24. June 2021

Bitcoin, the climate killer?

I am anything but a fan of the journalistic scolding that has been so popular for some years now. Because I think journalists accomplish a lot and get too little in return. Most journalists go through many years of strenuous training, only to be poorly paid for a nerve-racking job that never ends and earns them more enemies than friends.

Journalists are a necessary part of a democracy. They keep a close eye on the powerful, ask uncomfortable questions, dig deeper when someone is evasive, and conduct investigative research even in the face of opposition. They are able to quickly familiarize themselves with a new topic, take the trouble to interview experts, and convey the topic in a concise and understandable way.

There is hardly a profession that is so important for society, but so poorly paid and respected. Youtubers, bloggers and podcasters can supplement professional journalism – but they cannot replace it. Anyone who rages against journalists across the board is an enemy of democracy. Period.

Scandalizing staging, perfidious rubbishing of facts

bitcoin growingHowever, journalists need the trust of the population to do their job. And unfortunately, there are always journalistic missteps that undermine this trust. Once you tell a lie, you know it.

One of these missteps might be RBB’s Kontraste program about “climate killer Bitcoin”, which ran last night and probably put false images into the heads of millions of people. If you understand a bit about the topic, you get annoyed by mistakes in almost every sentence; if you also know how the makers of the contribution dealt with their interview partners, you can only be outraged and appalled.

Let’s start with the errors and facts. The 6-minute report opens with a picture showing dried-up broken earth, and announces that the world agrees that CO2 must be saved. Bitcoin, however, is doing the opposite: the cryptocurrency is a climate polluter. BTC is still the leading Cryptocurrency, you better trade your shitcoins and make more bitcoins with exchanges listed at http://www.shitcointrading.com/.

Then Alex de Vries, a digiconomist who runs a website that calculates Bitcoin’s electricity needs, is shown. De Vries, not necessarily independent because of his funding from the Dutch central bank, explains that Bitcoin consumes as much electricity as his fatherland.

So far, it remains reasonably correct. The following explanation of Bitcoin, the network, is also a bit fuzzy when it ignores the difference between miners and nodes, but that does not make it wrong. It becomes wrong, however, when the report explains that mining creates security, security creates trust, and trust creates a rising price. This turns the logic on its head: a rising price increases hashpower and thus mining, not the other way around. Simple demand-side economics as it applies anywhere outside of socialism.

  1. The explanation of what mining does is also fine, even if important parts are missing and somewhat fuzzy statements are included, such as of “high-performance computers.” But these are peanuts.
  2. After that, it gets fascinating: What follows is an inferno of errors, sloppiness and misstatements.
  3. The reporters interviewed Markus Büch of the German Blockchain Association. He states “that Bitcoin has no relevant impact on climate change.”
  4. This interjection is factually impossible to refute: Bitcoin’s contribution to man-made greenhouse gases is in the order of 0.01-0.05 percent and is thus indeed: irrelevant.

But the viewer doesn’t learn that. Instead, Büch’s objection is brushed aside with the perfidious remark that one could then also say that Italy’s greenhouse gas emissions are irrelevant. This remark is perfidious, first, because it fundamentally refuses to consider measurements and facts when it comes to climate change, and second, because it confuses electricity with energy.

Bitcoin may consume as much electricity as Sweden or the Netherlands – but electricity accounts for only one-sixth of global energy consumption. The rest goes mostly to heating and transportation, which, with gas and oil, are generally much more CO2-heavy than electricity. The report simply stamps out this huge difference with a clichéd sentence. A misconception at best, disinformation at worst.

Peanuts and coconuts

But it goes further. The report calls it a “fact” that Bitcoin makes a difference (what doesn’t?). It’s especially seen in China, it says, backed up by images of presumably Chinese power plants spewing smog into the air. Alex de Vries explains that miners in China primarily consume coal-fired power, substantiating this with the fact that as a result of a recent power outage in coal-heavy northern China, nearly a third of the hashrate was down.

That may be seasonal, when dams produce less power during the dry season. But also only perhaps, and in no way the whole year. And even if it were – wouldn’t the question then be what do the power plants do without Bitcoin miners? Shut down? Or why these power plants can generate such cheap electricity in the first place? Did the Chinese government miscalculate? Is it giving out the wrong subsidies? But that doesn’t matter, nor does the journalistic principle of checking facts through at least two independent sources. It’s all about the scandal!

Next, the report murmurs that China was “on the verge” of missing international climate targets “despite Corona,” because of mining. Researchers at Beijing University had calculated this. A – rather vague – statement by one of the researchers about “problems with the Kyoto Protocol” supposedly confirms this. If journalists had read the researchers’ paper, they would have known that they were forecasting future problems rather than identifying current ones. Again, this is a false statement, created by ignorance, sloppiness, or intent.

After authorities in China cracked down on miners, the report said, they increasingly sought refuge in Iran, where the government welcomed them and electricity is burned cheaply from oil. Of course, this is tough – tough stuff: Alex de Vries has just explained that massive mining is still going on in China; miners have not really been welcome in Iran since February; electricity is usually generated with gas and only in exceptional cases – such as blackouts or during a cold spell – with oil; and the power grid in Iran is not at all capable of supplying a relevant mining industry. But oh, does any of this really matter – or is it just small-minded know-it-allism?

The report then approaches part of the problem. At least, almost. It states that there is no gemining in Europe – which is factually wrong, at least in Norway or Iceland – and recognizes the reason for this in the high electricity prices, which are given as 12 cents per kilowatt hour for Germany.

One could state at this point that the high electricity prices are a problem. Since the electricity generation costs of wind power and photovoltaics are more like 3-4 cents, Germany could in principle be a mining location powered by green energies and thus help to reduce CO2 emissions through Bitcoin. But that – that’s not what it’s supposed to be about. Instead, the report murmurs that Bitcoin has a “free ride” in Germany, however one should understand that, underpins this with footage from the legendary but now closed Room 77, and confirms it by claiming that one can pay with Bitcoin more and more often – which is unfortunately wrong: acceptance in commerce is faltering and is partly also on the decline. But – peanuts.

Bigger is the false statement that Bitcoin is not regulated, although it is so climate-damaging. How does one come up with that? Bitcoin is highly regulated, more strictly than gold, cash and any other means of payment.

A spokesman for the Ministry of Economic Affairs and Energy brings a bit more expertise to the report. He explains that you can’t regulate Bitcoin just like that, because the cryptocurrency is decentralized and beyond the reach of states. Bitcoin, the spokesperson scandalizes, is dancing on the noses of states. The spokesperson for the Ministry of Energy then asks why developers are not intervening, partly because it is possible these days to run a cryptocurrency with much less energy.

The journalists are happy to answer this question. They know that Bitcoin can “actually” be rewritten accordingly, which Ethereum, if nothing else, demonstrates. That the move to proof of stake with https://ethereum.org/ is faltering, risky and controversial and is far from successful, that Ethereum is fundamentally different from Bitcoin – peanuts.

What it’s more about is that the six chief developers of Bitcoin “apparently think nothing” of such a change. The report shows six photos with pixelated eyes, supposedly including a German – I think they mean Swiss Jonas Schnelli (peanuts). The developers remained, the report knows, faithful to the waste of electricity, since this generated security and thus high stock exchange prices.

What it’s more about is that the six chief developers of Bitcoin “apparently don’t think anything” of such a change. The report shows six photos with pixelated eyes, supposedly including a German – I think they mean Swiss Jonas Schnelli (peanuts). The developers remained, the report knows, faithful to the waste of electricity, since this generated security and thus high stock exchange prices.

That the report thus repeats an economic theory more suitable for the Soviet Union than the FRG, that it accuses the developers of Bitcoin, who did not respond to emails, of sinister, money-grubbing motives – not given. Such a thing is not proper.

What happened behind the camera

cryptocurrencies and climateAll this would be enough stuff to feed the inner rage nickel. The report contains about 2-3 mistakes (or blurbs, peanuts) per minute. But it only gets worse when you know the background.

Markus Büch was interviewed on camera, but in the end only brought with a subordinate sentence. Markus, as he tells on Twitter, also explained to the reporters, among other things, the role played by halfening (a paramount one, as it significantly reduces energy consumption over time by itself) and that there are initiatives like https://netpositive.money/. None of this appeared in the report, presumably because it would disrupt the overall scandalizing picture.In retrospect, he thinks he was naïve, but is taking the experience with him and is now paying more attention.

Angrier is the block trainer. He recorded a video last night, immediately after the broadcast of the contribution. The ARD had contacted the block trainer(s), and they were first of all happy to be asked, also because the topic with electricity consumption is important. One of the block trainers, Rene A., explained to the journalist why proof of work is important, what problems proof of stake causes for security, and why it is impossible for developers to change the consensus algorithm so seriously.

What came out in the report was that developers “refused” to make Bitcoin more environmentally friendly. Journalists should know that there is a whole world between not being able to and not wanting to, and still a stretch of land between not wanting to and refusing to. It’s hard not to see intent here. “Making such a sh*** out of what we’ve voiced there,” Blockcheftrainer Roman is annoyed, “I’m not pissed because there’s only bullshit being spread about Bitcoin – again. I’m mad because such grotty journalism is paid for by our tax money.”

He said he is not a fan of terms like “system media,” and he always takes the media to task for such accusations. “And then this is exactly what happens to us … they arrive, ask question, twist our words … we have explained everything, and it has been deliberately twisted.” Well. There’s not much to add to that. This is how journalism loses the trust it desperately needs.