On Bitcoin, the Gray Lady Embraces Climate Lysenkoism
By: Nic Carter
Tags: New York Times, Bitcoin, Bitcoin Mining, Cryptocurrency

On Bitcoin, the Gray Lady Embraces Climate Lysenkoism

How the NYT wields junk science in their attacks on Bitcoin Nic Carter Apr 15·21 min read

Pictured: the NYT cruelly wasting energy and destroying the rainforest

I want to thank the formerly eminent New York Times. I read their latest article on Bitcoin at 5:30 am this morning and I was immediately jolted into a state of alertness — no coffee needed. Their latest missive on Bitcoin’s climate footprint is so poorly-researched that once I read it I knew I had an immediate duty to push back. I’ve transcended resignation at this point. My current attitude is astonishment. I am simply amazed that the NYT would publish such shoddy work. Presumably, someone at the NYT knows about Bitcoin. Why would they put through such a weak piece? Did they not think they would face pushback?

Here’s the article in question:

There’s another questionable article on NFTs from the same author that I don’t have time to get into, but suffice to say the author’s take on NFTs is inadequate. For a decent discussion of the NFT energy outlay, see this much better article from ARTNews featuring my commentary on how to actually evaluate the cost of NFTs.

The context here of course is that the NYT tried to take down Coinbase, Uber-style, by publishing multiple hitpieces on the company following CEO Brian Armstrong’s commitment to keep the company focused on the core corporate mission (advancing the usage of cryptocurrency) and refusing to wade into any ancillary culture wars or political conflicts. Reasonable enough, right? Not in Current Year. This unforgivable crime of staying focused put a gigantic target on Coinbase’s back and caused the NYT to direct considerable resources to belittling the company.

Thankfully, the NYT manifestly failed, and was humiliated when Coinbase rose above and had the most successful direct listing of all time yesterday (and the 3rd biggest public listing ever).

So it’s unsurprising you’d see some sour grapes from the NYT in light of their defeat. Their journalists have never been positively disposed to Bitcoin, nor would I expect anything different now. But this article on energy is shocking. It doesn’t pass journalistic muster. We’re not just talking about differences of opinion. We’re talking about misunderstandings of Bitcoin, and a reliance on weak, thoroughly rebutted academia. You actually don’t need to know anything about Bitcoin to ascertain that this article’s core claims are invalid; just the willingness to actually chase down the sources in question and evaluate their credibility.

Let’s get to the article. It contains, by my count, ten — TEN — specific claims that are erroneous, questionable, or rely on a complete misunderstanding of Bitcoin. Impressive for a short article. (I’m going to ignore the author’s generally confused descriptions of how blockchains work). Let’s lay them out (paraphrasing in some cases):

This quote from Camilo Mora: “All this accounts for so little of the world’s total transactions, yet has the carbon footprint of entire countries. So imagine it taking off — it’ll ruin the planet” Reference to the Mora et al paper: “Bitcoin emissions alone could push global warming above the Paris Agreement target of 2°C” “Cryptocurrencies’ heavy environmental toll is starting to roil climate policy” in China with a reference to the Jiang et al paper Implied that mining was responsible for blackouts in Iran Suggesting that NFTs have an “outsized environmental impact” Repeats the De Vries claim that each Bitcoin transaction accounts for 10,000x more energy than a Visa transaction Claims that PoW is a “computing method that’s intentionally designed to be inefficient” Claims that Bitcoin is “expected to eventually follow” Ethereum’s transition to Proof of Stake Repeats the claim that PoS “reduces your emissions to almost nothing” Claims that Tezos and Near have “vastly lowered their energy use” by using PoS

I’m going to respond to these in turn. 1 and 2 are effectively the same point so I’ll address them together.

Bitcoin emissions could increase global temperatures by 2ºC

This is the central premise of the article, that Bitcoin emissions could push up global temperatures by two degrees. This claim relies on a single, two page paper dating from Oct. 2018 from Mora et al. I don’t believe the author of the NYT piece read the paper, because if she had, she would have immediately known it was invalid. It’s not really a paper: it’s a two-page Comment in the Nature Climate Change journal. The problem is that it’s paywalled, so NYT readers can’t easily evaluate the source material itself. Citing paywalled work is pretty insidious, but at least we have the wonderful Sci Hub (powered by Bitcoin donations!) as a convenient paywall buster. So if you want to read the paper, paste the link into Sci Hub and you should get the PDF.

I don’t often say this, but the Mora paper is complete nonsense. It relies on a fictional conception of what Bitcoin is. You don’t have to take my word for it. It’s so egregious that there have been no fewer than three academic rebuttals written [1] [2] [3]. But you don’t have to be an academic to spot the flaws with the paper. The paper is non-forthcoming in a methodological sense, so it’s hard to fully infer the method. From what I can tell, the approach is as follows:

Rely on existing academia and hashrate & miner data to determine the energy and carbon outlay of the Bitcoin system as of 2018 Devise a ‘per-transaction energy cost’ of Bitcoin by dividing that energy cost by the number of transactions processed Assume 314 billion digital transactions per year Assume that Bitcoin transactions will follow the average growth trajectories of other technologies and account for a large fraction of those 314b txns at maturity Extrapolate Bitcoin’s transactional growth to tens of billions of transactions per year Multiply that extrapolated figure by the naive per-transaction energy cost devised in (2) Assume that Bitcoin’s energy mix will not change Multiply the energy figure found in (6) by the static energy mix assumed in (7) Voila. Bitcoin is warming the planet by 2ºc.

There are multiple problems with this analysis. The first is that the transaction energy cost analysis is completely flawed. In 2018, the overwhelming majority of miner revenue was attributable to the issuance of new Bitcoins. So amortizing that figure to transactions makes no sense. There’s no per-transaction energy cost in Bitcoin. Individual transactions do not carry energy payloads. Miners produce blockspace and mainly collect revenue deriving from subsidies deriving from new issuance, not per-transaction fees. You have to tease apart fees and issuance-driven subsidy. In the long term, fees will be important in miner revenue, but that is a separate analysis. You can’t use numbers from 2018 (when miner revenue was almost exclusively issuance-based) to derive estimates on what a fee regime would look like.

Second, the Bitcoin system cannot support the tens of billions of transactions the authors assume it will. It’s pretty much maxed out at 300–500k txns per day. Data overheads mean that it will never grow much beyond that, and that’s ok. Bitcoin is a settlement, not a payments network. This trivial point undermines the entire premise of the article.

As Masanet et al point out in their critical response to Mora,

Second, all three Bitcoin adoption scenarios designed by Mora et al. represent sudden and improbable departures from historical trends in Bitcoin transactions; over the preceding five years annual growth ranged from 1.3× to 2.3× (Supplementary Figs. 3 and 4)9 . Specifically, Mora et al. assume that Bitcoin transactions — which totalled 104 million in 2017, representing a mere 0.03% of global cashless transactions — would abruptly leap to 78 billion by 2019 in the fast scenario (a 750× increase in only 2yr), to 11 billion by 2020 in the median scenario (a 108× increase)

Put simply, Bitcoin cannot scale to the size that Mora et al stipulate it will in the paper.

Third, the authors assume that the energy mix of Bitcoin will be fixed. This fails to take into account the natural development of Bitcoin mining into a system that monetizes stranded energy assets, many of which are renewable.

The Mora paper posits a completely fictional version of Bitcoin. It erroneously assumes a per-transaction energy cost, and wrongly assumes that Bitcoin will scale at the base layer to hundreds of billions of txns per year, and wrongly assumes that you can simply combine those two variables to get a carbon footprint. The paper has no place in a NYT article, nor does it make sense to consult the author for a quote. This isn’t a footnote. This is the key premise of the NYT article. Relying on this article is disqualifying.

Bitcoin is affecting Chinese climate policy

The other paper the NYT relies on in their article is Policy assessments for the carbon emission flows and sustainability of Bitcoin blockchain operation in China by Jiang et al. Tabuchi relies on this paper to claim that Bitcoin mining “could make it difficult for the world’s largest polluter [China] to meet its climate goals.”

But this paper isn’t affiliated with Chinese energy policy. It’s not emanating from the Chinese energy establishment. The paper, published in Nature Communications, is a black box purporting to forecast Bitcoin emissions. If I were to undertake the unenviable task of forecasting Bitcoin emissions, I would do the following:

Forecast the price of Bitcoin

Forecast the fees of Bitcoin

Forecast the energy consumption of miners (resulting from the above)

Forecast the energy mix of miners

You can probably see the issues here: you’re trying to project largely unknowable variables. Moreover, this paper doesn’t approach the analysis in a straightforward way. The paper presents an incredibly complex black-box model (see below figure) to attempt to forecast the C02 emissions of Bitcoin mining.

This is an actual figure taken from the article

This model is impossible to audit, and key variables are impossible to project, like price, fees, and energy mix of miners. No one knows what the price of Bitcoin will be in 5 or 10 years. The future rate of fees is unknown, as is the sources of energy miners will consume. So it’s completely unscientific to assert a hard figure relating to energy consumption or C02 impact. And yet that’s exactly what the authors do, brazenly claiming that

the annual energy consumption of the Bitcoin blockchain in China is expected to peak in 2024 at 296.59 Twh and generate 130.50 million metric tons of carbon emission correspondingly.

It’s an immediate red flag that the authors confidently declare Bitcoin’s future carbon outlay to two decimal places, when realistically the number can only be estimated to within an order of magnitude.

This isn’t quite as bad as Mora’s paper, but it’s a largely unauditable black box algorithm spitting out overly-confident estimates relying on unknowable variables. And regarding its insertion in the article, China has already banned Bitcoin mining in Inner Mongolia and could just as easily ban its usage in Xinjiang, the other coal-heavy province where mining occurs. That would solve China’s bitcoin-emissions problem, to the extent they have one (while being extremely positive for the Bitcoin network). This isn’t a problem. It’s an anti-problem. Chinese antipathy towards Bitcoin is great news for its carbon intensity and the security of the network overall.

Bitcoin is to blame for Iranian blackouts

The NYT also suggests that Bitcoin is to blame for blackouts in Iran:

Iran has also cracked down on Bitcoin mining, calling it a burden on its electric grid, after blackouts hit Tehran and other major cities earlier this year.

In fact, the Iranian government scapegoated Bitcoin for their blackouts. If you read coverage on the topic from the Associated Press, they saw through the Iranian regime claims (why would you believe these?) and pointed out how hollow they were:

Although Bitcoin mining strains the power grid, experts say it’s not the real reason behind Iran’s electricity outages and dangerous air pollution. The telecommunications ministry estimates that Bitcoin consumes less than 2% of Iran’s total energy production. “Bitcoin was an easy victim here,” said Kaveh Madani, a former deputy head of Iran’s Department of Environment, adding that “decades of mismanagement” have left a growing gap between Iran’s energy supply and demand.

Why the NYT is uncritically repeating propaganda disseminated by the Iranian regime without caveats is beyond me.

NFTs have an outsized environmental impact

There’s a lot to say on NFTs, but I’ll just repeat what I told ARTNews. To ascertain the energy cost of NFTs, you have to do the following:

“You want to measure the fraction of Ethereum transactions that are NFTs. Then you want to try to evaluate how far out of equilibrium those NFT transactions are pushing the clearing price of gas, which is then providing extra revenue to miners,” Carter said. “Then you presume that those miners plow some of that extra revenue into more hashing” — enlarging the Ethereum network and consuming more energy. But, Carter noted, “not all miner revenue is being homogeneously deployed into pure electricity consumption.”

As far as I can tell, no one has done this analysis so far. To really understand the carbon footprint of NFTs, you’d also have to determine the energy mix of ETH miners, which no one has done, either.

NFTs are a single digit percentage of Ethereum transactions. As I point out in the ARTNews article, there were 30k NFT txns versus 1.2m ETH txns the day that I ran the numbers. NFTs don’t really move the needle energy-wise.

The author’s parallel article on NFTs could do with an entire teardown of its own. There’s passages which are betray a misunderstanding of how Ethereum works.

In a nutshell, when an artist uploads a piece of art and clicks a button to “mint” it, she or he starts a process known as mining, which involves complex puzzles, awesome computing power and a huge load of energy.

This just simply isn’t true. Minting an NFT does not kick off a causal chain which leads to miners powering up their machines. They are mining anyway. The relationship between gas consumed and energy expended is much more diffuse. Again, if you want to quantify the impact, you have to follow the methodology I lay out above. And certain platforms offer gasless minting, like Mintable.

Bitcoin transactions use 10,000x more energy than Visa transactions

This talking point is so pervasive, and so fundamentally off-base, and relies on so many misunderstandings of Bitcoin, that I’ve already written multiple articles addressing it. You can find them here and here.

You see it all the time. Here’s climate journalist Eric Holthaus relying on the same ‘txns have an embedded energy cost’ logic, while comparing BTC transactions to Visa:

At its current consumption rates, Bitcoin could never replace the global financial system. Right now, with its high transaction fees, Bitcoin only can handle about 350,000 transactions a day. At that rate, Bitcoin would require 14x the world’s total electricity just to process the 1 billion credit card transactions that take place every day.

And of course this is the same premise that underpins the Mora study.

In short, the comparison between Visa and Bitcoin is wildly off base. It’s an apples-to-koalas comparison. Visa is a payments network which relies, ultimately, on underlying financial infrastructure. Bitcoin is the financial infrastructure. It is a full stack monetary network. I’m going to quote myself:

I’ll keep this short: Bitcoin offers fast, high-assurance, final settlement. This means transactors can trust that value transfers are absolutely final within a short period of time. This permits Bitcoin to scale to enormous size — billion-dollar transactions are common and settle without incident. Can you do that with Visa? Bitcoin is therefore best understood as a high-integrity utility-scale settlement network, similar to Fedwire (but arguably more resilient, given Fedwire’s recent outages). No surprise that like other real-time gross settlement systems, Bitcoin is a suitable base upon which other payments networks can be built. These are numerous, but they include off-chain transactions at exchanges, near-chain solutions like Lightning, sidechains with new trust models like Liquid and Rootstock, and smart contract platforms like Blockstack that rely on Bitcoin’s security. Like Visa with Fedwire, all of these payment layers introduce new trust models and different settlement guarantees, but in exchange provide scalability and transactional creativity.

Bitcoin transactions are payloads that run into the billions of dollars. Visa doesn’t give you that. It doesn’t really offer final settlement. You need underlying settlement networks for that. Quoting myself again:

One Bitcoin transaction, therefore, can settle thousands of off-chain or near-chain transactions on any of these third-party networks. Exchanges and custodians could choose to settle up with each other once a day, batching hundreds of thousands of transactions into a single settlement. Lightning channels could settle literally millions of payments into a single bitcoin transaction with a channel closure. This isn’t just speculative. It’s happening today. As Fedwire’s 800,000 or so daily transactions reveal little about the total payments volume supported by the network, Bitcoin’s 300,000 daily transactions and 950,000 outputs do not tell the whole story.

And of course, as I mention in my other article on the topic, if you want to quantify the cost of Visa, you should probably consider the costs of the entire dollar system.

Visa relies on ACH, Fedwire, SWIFT, the global correspondent banking system, the Federal Reserve and, of course, the military and diplomatic strength of the U.S. government to ensure all of the above are working smoothly. Any energy comparison must take the above into account — including the externalities from the extraction of oil, which implicitly backs the dollar. As those who make this comparison inevitably fail to mention, the dollar’s ubiquity is partly due to a covert arrangement whereby the U.S. provides military support to countries like Saudi Arabia that agree to sell oil exclusively for dollars. It’s worth noting that the grossly oversized U.S. military, whose presence worldwide is necessary to backstop the international dollar system, is the largest single consumer of oil worldwide. Bitcoin transactions, by contrast, rely just on bitcoin. Bitcoin proposes a new monetary unit (also named bitcoin) and mediates its circulation through the Bitcoin protocol, which is administered by nodes and miners. Bitcoin’s energy footprint is highly transparent, due to the accessible and highly integrated nature of the system. This provides fertile ammunition for critics who can easily estimate the externalities of Bitcoin while insisting no equivalent ones exist for the dollar system. But the two systems are different.

Leaving aside the total lack of comparability between Bitcoin and Visa, I’ll remind you once again that Bitcoin transactions do not have an embedded energy cost. 80-90% of Bitcoin’s energy outlay is due to initial coin issuance. That causes energy usage that will occur if blocks are full or completely empty. From my same article:

Today, bitcoin miners earn around $50 million/day, which annualizes to around $18.2 billion in miner revenue. Fully 85% of that revenue derives not from per-transaction fees, but from the issuance of new bitcoins. This issuance process is finite: in fact, it’s 88.7% done. The rate of new coin issuance halves every four years as it approaches that 21 million limit. (These are the “halvings” you have probably heard about. Bitcoiners really love them.) So the issuance component of miner revenue is structurally decaying over time. Unless you believe that the price of bitcoin is going to literally double in real terms every four years until 2140, that expenditure (and hence energy usage) is going to decline.

If you strip out the subsidy from the issuance of new coins (which won’t exist at maturity), Bitcoin’s miner reward is much lower than it is today. There is an upper bound on the fees that users will tolerate, so there is a natural check on the miner revenue. The Bitcoin protocol can’t support tens of millions of transactions at the base layer every day — that’s incompatible with the computer science constraints that guide network development. So there will never be hundreds of millions of energy-intensive transactions settled on Bitcoin every day. Journalists repeating these claims should familiarize themselves with ‘block size’. We fought a whole civil war over it.

And lastly, as mentioned, many critics rely on the mistaken assumption that Bitcoin requires many more transactions (each with an embedded energy cost) to achieve scale. But that’s not the case. Bitcoin is scaling in a layered manner — vertically rather than horizontally. Quoting myself again:

Bitcoin’s base layer cannot, for good reasons, scale up to a global payments network, nor should it. The layered model — mimicking the way the traditional payments system developed — is what the community has wisely opted for. Bitcoin has a fundamental constraint in terms of the blockspace available which is a function of the cost to operate a node and be a peer on the network. Push too much data through Bitcoin’s pipes, and only individuals with large data centers will be able to validate the blockchain. The trustleness of the system evaporates in that scenario.

PoW is “designed to be inefficient”

This betrays another misunderstanding of PoW in Bitcoin. Most of the energy outlay for mining comes from the revenue provided by the issuance of new coins. Today, that’s 90% (the remaining 10% derives from txn fees). The Bitcoin protocol auctions off new units every 10 minutes, and miners bid for them in a lottery format. Miners will logically spend $99 to obtain $100 worth of Bitcoin (in practice, their margins fluctuate). This is how Satoshi determined Bitcoins would be trustlessly distributed from scratch without a third party. So the vast majority of miner revenue (and hence energy outlay) relates to the initial distribution of Bitcoins from scratch. This is no different from energy spent to extract gold from the earth’s crust. Is that inefficient too?

Now, you read this charitably and see this as a reference to the difficulty adjustment mechanism (which makes mining harder as more hashpower comes online). But what does inefficiency mean here? Is there some optimal ratio of energy-spend-to-transaction-volume that the author is targeting? What’s the acceptable number? Bitcoin users spent around $8.5m in fees yesterday to send around $19b worth of BTC. That’s a take rate of 4 basis points.

Bitcoin will transition to Proof of Stake

This is false. This is simply not in the roadmap. No one wants it. Proof of Work is inherent to Bitcoin and is what provides the assurances that make Bitcoin work. You’d be hard pressed to find a single Bitcoiner who would express a desire to move to PoS. Already a number of influential Bitcoin developers and community members have expressed their astonishment at this claim. It’s a bit like reading an article on Venezuela that claims that it’s a country in Africa, or an article on Catholicism claiming that it’s a polytheistic religion. It’s just stunningly wrong.

Changing something that essential to the protocol would be complete heresy. Bitcoiners argue passionately over tiny changes. A gigantic change such as this would be virtually impossible to find consensus on, and it’s not clear at all that PoS offers any advantages (or even works, frankly!), beyond placating journalists.

You’d expect a journalist reporting on Bitcoin to know enough about the Bitcoin community to not make elementary mistakes such as these. This is nothing short of a credibility destroyer.

[Update: as I was writing this article, the author stealth-edited the article in response to backlash, adding (without inserting any notice of a correction in the article) the caveat that “Though some critics say Bitcoin will eventually need to follow, particularly if an environmental backlash grows, there are no current plans to do so and such a move is unpopular within the Bitcoin community.”]

[Update 2: the NYT has now added an explicit correction. Kudos to them. See Below:

An earlier version also may have implied incorrectly that Bitcoin is likely to shift to a proof-of-stake model. While some critics say Bitcoin will eventually need to make the switch, there are no plans to do so, and the idea is broadly unpopular within the Bitcoin community.]

PoS “reduces your emissions to almost nothing”

This claim contains two embedded assumptions (both of which are false, in my view):

PoS offers equivalent assurances to Bitcoin There are no costs associated with PoS

For a full teardown, scroll to the end of my recent article on the topic. I’m going to quote myself on that first point:

This is a cornerstone of the anti-Bitcoin energy argument: the notion that you can have something for nothing with Proof of Stake. No energy consumption, yet still a functioning decentralized consensus. If this logic reminds you of perpetual motion machines, it’s because that’s exactly what is being proposed here: a completely free lunch where you get precisely the same assurances as Bitcoin with no costs whatsoever. Of course, this is fantastical. ‘Proof of Stake’ is just a fancy phrase meaning “those who have the most wealth wield political control.” That sounds a lot like our current system, which Bitcoin is specifically designed to solve. Bitcoin explicitly rejects politics, and doesn’t grant any special privileges based on coins held. If holding more coins gave you more control, the attempted takeover of Bitcoin through the 2X movement (backed by the largest custodians and exchanges in the industry) would have succeeded.

So I thoroughly dispute that PoS gives you equivalent assurances. It seems strikingly similar to the existing financial system, which Bitcoin and PoW is meant to free us from.

On to the second point. Let’s just assume for now that PoS works just the same as PoW and provides identical assurances. To the extent PoS consumes productive capital, it consumes energy. I’m not just being trite here. Capital is society’s fungible, tokenized energy. It’s how resources get allocated. Dams, wind farms, solar farms, nuclear power plants — those require capital to be built. Capital can produce literal physical energy. As a venture capitalist, I am in the capital allocation business. I am intimately familiar with the constraints of capital. Startups live and die based on their ability to procure capital. So yes, it is finite, and yes, it has the capacity to be transformed into physical energy. Governments can print fiat out of thin air, but they cannot print real resources into existence.

What happens if a Proof of Stake chain reaches $1T dollars in valuation and offers stake rewards of, say, 5%? Logically, stakers will borrow at the risk free rate and ‘lend’ to the protocol, in a kind of carry trade (as Paul Sztorc points out in his seminal article). Thus, they will allocate productive capital away from other projects and deploy that $5b/year into staking. That’s $5b that could be spent on cancer research, reforestation, life extension, wind or solar farms, nuclear fusion research, carbon sequestration, creating a giant aerosol shield in the atmosphere to block the sun, you name it. Instead, this energy would be allocated to a monetary system. So there’s really no fundamental difference here. Capital is energy, and PoS consumes it just as Bitcoin does. Energy has an environmental externality, depending on how it’s generated, but logically so does the allocation of capital, via negativa. That capital could always be put to work towards carbon negative projects.

As always, emissions are not a monetary question. Emissions are a policy question. It’s up to governments to work with the private sector to design grids that are sustainable, not scapegoat useful monetary technologies.

Tezos and Near have “vastly lowered their energy use” by using PoS

Tezos and Near consume virtually no physical energy (capital is another question), but they haven’t “lowered their energy use”. They didn’t have any to begin with. They didn’t switch to PoS; they began as PoS networks. This comes with obvious tradeoffs — both had to be issued as a sale by centralized entities. There is no way to trustlessly distribute units of new currency without Proof of Work — which is why Ethereum, even though it intends to move to PoS, launched on PoW.

And of course, you have the question of whether Tezos and Near offer the same assurances as Bitcoin. I think the answer is an unambiguous no, but frankly both systems are too young to yield a determination. If they can survive in the wild for 10 years, survive civil wars, coup and takeover attempts, and reliably settle trillions of value with virtually no downtime, and they can fully decentralize their governance, they will have a case. But we just don’t have enough data on that. It’s surely too early to declare competing PoS systems equivalent from an assurance perspective.