Bitcoin is a cryptocurrency, the first decentralized digital currency, invented in 2009 by an unknown person using the alias Satoshi Nakamoto. It’s gone through a number of evolutions including being replaced by other cryptocurrencies like Ethereum and Ripple.
There are many narratives surrounding bitcoin. While many of these narratives are very simple—like bitcoin being a haven for money laundering—most of them are more sophisticated, and often more profound. One such narrative is that bitcoin has become so popular that it has amassed an antifragile network effect.
The world’s first cryptocurrency, Bitcoin, has been around since 2009 and has been a growing presence in the world of investing and commerce over the past decade. Now the cryptocurrency is becoming more popular than ever, with many retailers accepting Bitcoin as a means of payment and some investors believing it may not just be the future of currency, but an entirely new economic system.
Over the years, bitcoin has managed to win over skeptics and often redefine its history. Because bitcoin (BTC) is so versatile, it can evolve quickly to face new criticism.
We have seen this over the years. For example, bitcoin was often attacked by the media for its volatility – many articles claimed that bitcoin was too volatile to succeed as a currency. Today, we don’t hear much about bitcoin’s volatility, partly because observers are used to frequent price swings, but mostly because bitcoinists have bought into the idea that bitcoin is an investment, namely digital gold. They argue that BTC is only subject to such wild price fluctuations because it has not yet achieved a market capitalization that can offset such volatility like, say, gold. As a result, the dominant narrative around bitcoin today is that it is a store of value and a protection against inflation, despite its continued volatility.
Bitcoin has recently faced new hurdles, namely environmental, social and governance (ESG) issues related to mining, extortion and regulatory oversight. The Bitcoin community has been quick to address these issues, even though the seeds were planted under the surface years ago. The Bitcoin community is so large that members are now represented in most industries and even politics. As a result, their work covers areas that have received little attention in the past, such as renewable BTC operations.
Related: Is bitcoin a waste of energy? Pros and Cons of Bitcoin Mining
So when new issues emerge that clash with current discourse, attention is suddenly drawn to the areas bitcoiners have been working on behind the scenes. The community then gathers around them to create a new narrative that becomes the dominant vision of bitcoin.
ESG attacks on bitcoin started in the spring of 2021. They generally include the following:
Bitcoin consumes too much energy (more than small countries).
There is not enough clean energy to mine bitcoin.
Most bitcoin mines are located in countries like China, which are known for their lack of transparency or lack of ESG compliance.
Bitcoiners took almost immediate action to counter these perceptions. According to them, bitcoin encourages the use of green energy, as it is often one of the most efficient and cheapest forms of energy for mining. Bitcoin miners who use cheap renewable energy can earn more than those who use more expensive and potentially non-renewable energy. As a result, BTC’s mining industry will eventually be forced to rely solely on renewable energy sources.
Related: Green Bitcoin: Impact and importance of energy use for PoW
They also rushed to provide more resources and education on the sustainability of bitcoin. A study by investment manager VanEck and the Cambridge Centre for Alternative Finance found that 39% of the energy used by BTC miners comes from renewable sources, and 76% of Bitcoin miners use renewable sources. This makes bitcoin more environmentally friendly than many other industries, few of which are scrutinized in this way for their green energy use.
Bitcoiners also point out that Bitcoin’s energy consumption is used to secure the network, which benefits all network participants. This security ensures that the Bitcoin network never fails, unlike traditional financial networks that have experienced outages and interruptions in the past. The energy consumption of bitcoin may be large in absolute terms, but the services miners provide with that energy are a net benefit to society. If people are willing to ignore the consequences of the energy consumption required to run the global financial system, why aren’t they paying attention to the relatively harmless energy consumption of bitcoin, which promises to create a better and more open financial system?
Related: Ignore the headlines: bitcoin mining is already greener than you think.
We also saw how outspoken bitcoiners like Michael Saylor united the bitcoin community and miners against misconceptions about bitcoin energy by creating the Bitcoin Mining Council. BTC miners have been encouraged to be more transparent and open about their energy sources. This coordination shows that bitcoiners are united in their desire to make the network even greener.
Attention was also drawn to BTC’s mine operators, who already use significant amounts of renewable energy in their operations. And with the headlines about bitcoin being powered by more than 99% hydroelectricity, I expect the public will learn how environmentally friendly bitcoin mining is. Along with promoting the above actions and awareness activities, Bitcoiners are rethinking the term ESG. If they succeed – and I have no doubt they will – bitcoin’s potential ESG problems are unlikely to make the front pages in the future.
Related: Blockchain and sustainability – it’s not just about using electricity
Monetary and narrative scale
Bitcoin as a currency has largely been taken off the table and the focus has shifted to bitcoin as an investment. But in the background, there are Bitcoiners working hard to promote the adoption of BTC around the world and the development of the Lightning Network.
The recent development in El Salvador – the passage of the bitcoin law recognizing BTC as a legal currency in the country – is revolutionary for cryptocurrencies, even if it seems to many to have come out of nowhere. Taking a closer look at the situation, it is clear that the foundation was laid by bitcoiners several years ago. Bitcoin Beach, a project that aims to create a sustainable bitcoin ecosystem in El Salvador, has done most of the groundwork in the country. In an effort to increase affordability through the use of bitcoin, he has also worked to dispel the narrative that bitcoin is not used as a currency. And it worked. The consequences for the global acceptance of bitcoin could be very serious if there is a domino effect when countries try to accept BTC as legal tender.
Related: El Salvador’s move to bitcoin could lead to it losing its dominant market position
To counter the argument that bitcoin cannot be used as a currency, many bitcoiners have been quietly working on a Lightning network for the past few years. Although the network is not yet perfect, its usage and throughput are increasing, making it a promising solution for scalability. In general, it gets surprisingly little attention. I suspect that at some point in the future, the sudden success of scaling solutions will change the story of bitcoin again: from an investment to a currency.
Thanks to the zeal of bitcoiners working together to expand bitcoin adoption, it manages to remain antifragile. So far it has managed to overcome all the major obstacles, not least because Bitcoiners can shape their new story themselves.
This article contains no investment advice or recommendations. Any investment or business transaction involves risk, and readers should do their own research before making a decision.
The views, thoughts and opinions expressed herein are those of the author and do not necessarily reflect or represent those of Cointelegraph.
Martin Gaspar is an analyst at CrossTower, a company that manages capital markets for digital assets, and has experience conducting fundamental research and analysis of cryptocurrencies. Previously, Martin was a fixed income research analyst at Wells Fargo Securities, where he provided practical investment advice to traders, sellers and buy-side clients. He is passionate about cryptocurrencies and has been actively following this field since 2012. Martin received his undergraduate degree from Colorado College, where he graduated cum laude in economics.
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