The energy system benefits from Bitcoin mining

Illiteracy is a peril of the job for anyone working in the technology sector. New technologies tend to meet resistance until they are widely understood, and unfortunately policymakers and regulators are often guilty of the most egregious technological illiteracy – stopping innovation in its tracks for let them catch up.

Every month there is another facepalm-inducing moment. In January, it was the turn of Erik Thedéen, Vice-President of the European Securities and Markets Authority, who took advantage of an interview with The Financial Times to call for an EU ban on any proof-of-work mining (the method by which new bitcoin is issued).

This is the latest in a series of attacks on bitcoin mining by naysayers who haven’t done their homework. Once you understand the role bitcoin mining plays in our current energy system, banning the practice starts to look like a really terrible idea.

It’s not the government’s job to dictate energy consumption

Energy use is synonymous with human flourishing, so it’s only fitting that it should be a key objective for policy makers, such as Thedean, who seek to improve the lot of those they govern. However, in recent years, the political agenda has gradually shifted away from finding ways to increase energy affordability and reliability, towards mitigating energy consumption. This latter position is fundamentally anti-humanist and comes at the cost of improving human welfare by driving up and down energy prices.

Moreover, by attempting to dictate the precise terms of energy use by individuals and businesses, regulators and governments are short-sighted, overlooking the value that innovative new technologies can deliver. In fact, Bitcoin has a crucial role to play in enabling the transition to renewable energy by mitigating many of the challenges that this transition presents.

The transition to renewable energy is not easy

There are three main measures for evaluating the usefulness of different energy sources: reliability, abundance and cost. While renewable energy may be the world’s preferred option from an environmental perspective, it doesn’t perform particularly well against any of these criteria.

First, while renewable energy is plentiful, it is variably distributed around the world and much easier to harness in some places than in others.

Second, it’s intermittent. Electrical networks require a base load and a power source that continued Power. Energy systems that rely excessively on renewables go from underpowering to overpowering. The latter causes problematic overvoltages on the network; the first requires nations to reintroduce fossil fuels into the mix, and in the short term.

Finally, renewables receive massive government subsidies to operate. Over time, with continued technological innovation, the cost of production will likely decrease. But, for the foreseeable future, renewable energy only increases the cost of energy for the population, both in terms of higher energy bills and higher taxes.

Bitcoin alleviates many renewable energy issues

As global energy grids attempt to transition to renewable energy, bitcoin mining has a crucial role to play in making such an effort viable. Renewables, like solar and wind, are unreliable and expensive sources of energy, but because the sun shines and the wind blows intermittently, bitcoin mining improves the resilience of the power grid by being able to absorb the excess energy caused each time there is an excess of renewable production. It also encourages the additional production of renewables, thereby reducing their overall manufacturing cost.

Mining bitcoin is energy intensive. There is no debate on that. But it is wrong to claim that it diverts energy from other more valuable uses, when in reality it acts as the energy buyer of last resort, an on-demand solution to harnessing energy in case of overproduction. Without bitcoin mining, excess energy is wasted and unprofitable projects remain as they are.

Additionally, in the scenario where too little energy is produced by the grid as a whole, or by renewable energy projects in general, bitcoin miners are one of the few demand generators that can quickly shut down. operations to help the network cope, as they have done recently. made in Texas when winter storms put additional pressure on the system. In this way, bitcoin mining can act as a built-in buffer. What European policymakers fail to understand is that, assuming we want to have a power grid that is not prone to blackouts or surges caused by renewables, bitcoin mining is essential.

Not only that, but because bitcoin mining is a source of revenue, it has the potential to monetize previously unviable renewable energy projects. For example, there are thousands of geothermal energy sources in remote locations, far from the nearest population center and therefore underdeveloped by energy companies. Bitcoin mining creates a clear financial justification for investing in these energy sources, monetizing the operation from the moment the energy is first generated. Such an incentive to invest, develop and reduce the long-term cost of renewable energy products has never existed before outside of direct government intervention.

Reverse an unnecessary narrative

It is high time to change the perceptions of policy makers on the value bitcoin brings to the table. Most states continue to view it with suspicion or outright contempt, El Salvador being the exception. And while it is understandable that a state or an economic bloc like the EU is afraid of technology controlled by no one, to see influential regulators – whose role should be to ensure the proper functioning of markets – perpetuate an understanding misconception of their market and bitcoin – is deeply concerning.

Bitcoin is a perfect and poetic illustration of why energy use and human flourishing go hand in hand. Yes, bitcoin mining requires a lot of energy, but it also protects our energy system and incentivizes investment in renewable energy. Plus, it’s a great example of how smartly designed technology can perfectly align profitability with positive societal change – a point that policy makers would do well to understand.

This is a guest post by Alex Mann. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.