This post originally appeared on the Unbounded Capital website, and we republished with permission from its author Dave Mullen-Muhr.
Mythology is not really invented, it is more accurate to say that it is revealed. Inventing your own mythology to shoehorn an agenda is something else entirely: propaganda. In Square Crypto’s new “Book of Bitcoin Mythology,” they have created one such example of propaganda.
Volume 1 of Square’s propaganda has to do with Bitcoin mining. Their goal seems to be to convince readers that Bitcoin (used by Square to refer to BTC) is an environmentally friendly technology that will provide incredible benefits, which reduce the world’s negative environmental impact. The following are some of the lies that Square Crypto uses to push this agenda.
Lie 1: Green energy is always the cheapest form of energy
The suggestion that renewable green energies are the cheapest form of energy is a difficult one to parse. A quick internet search will yield all sorts of conflicting information making bold claims for and against this proposition. The easiest way to test the validity of this claim is to see what miners are using today. The University of Cambridge has published multiple studies, which provide insight about from where BTC miners are drawing their energy. Their December 2018 study suggested that, “on average, roughly 28% of the total energy supply for both small and large facilities is generated through renewable sources” (p 84). Their subsequent study from September 2020 suggests that “the share of renewables in hasher’s total energy consumption remains at 39%” (p 26). In the sentences that precedes this claim, the Cambridge Study, somewhat ironically for the purpose of Square’s propaganda, notes that:
Despite the increasing transparency and research on the environmental impact of PoW mining, the topic is still typically misrepresented in most sources and on both sides of the debate. Similar to 2018, this year’s survey data shows that a significant majority of hashers (76%) use renewable energies as part of their energy mix. However, the share of renewables in hasher’s total energy consumption remains at 39%.
In such a low margin and competitive business as BTC mining, miners are no doubt using the cheapest form of energy they can find. While the 39% number from the study is large and growing it is far from 100% which is what we would expect to see if Square’s claim were factual. The fact that particular previously-nonviable energy sources, particularly hydroelectric, which are far from populations centers can now be used to mine cryptocurrencies is a major boon that should increase the use of such sources. Highlighting this advantage, however, need not exaggerate the benefit to claim that BTC miners who want to be profitable must use green energy. It is likely that the most profitable miners today (as well as profitable non crypto enterprises which require energy) use mostly fossil fuel based energy and it’s unclear if, or when, this will change.
Lie 2: BTC can process over 10,000x as many transactions as they are today with the same total energy consumption
This lie is a tricky one because it is true of Bitcoin (today sold under the ticker BSV) but not BTC (which Square calls Bitcoin). Because BTC has decided to retain their arbitrary cap on the total number of transactions which can be processed by the network in each 10 minute block (a decision supported by powerful legacy banking and payment processing companies like Square) they are unable to include even 10x more transactions for the same energy consumption, let alone 10,000x more. What Square might be alluding to here is the BTC’s long-promised layer two “scaling solution” the Lightning Network. The Lightning Network has infamously been touted by people like Jack Dorsey confidant Elizabeth Stark, the CEO and Founder of Lightning Labs, as a functional solution that is only a few months away since…