WASHINGTON–While most discussion around Bitcoin has to do with its astronomical increase in value and whether the federal government should be exploring a “digital dollar,” another related issue that is often less recognized was recently raised by new Treasury Secretary Janet Yellen—it’s extremely inefficient.
During an interview, Yellen said one of the reasons she is skeptical of the promise of Bitcoin is its energy use, as it requires high-powered computers to “mine” Bitcoin using increasingly complex mathematical puzzles to verify transactions earning Bitcoin for the work. The process consumes huge amounts of energy, equivalent to a midsize country’s power, as one report noted.
“It’s an extremely inefficient way to conduct transactions and the amount of energy consumed in those transactions is staggering,” Yellen told the New York Times.
Yellen isn’t alone in that view.
“Bitcoin is energy inefficient by its very nature,” agreed Charles Hoskinson, CEO of the blockchain engineering firm IOHK. Hoskinson told the Times, “The more its price rises, the more competition there is for the currency, leading its energy requirements to rise exponentially.”
Digital Dollars Also Discussed
One Bitcoin transaction has the carbon footprint of 700,000 Visa payments, according to Alex de Vries, an economist who created the Bitcoin Energy Consumption Index. The Times noted smaller estimates still reckon it’s in the tens of thousands of equivalent credit card transactions.
“The Bitcoin network already requires half the amount of electrical energy to operate as all global data centers combined,” de Vries told the Times.
Yellen did tell the Times she believes it “makes sense” to consider a so-called digital dollar run by the central bank. Such a digital dollar, she said, could lead to “faster, safer and cheaper payments.”