If bitcoin could just cool it with the whole "using copious amounts of energy to mine magic internet money" thing, that'd be great. That's the message some environmental groups are putting out there as part of a new campaign pressuring the bitcoin community to clean up its act with a code change.
Greenpeace USA, Environmental Working Group and other organizations began a campaign called #ChangeTheCode this week in an attempt to turn up the heat on bitcoin investors. The cryptocurrency currently relies on a proof-of-work process that puts miners in competition with each other. That mechanism is used by miners to confirm and record crypto transactions, providing a greater level of security, but it also takes a heavy climate toll due to the amount of energy used and the associated carbon emissions. There are other options, including proof of stake, that use vastly less energy.
Making that shift happen faces overwhelming challenges owing to the fact that it would make many mining operations obsolete, essentially leaving operations holding a bunch of stranded assets in the form of mining rigs, power plants and other infrastructure. The campaign acknowledges that challenge, which is why it's targeting big investors rather than miners.
“If only 30 people — the key miners, exchanges, and core developers who build and contribute to Bitcoin’s code — agreed to reinvent proof-of-work mining or move to a low-energy protocol, Bitcoin would stop polluting the planet,” the groups wrote.
The groups are running ads in several publications, including the Journal and New York Times, targeting crypto lovers like Elon Musk and Jack Dorsey. Ripple co-founder Chris Larsen funded the campaign with a $5 million contribution, though he isn’t representing Ripple in this effort. “It’s important for anyone in a position to act, to act,” Sierra Club’s Michael Brune, who’s advising the campaign, told the Wall Street Journal. “You can’t ignore that we are in a climate emergency.”
Bitcoin miners seek out the cheapest sources of electricity possible to maximize profits. But that often means relying on dirty forms of energy or, as an increasing number of mining operations are doing, taking over old fossil-fuel power plants and vertically integrating mining operations. Bitcoin's ballooning carbon footprint shows the risk of continuing to use proof of work absent stronger environmental regulations.
The actual act of changing the code is no small feat. Anyone can technically do it because bitcoin's code is open source, but it needs consensus from nearly the entire network. That’s by design — it provides an added layer of protection — but it also means the process is long and hard. It’s not impossible, though.
Ethereum is in the process of changing from proof of work to proof of stake, which will reduce its energy consumption by an estimated 99%. The groups behind the campaign are hoping bitcoin supporters will go a similar route. Other cryptocurrencies already use proof of stake as their consensus mechanism, showing it can be secure, fast and reliable.
Correction: An earlier version of this story misspelled Chris Larsen's name. This story was updated on March 29, 2022.
An analysis of valuations based on forward revenue multiples show fintechs have fallen harder than other tech sectors.Image: Andreessen Horowitz