Bitcoin is Unsustainable in Current Environment

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An investment of $1,000 in Bitcoin eight years ago would be worth $2.2 billion today.

This is truly amazing and makes me wish I was one of the lucky (or smart?) ones who purchased Bitcoin way back when.

Of course, today is another story.

People are rushing into Bitcoin in droves. Its valuation has increased 600% in the last year alone. Is its run sustainable?

I have no idea.

Who knows how high Bitcoin can go in terms of value if it maintains its allure as a speculative bubble.

One thing that’s certain, though, is that Bitcoin is most assuredly not sustainable as a currency, at least when viewed from an energy use perspective… The computing power needed to process the mathematical cryptography equations to mine Bitcoin is mind boggling.

How does Bitcoin use energy?

Cryptocurrencies like Bitcoin are created out of thin air through a process called mining. Mining is a digital computing process analogous to being in a race against others to solve extremely complex math problems. The math problems are deliberately complex because each time a problem is solved, Bitcoin is created.

Of course, if the problems were simple, everyone would mine Bitcoin… Bitcoin would not be scarce… and Bitcoin would become devalued…

Indeed, because the math problems are so complex, a person (aka miner) trying to solve the problem to win a single Bitcoin can take millions of tries… These attempts are repeated over and over throughout the entire Bitcoin mining network. Problem solving favors faster, more powerful computers. The more computing power you have, the greater the chances you have of solving the hash, and being rewarded with Bitcoin.

All this computation requires a staggering amount of energy.

Staggering is an understatement. According to Digiconomy, the Bitcoin network today uses as much electricity in a year as a small country.

Indeed, if Bitcoin were a country, in terms of electricity use, it would be somewhere in between Ecuador and Nigeria.

And Bitcoin may just be getting started in terms of its expansion. An article by Peter Detweiler in Forbes notes:

“…the number of bitcoin transactions is estimated to range from 150,000-250,000 per day – up to 90 million annual transactions. In the scheme of things, that number is miniscule in the context of an estimated 389 billion global annual non-cash transactions.

The history of Bitcoin is like a fictional crime movie akin to the Godfather. There’s a great documentary movie on Netflix called “Banking on Bitcoin” that tells the history of Bitcoin and all it’s epic and erratic trajectory to today.