Fort Knox is Everywhere

I had an opportunity to discuss my ideas on solving global warming yesterday. I got a cool reception.

One of the questions to my presentation was left without answer, for lack of time. So I write a couple of lines here instead.

I was talking about the recent discussion on requiring permission to use electricity in a specific way to operate a computer. Some people think that others should not be allowed to use electricity for bitcoin mining.

The recent hearing at the United States House of Representatives, calls for a ban on mining in the EU. and discussions on a ban in Russia are in the headlines. China actually made mining illegal last year, leading to a large drop in the hash rate and relocation of industry to other countries. The Bitcoin ecosystem needed about half a year to recover from that particular ban.

The object of measures like these is to save energy and do something about global warming. The effect is to weaken Bitcoin security.

In the Bitcoin security model, using a lot of energy means it is difficult to attack. You would need large amounts of energy and mining machines to do so. You would be able to make more profit by staying honest.

The effect of measures like the Chinese ban was to decrease security for a while. As long as there is no ban in all countries and the bans are not enforced completely, there will always be mining.

My point here is a comparison to gold. With gold, securing the gold bars requires building safes, like in Fort Knox. The United States Bullion Depository located there currently holds about 4580 tons of gold, secured by a fortified vault building and the United States Army post located next door.

The Bitcoin hash rate is the equivalent of that. But the difference is that gold security is not independent of location. You can mine and contribute to the hash rate anywhere. There is no need to concentrate your efforts at one location.

You can also mine anytime, 24/365. Bitcoin is a source of electricity demand that is always available, without a need to build power lines.

That is an excellent match for renewable energy projects. Since a couple of years ago, renewable energy is the cheapest option, which means that Bitcoin miners will seek it. The latest Global Mining Council report shows that renewable energy shares are very high in the industry, beating even Germany and the United States.

If you get in the business of banning some industry or other for their energy use, it does not make much sense to ban the cleanest one first. There are lots of other industries and countries that need to improve vastly before they achieve Bitcoin levels of renewable energy share.

And Bitcoin is part of the solution, not part of the problem. It works like a world wide feed-in tariff for renewable energy projects, accelerating the move away from fossil fuels. If you worry about global warming, the last thing you want to ban is the biggest and most reliable customer of renewable energy projects. A customer that can switch demand on and off at any time and does not require building any power lines.

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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