Re: Nic Carter’s “How Much Energy Does Bitcoin Actually Consume?”

6 min readMay 5, 2021


Nic Carter, partner at Castle Island Ventures and cofounder of recently released an article titled “How Much Energy Does Bitcoin Actually Consume” in the Harvard Business Review. I believe it deserves a response.

Nic mentions his enthusiasm for Bitcoin. It is therefore only fair to start off by stating that I am enthusiastic about cryptocurrency, but believe that Nano is the future of cryptocurrency, not Bitcoin. That being said, my response to Nic’s article.

Is Bitcoin’s energy usage worth it?

This is the deeper question in the Bitcoin energy usage debate, and it is the first point the article touches upon. I believe Nic ignores the real, tough question, by equating Bitcoin to being able to escape monetary repression, inflation, and capital controls. While true, this ignores that Bitcoin is not the only tool available to accomplish these goals. Bitcoin does not exist in isolation. I believe that the utility that Bitcoin and other cryptocurrencies offer is valuable, just like I believe the utility that a car offers is valuable. However, if given the choice between two cars, where one car is cheaper, faster, better built, and a million times more energy efficient, I do not think it fair to defend the inefficient car based on the utility it offers in isolation. Rather, we should also look at the alternatives.

As mentioned earlier, I am enthusiastic about a cryptocurrency called Nano. Without going too deeply into it, I believe that it is a superior medium of exchange through instant and feeless transactions, and a better store of value thanks to stronger game theory and a lack of inflation. While Bitcoin centralizes over time due to the economies of scale inherent in mining and the monetary incentives stemming from block rewards, Nano lacks these incentives. Due to its Open Representative Voting consensus mechanism which does not use mining, there is no drive to capture an ever increasing share of consensus power, as there are no monetary rewards to be gained from this. While Bitcoin still has a supply increase for the next 120 years, Nano’s supply is entirely fixed, and can never be increased.

More importantly for this article, Nano accomplishes this at roughly 1/6,000,000th the energy usage of Bitcoin.

To drive the point home in a different way — while the energy usage of Bitcoin is akin to that of Malaysia or Sweden, Nano runs faster, more cheaply, and with higher throughput on the energy output of a single wind turbine.

It’s the more efficient car, and the main question for many of these articles should be why we’re defending an old, inefficient car now that a more efficient car has arrived.

Energy consumption is not equivalent to carbon emissions

When phrased like this, I can only agree. That being said, no one would deny that there is a strong correlation between energy usage and carbon emissions.

The growth in electricity usage by Bitcoin is so huge that even with an increasing share powered by renewables, the total emissions that Bitcoin mining is responsible for is still increasing. As an example — exactly a year ago the estimated energy usage of the Bitcoin network was 77 TWh per year. The estimated energy usage today is at 110 TWh per year. That’s a 42% (~33 TWh) increase in the past 12 months. Using the figure of 39% being generated by renewables (~43 TWh), this means that unless the Bitcoin network started past year at a level of just 10 TWh worth of renewables, the total non-renewables usage of Bitcoin increased.

Additionally, when coal mines in a single province in China were shut down recently, Bitcoin’s total hashpower dropped by 16.5%. This casts some doubt on the claims of renewable energy usage. There is also strong reason for miners to prefer coal and other fossil fuels as an energy source — these sources are stable. Bitcoin mining rigs are a large investment, that depreciates quickly as more efficient rigs are always being researched. Miners therefore prefer a stable baseload, to keep the mining equipment running as constantly as possible.

Bitcoin can use energy that other industries can’t

This is, again, undeniable. One does wonder when China will start making use of the stranded hydro energy, as it seems like a waste to have such a stranded asset when electricity grids are relatively strong throughout most of China. One would assume that with electrification of transport and battery technology improving it would make more sense to transport this energy and use it, during off-peak hours, to charge vehicles. However, if this currently isn’t the case yet, then Bitcoin seems like a good temporary solution here.

The article then moves on to flared natural gas. While Nic presents this as a carbon neutral mining opportunity, this is an isolated and limited view. What Bitcoin mining does here is increase the revenue from natural gas. Higher revenue from natural gas fields means that more natural gas fields become economic to exploit, as Nic points out. As small a “drop in the bucket” as this might be, it is hard to argue that increasing the lifespan of natural gas versus renewable energy sources is positive, let alone the logistics involved in moving mining equipment between natural gas extraction locations.

Mining Bitcoin consumes a lot more energy than using it

This is a rather spurious separation. Indeed, the actual transaction validation takes little energy, mining is what takes energy. However, we would then have to reach the even more painful conclusion that what makes Bitcoin use additional energy is additional investment into Bitcoin. By buying Bitcoin, buyers increase the Bitcoin price, making it more profitable to mine Bitcoin, incentivizing miners to use ever more mining equipment and therefore ever more energy to increase their odds of gaining Bitcoins.

I see the phrasing of “per average transaction” mostly as a method to show what ridiculous amounts of energy the Bitcoin network uses relative to the number of transactions (usage) it allows for, and in that sense talking about an average per-transaction energy cost seems sensible to me.

Runaway growth is unlikely

Currently, Bitcoin energy consumption is at roughly ~0.5% of global output, and as we have just established that the energy consumption is roughly proportional to price because of the incentives in mining. Ask any Bitcoin enthusiast, and they will gladly explain to you how Bitcoin might go to $1 million (from the current ~$50,000). If we perform the simplest possible calculation on this, that would mean the energy usage increases roughly 20-fold, to 10% of global output.

Bitcoin enthusiasts never provide clear projects of the energy usage they foresee at different price levels, and taking into account halving eras. It would be good to provide clarity on this subject in any discussion or article such as this.

While Nic argues that runaway growth is unlikely because the paper he references focuses on per-transaction energy usage and Bitcoin is not able to increase its number of transactions, the growth in energy usage from a price increase alone should be a worry to anyone who sees climate change as a problem.

Closing thoughts

The article presents some fair points, but is clearly written by someone intending to defend Bitcoin, rather than look at it objectively. As unfortunate as it is to say, Bitcoin’s emissions and energy usage are not even the only worries. Due to the intense competition in mining and the relatively short lifespans of mining equipment, the equivalent of roughly 200,000 iPhones are thrown away, every day, just to keep the Bitcoin network running. At some point, I think we have to focus more on the question of whether such immense waste, of both materials and energy, is the most efficient solution.

At the risk of letting my own bias shine through, I would once again like to reiterate that I am pro-crypto. I believe the good that crypto can offer to the world is immense. However, it is a simple fact that there are better options available than Bitcoin. When looked at fundamentally, Nano is a better medium of exchange and store of value than Bitcoin, at a literal fraction of the energy usage. I do not expect Bitcoin miners to agree with this assessment. I would however expect blockchain experts to look at this comparison with an open mind, and would encourage any reader to do so as well.

At the end of the day, we all, as individuals and institutions, are free to purchase any crypto asset of our choice. It appears to me that by choosing Bitcoin, one is actively contributing to increased emissions, while actively ignoring that greener solutions exist that offer the same or better utility.