Skip to content

Investigating the Dubious Investigations of Bitcoin

Some challenging stories are begging to be properly investigated and told. The question is always which investigative journalists have the willingness, integrity and editorial freedom to take these on?

Scott Wolfe
Scott Wolfe
Apr 22, 2022April 22, 202211 min read11 minutes read

Some challenging stories are begging to be properly investigated and told. The question is always which investigative journalists have the willingness, integrity, and editorial freedom to take these on? Sometimes, the question is why few or none do.

The case of Bitcoin, its global use cases, and its possible limitations is a great example. These stories are begging to be properly investigated and told because, as it stands, something just doesn’t smell right.

Beginning in late 2021, we began to see a noticeable uptick in reporting and legislative interest in “cryptocurrencies”. On one level, this is totally understandable given the growth of this evolving technology space and the typical lag in journalistic and legislative attention. But there is more to it than that. 

A disproportionate amount of legislative and journalistic interest in “cryptocurrencies” (a generic term applied incorrectly to Bitcoin, incidentally) has coalesced around Bitcoin and its consensus mechanism, known as “Proof of Work (PoW)”. This PoW protocol is one of the essential characteristics that distinguish Bitcoin from most of the roughly 17,000 other projects that are captured within the generic term “cryptocurrencies” — projects such as Cardano, Solana, Avalanche, Algorand, and others. 

Mainstream reporting and legislative interest in Bitcoin / PoW — especially since late 2021 — has almost exclusively characterized Bitcoin and PoW as a climate change culprit, consuming vast amounts of energy. But is this true? Let’s take a look.

It is true that Bitcoin / PoW consumes a greater amount of energy than its alternative, “Proof of Stake (PoS)”, the consensus mechanism used by other projects termed “cryptocurrencies”. It is also true that, in the past, a much larger share of this energy came from non-renewable sources. So is that the whole story then? Not in the least. 

Beginning several years ago, and in a huge way since 2020, Bitcoin / PoW mining has shifted to renewable energy sources, with a rapidly expanding amount of global Bitcoin mining now coming from renewable energy. In 2021 alone, the proportion of global Bitcoin mining utilizing renewable energy sources jumped from 36.8% to 58.5%. Over the course of 2021, the energy efficiency of Bitcoin mining — the hash rate per megawatt (PH/MW) — also increased significantly, jumping from 12.6 PH/MW to 19.3 PH/MW. Both of these metrics continue to improve due to further advances in Bitcoin mining technology and a flourishing of awareness among Bitcoin miners and energy producers that Bitcoin mining and renewable energy production have a powerful symbiotic relationship, contributing to the build-out of sustainable energy grids predicated on renewable energy. There is also concerted leadership among the Bitcoin mining industry to continue improving these metrics through the Bitcoin Mining Council, which launched in 2021. The industry group now represents nearly 50% of all Bitcoin mining (hash rate) globally and has committed to a shared agenda of increased renewable energy mining and efficiency, with quarterly reporting. 

Just to put Bitcoin mining into further context, Bitcoin mining currently consumes just 0.14% of the world’s total energy consumption — far less than the global gold mining industry and existing financial industries, for instance. It’s about the equivalent of global energy consumption from seasonal lighting (eg, Christmas) or video games.

With respect to Bitcoin’s PoW mechanism, which has also come under specific criticism, most media coverage and legislative scrutiny to date have been found wanting. PoW energy consumption is an essential characteristic of Bitcoin — one that enables security and functionality that PoS projects simply do not and cannot achieve. To suggest that Bitcoin should move to PoS would be like suggesting that the banking industry should operate without vaults, security guards, and armored trucks. Or, that central banks should just be able to create new money out of thin air whenever they want (ok, so this one is already happening, I know). 

If we acknowledge that, yes, Bitcoin / PoW does consume more energy than PoS, but we argue that it is an essential attribute of Bitcoin, then a fair and much-needed area for investigative journalism is whether this energy consumption differential is merited based on Bitcoin’s value and uses, globally. 

An honest examination of Bitcoin’s global use cases is mostly absent from mainstream reporting to date. It has featured only marginally in legislative hearings that have taken place in the United States and Europe. What are these use cases? How do we assess Bitcoin’s value, not just what energy it consumes? Let’s take a look. 

Often called a “cryptocurrency”, Bitcoin is better understood as a technology with three core use cases: a digital store of value (property); a medium of exchange (currency); and, a decentralized global network for “layer 2 & layer 3” applications (eg, Lightning Network). As these three core use cases continue to be built out globally, Bitcoin is already achieving impact in multiple domains of social and public good, including social and economic inclusion, advancing human rights, and catalyzing advances in sustainable and renewable energy production. 

First, Bitcoin is providing a financial and economic on-ramp for millions of people worldwide who have been excluded by traditional financial institutions and government restrictions. In so doing, it is also providing a means for oppressed individuals and groups to escape persecution. This is a revolution in social and economic inclusion that is easy to overlook for most people in the more affluent countries of the global North but is of tremendous value just about everywhere else in the world. In this respect, a recently published book called Check Your Financial Privilege: Inside the Global Bitcoin Revolution by Alex Gladstein, from the Human Rights Foundation, is essential reading. 

It bears noting, that while persistent economic and financial exclusion in countries in the global South is most acute, similar patterns of exclusion are also experienced by many groups and communities within the more affluent global North. For decades (centuries in some cases), Black, Latinx, and other groups have been systemically excluded from banking, credit, homeownership and other means of financial security and opportunity in the U.S., Canada, Europe, and elsewhere. These phenomena are fairly well documented, including the compounding, multi-generational impact of slavery and racial segregation for members of the African diaspora; the history of “redlining” in the United States; and a myriad of other forms of discriminatory lending practices for Black-owned businesses, and aspiring home purchasers. This social and economic use case extends to many other vulnerable groups as well, including individuals fleeing domestic violence, individuals who are homeless, and other groups kept in poverty and precarious situations due to exclusion from banking and the predatory nature of the other current alternatives such as payday loan businesses. Bitcoin now offers a censorship-free economic and financial onramp, to store value, and conduct peer-to-peer transactions. 

Next, as indicated earlier, Bitcoin mining is also increasingly catalyzing the build-out of renewable energy production and helping stabilize local energy grids. This benefit is made possible by Bitcoin’s flexible load energy consumption requirements — the ability to adjust operations to accommodate the broader energy consumption patterns of the population drawing from the local grid. In simpler terms, decreasing mining activity during peak demand periods and increases activity during lulls. It is increasingly acknowledged that in order to dramatically reduce global CO2 rates and reliance on fossil fuels, we are going to need to massively scale up renewable energy production and electrification of industry and goods. If this were an easy feat, we would already have made far more progress. However, this transition is complicated and requires us to meet energy demand with reliable, renewable energy production. Bitcoin mining is the tool par excellence to achieve this scale-up, providing the perfect mix of financial incentives, capitalization, and supply/demand dynamics. 

The opportunity for unprecedented action on climate change offered by Bitcoin is one of the many promising developments that would probably have been unimaginable when Bitcoin’s protocol and network were being developed more than 13 years ago. But is gets better still. In the process of connecting Bitcoin mining to renewable energy production, a growing network of industry and non-profit groups are also connecting Bitcoin’s energy use/expulsion dynamics to additional social purpose activities like local food production, residential heating, and more. Take the case of MintGreen, a Canadian cleantech company specializing in heat recovery from Bitcoin mining, which is providing residential and commercial heating from captured Bitcoin mining heat. Or, the case of Nhimbe Fresh, in Zimbabwe, which is integrating solar energy production and Bitcoin mining to capitalize and enable sustainable, local food production, increasing community economic empowerment at the same time. These are but two examples.

As Bitcoin adoption grows and its global use cases are further elaborated, this technology is also displacing portions of the high climate footprint of legacy industries and assets such as banking, lending, financial settlement, gold mining, and more — much like the internet did to other media and communications industries before. 

For any journalist or legislator who undertakes an assessment or investigation of Bitcoin, all of these global use cases are required learning. So too is learning about how Bitcoin is displacing segments of other legacy industries and asset classes — ones that consume vastly more energy than Bitcoin. As this displacement of portions of legacy industries and assets continues, Bitcoin’s environmental impact will continue to be offset by the reduced footprint from those industries and assets.

Without carefully factoring in the global use cases and the disruptive and displacing role of Bitcoin / PoW, any opinion or declaration about the technology’s social, economic, or environmental “costs” is methodologically and intellectually bankrupt. It’s like arguing that email uses energy while ignoring all the paper and envelopes and energy now conserved by the snail-mail it replaces. 

A proper investigation would ask, for instance: 

  • How much energy is consumed around the world to maintain legacy financial institutions, including all their brick-and-mortar branches and office towers, their personnel, the data centers they run, and the jets their executives take to conferences where the environmental impact of Bitcoin is critiqued? 

  • And, what about gold mining which consumes tremendous amounts of energy and literally rips up tonnes of land to generate a few grams of gold? 

  • How “green” is the energy consumed by gold mining or by legacy financial institutions? What is the net social value of these industries and how inclusive are they? 

The evidence stemming from these questions, and the subsequent implications, bear careful consideration. Yet, these questions are neither being asked by journalists, nor by most legislators when assessing Bitcoin / PoW.

Lastly,  let’s turn specifically to the very specific matter of how Bitcoin / PoW energy consumption is being calculated and reported in the bulk of news publications and policy briefs to date, and what this means for fair and informed legislative scrutiny, as well as emerging public narratives. 

If one refers to source material for most journalists reporting on Bitcoin / PoW energy consumption and legislative policy briefs over the past few years (and past few months specifically), one sees a corpus of recurring and recycled methods and data.  Upon careful examination, this corpus is almost exclusively attributable to a single individual named Alex de Vries, known pseudonymously in some documents and on social media as “Digiconomist”. So who is he? Let’s take a look. Investigative journalists, take note. 

Digiconomist (deVries) is an employee of the Dutch Central Bank, currently in his first year of a Ph.D. program. His research methodology and findings on Bitcoin / PoW energy consumption have been carefully debunked and discredited in peer-reviewed journals and grey literature, yet his findings continue to be cited as evidence by an astonishingly large number of journalists and legislators. Never, in de Vries’ research is energy consumption measured or even considered against use cases and value. These, he categorically dismissed as non-existent. 

How does the employee of a central bank — an institution which has a clear conflict of interest related to the disruptive nature and competing use cases of Bitcoin — become anointed and invested with such import? How is it that a wide range of legislators on multiple continents and journalists from a wide range of media outlets have adopted as gospel the demonstrably flawed research conducted by Digiconomist / de Vries about Bitcoin / PoW? Now that is something worth investigating!

These are but a few of the critical considerations for journalists and legislators related to any future review of Bitcoin / PoW. They briefly outline a minimum set of considerations without which any journalistic or legislative review of Bitcoin / PoW is painfully and tragically inadequate. 

I offer my thoughts and reflections on these issues guided by values that I try to embody, both personally and professionally — those of fairness, discernment, compassion, inclusivity, and global-mindedness, among others. These are values I hope to see increasingly reflected in journalistic and legislative undertakings on Bitcoin / PoW moving forward.

This blog offers thoughts and opinions on Bitcoin from the Swan Bitcoin team and friends.

Scott Wolfe

Scott Wolfe

Scott Wolfe is a health and social policy expert based in Toronto, Canada. For more than 20 years, he has worked and collaborated with a wide range of governments, academic institutions, professional associations, and community organizations around the world on a diversity of interconnected health and social policy issues including community-based primary health care; HIV/AIDS prevention, care, and treatment; affordable housing; food security; climate change; racial justice; and more. Wolfe has a Master’s degree in Political Science, and a joint undergraduate degree in Political Science and Communications & Media. He has served as Director of Global Health Policy for the International Association of Providers in AIDS Care (Chicago, Geneva, Johannesburg); Communications Advisor at the Pan American Health Organization / World Health Organization (Washington, DC); and, Senior Policy Advisor for the Alliance for Healthier Communities (Toronto). He currently serves in a dual role as Executive Director of the Canadian Association of Community Health Centres (CACHC) and Global Coordinator for the International Federation of Community Health Centres, both based in Toronto.

More from Swan Signal Blog

Thoughts on Bitcoin from the Swan team and friends.

See all articles