There has been a lot of talk recently about how the price of BTC crashed after known sustainable energy-focused Tesla CEO Elon Musk stopped accepting BTC payments and ultimately separated itself from it because he was concerned over the digital currency’s “rapidly increasing use of fossil fuels for Bitcoin mining.” This led to $365 billion being wiped off the cryptocurrency market in May, and BTC has yet to recover its previous price.
All this uproar has caused a huge confusion about Bitcoin mining, Proof of Work (PoW) and BSV. And this calls for a clarification, which was discussed in-depth by a panel at the recently concluded CoinGeek Conference held in Zurich last June. The panel discussion, moderated by Bitcoin Association Technical Outreach Manager for North America Bryan Daugherty, features leading provider of blockchain solutions nChain CTO Steve Shadders, BSV-focused venture company Unbounded Capital Managing Partner Zach Resnick, TAAL Distributed Information Technologies executive board member and CMO Angela Holowaychuk, and UK-based digital wallet Zumo Environmental & Sustainability Advisor to the Board Kirsteen Harrison.
“I think what [Elon] got right is that BTC is not efficient and it does not, I think, have a good ratio of what it costs to use and the environmental cost relative to its utility. I think what people get wrong though is then, that’s true for all Proof-of-Work blockchains, that’s true for all versions of Bitcoin, that’s true for crypto in general… Proof of Work without a limit on scale is actually wildly efficient, perhaps one of the most efficient technologies ever created in history,” Resnick clarified.
To be put it more bluntly, unscalable Proof-of-Work blockchains, such as BTC and ETH, are giving digital currencies a bad name, not only when it comes to price volatility, but as pointed out here, even when it comes to energy wastage. This is because PoW, which is integral to Bitcoin mining, uses up a huge amount of electricity that sustainability is questioned.
“The topic of sustainability, I suppose, is a question of the balance between the cost of something and the benefit it provides. And the fundamental unit of utility and benefit in Bitcoin, I guess, is the transaction. So there’s a lot of talk about the energy cost of Bitcoin per transaction,” Shadders explained.
This massive energy consumption is thought of as something that is not worth it, because only a few rich people are benefiting from it, on top of the fact that BTC only processes five to seven transactions per second (tps). An optimistic analysis shows that mining one BTC would need at least 5,500 kilowatt-hours, which is about 50% of what an average American household consumes in a year.
“I think proof of work is very much equated to BTC, and I think what happens then is that people see this direct line between electricity use, the value that Bitcoin creates and that sits directly with the holder of that Bitcoin. So in terms of benefit to society, I think that it has been difficult for the general public and those not involved in the crypto sector or with a particular interest in crypto to see what the wider benefits are,” Harrison pointed out.
What people fail to recognize is that there is a large gap between BSV and BTC when it comes to utility. Of course, it is certainly a waste of energy to consume all that electricity for only five to seven tps due to BTC refusing to scale its network; however, BSV continues to scale and can already process an average of 5,124 tps. And the release of the Teranode project later this year will increase that capacity to over 50,000 tps—a number that can rival that of VISA’s capacity.
“When you increase the transaction rate by a factor of 50,000 without actually increasing the energy consumption of the entire network, you’ve essentially dropped the per transaction cost by that same factor. And you know, 50,000 is just the starting point, we’re talking about millions, billions of transactions per second. It’s only one angle to it, but there’s this total energy aggregate cost for Bitcoin, which you can divide amongst five transactions per second, or you can divide that cost amongst millions or billions,” Shadders further explained.
When comparing the numbers, it is obvious that while BTC is not green technology, BSV very much is. It all boils down to the network’s utility—recording immutable and transparent transactions on a public blockchain provides a host of benefits and utility for many industries, such as healthcare, government, supply chain, iGaming, to name a few—and the ability to scale that the energy consumption is deemed more than worth it.