f1dc7f2e5420645f57127a15f3bf7631d6f72ca14c43463c63?
    – user103136
    Apr 18, 2021 at 5:00
  • Is 1 bitcoin transaction equivalent to 1 VISA transaction in terms of real world payments involved in the transaction? Context: bitcoin.stackexchange.com/a/100829
    – user103136
    Apr 18, 2021 at 5:08

3 Answers 3

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I have read somewhere that every Bitcoin transaction is "equivalent to the power consumption of an average U.S. household over 22.86 days.". Is that true? Isn't that horrible?

tl;dr: Most people don't value Bitcoin as a payment mechanism, and even if they were, most payments are not recorded on-chain. So calculating the energy cost of a transaction is as impossible and nonsensical as it would be for gold.

It's true in a similar way that the lack of pirates is causing global warming. Yes, this is a valid estimation of Bitcoin mining's energy use divided by a valid estimation of on-chain transactions, compared to a probably valid estimation of household electricity use.

However, connecting these three figures in this way doesn't yield any insight beyond shock and awe. That's because Bitcoin's primary value is not as a payment network, so the number of on-chain transactions is not an interesting metric for it. This can be seen easily: On one hand the number of onchain transactions has always been limited — and that limit has been pretty much hit constantly since at least 2019. On the other hand, the value of Bitcoin, as well as the estimated number of its users, has been rising over many orders of magnitude since 2009. How can this be possible?

  • In recent years, long term store of value has become Bitcoin's main use case. That is, people use it more for storing their savings than for paying for goods and services.

  • Its current usage is thus more comparable to gold, which is also rarely used in transactions. I have never seen anybody calculate the energy cost of gold mining plus handling divided by the number of physical gold shipments. Probably because that's as misleading a number as the equivalent in Bitcoin.

  • Just as with gold, there are ways to make even small transactions quickly and cheaply with Bitcoin. Most real-world transactions use one of these off-chain methods. Probably the most popular today are custodial services like exchanges. Sending bitcoin from one customer to another on a service like this just requires changing two numbers in their database and is the equivalent of gold in a bank changing owners. It's hard to say how many such transactions there are, since there are many "bitcoin banks" and their numbers are proprietary, but it's safe to say they dwarf on-chain transactions by orders of magnitude.

  • Unlike gold, there are methods of transacting Bitcoin off-chain that require less trust in intermediaries, such as the Lightning Network or Blockstream's Liquid federation. With a growing demand in transactions, such alternatives are refined and gain popularity, without this being reflected in the above numbers. With the Lightning Network, it's even difficult to estimate how many transactions are being performed, since there is no central ledger recording them all.

But I have read that Visa transactions are much more economical!

That's because these are very different things. Visa transactions are just a few companies changing a few numbers in their databases. It's basically just a fancy way of signalling an intent to spend something. It's not final. There might not be a real transfer of value happening at all (all the "money" is still debt in the same bank, just on another account).

On the other hand, a Bitcoin onchain transaction is a real transfer of a bearer instrument, comparable to a gold shipment from one central bank to another. Those are also quite expensive, I imagine. It's total overkill if you want to buy a coffee. For that, it might be enough to just update some numbers in a (Bitcoin) bank. Or use the Lightning Network.

If you have a little time, Nic Carter has explained it much better than me.

If you have more questions regarding Bitcoin's carbon footprint, I recommend the FAQ at netpositive.money

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  • interesting, if the real value is store of value, why are they trying to create Lightning network? seems like an additional benefit they want
    – mattsmith5
    Apr 18, 2021 at 8:50
  • Bitcoin is a protocol for decentralized p2p network that creates consenus without needing a central authority to provide trust, bitcoin is a currency (token) issued as a reward and used for fees in the proof of work mining process. Lightning Network is a layer 2 solution for Bitcoin like chains.
    – user103136
    Apr 18, 2021 at 12:07
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    Blockchains don't scale. Lightning is a technology for enabling trustless payments/transactions that needs the Bitcoin blockchain as a base layer, but can scale much further. Other benefits include potentially better privacy and immediate finality. This will enhance Bitcoin's functioning as a medium of exchange. Beside the technical complexity, however, this is limited by economic problems, ATM, mostly volatility. So SoV comes first, MoE is still developing.
    – stefanwouldgo
    Apr 18, 2021 at 18:28
  • just accepted answer and gave points, feel free to thumbs up question also, thanks
    – mattsmith5
    Apr 21, 2021 at 22:01
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No, bitcoin is inherently not an investment. There are three distinct concepts, but any one instrument could be more than one of these:

  1. Saving, or Store of Value
    • Bitcoin may well be this, at least in the medium term
  2. Speculation, or betting on the change in value of something
    • Bitcoin is principally this
  3. Investment, or spending money to increase productive capacity
    • Bitcoin is very much not this. In fact, on a global scale, it is the opposite. By using so much of our carbon buffer, productive capacity and waste disposal capacity it is literally reducing our useful productive capacity.

By buying bitcoin, you are providing price support for the mining operations that you detail. If you invest, you help everyone have more stuff. If you buy bitcoin you help everyone have less stuff.

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  • I agree with your investing vs saving distinction, but I don’t think buying bitcoin necessarily leads to a net reduction in useful capacity: the lower friction and less censorship when compared to legacy financial networks might make for a net increase of throughput of economic activity, as new forms of economic interaction become possible using bitcoin. The effect you described may well exist, but it is also possible it could be outpaced by the gains of these new avenues of economic interaction.
    – chytrik
    Apr 18, 2021 at 20:27
  • @chytrik with current transaction fees, where do you see this low friction? We are talking about 1% of our CO2 production, it should be demonstrable on that scale.
    – Dave
    Apr 18, 2021 at 20:58
  • tx fees are only one factor relevant in quantifying ‘friction’, but in any case, as example, lightning payments allow on-chain fees to be amortized across a potentially unlimited number of payments. The tech is still young but the potential of it is mind-blowing in terms of facilitating low-friction payments.
    – chytrik
    Apr 18, 2021 at 21:10
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    Ah, I understand your point better now. As example then: If I want to send ~$1 worth of value to someone in a far-off country, then a lightning network payment is lower friction than any other method I can think of. It is as simple as communicating a number to the counter-party privately. Much lower friction than any other payment method (wire transfer? PayPal? Dollar bills sent in an envelope??). Bitcoin does for money what the internet is doing for information: ease of transaction! And so people will transact more, and in new ways (again, similar to the change the internet is effecting).
    – chytrik
    Apr 18, 2021 at 22:52
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    > The friction of bitcoin investment is 1% of current CO2 production. < You are off by quite a bit here. Global energy-related CO2 emissions were 31.5 Gt in 2020 (iea.org/articles/global-energy-review-co2-emissions-in-2020). Bitcoin mining caused at most 35.89 Mt (netpositive.money/calculator) That's about 0.1 % of JUST the energy-related CO2 emissions.
    – stefanwouldgo
    Apr 19, 2021 at 13:48
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Bitcoin's energy consumption is not a long-term problem. It is a short-term red herring being used by those afraid of Bitcoin's eventual sweeping adoption.

There are already plans being developed to make Bitcoin's mining inefficiencies (energy consumption) independent of terrestrial sources of energy.

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