The anti-bitcoin arguments (2024)

Dear readers,

In this publication, i will address some of the arguments against Bitcoin. Common arguments used are the high electricity consumption, volatility, lack of intrinsic value, regulation, hacking, criminal activities etc... Let's examine these arguments against Bitcoin one by one starting with the high consumption of electricity.

Energy consumption

In many articles, we have heard that bitcoin will consume all the energy used by the entire world. Look at this article from the European Central Bank in 2017. The post says that by 2020 bitcoin will consume as much energy as the entire world's energy consumption.

Of course, such media claims have a political push from organizations that do not benefit (especially banks) from the mass adoption of bitcoin and attack it in various ways. Certainly, now that we are in March of 2024, we can say that this ECB prediction was totally wrong.

To avoid falling prey to such claims and to form our own free and fact-based opinion, we will do a simple calculation of how much electric energy bitcoin consumes, knowing that those who consume the energy, as we saw in issue #3, are the miners.

An average ASIC used by miners generates about 150 Th/s (Tera-hashes per second or 150 trillion different hashes in one second). The total computing power of all miners in the world is now around 600 Eh/s (exa-hashes per second), where 1 Eh/s = 1,000,000 Th/s. We would need then about 4 million of such (150Th7s) machines.

Let's take one of such machines (ASIC), the Bitmain S19 XP as an example. It consumes on average about 3.5 Kw/h. All the 4 million machines would require 3.5 Kw/h x 4 million = 14 million Kw/h or 14 Gw/h (14 billion watts).

In one year, bitcoin would consume 14 Gw/h x 24 hours x 365 days = 122.600 Gw/h = 122,6 Tw/h (terawatt-hours), while the amount of energy consumed by the whole world (see consumption) is about 27.000 Tw/h.

From these data, we can see that, on average, bitcoin represents about 0.0045 (0.45%) parts of the total amount consumed worldwide. So, less than half percent. Graphically, we can represent it as below where the gray part inside the circle is how much the world consumes, and the blue part shows how much bitcoin consumes.

So the consumption is far from what some media wants us to believe. Moreover such ASICs are becoming more efficient which means that for the same number of hashes generated, less and less electricity is required.

If we also want to look at the structure of such electricity consumption, we should also mention that Bitcoin mining can feed on waste energy and out of waste energy produces economic value. This is often left out but is an important point. Moreover, since the main cost for miners is electricity, they are most of all interested in reducing consumption through the development of more efficient computers than anybody else. So they are at the same time a technology driver.

Helping Renewables and Social Benefits

Renewables suffer from the one side on not having always a costumer and from the other side from not producing when needed. Being profitable and investing in the field is tough. Bitcoin also represent a perfect symbiosis with intermittent sources as it is a 24/7 demand making such enterprises becoming again profitable and encouraging investing stabilising also the grid.

In addition, when from the public there is a high demand of electricity, miners can give that back, while lowering hash power, providing so a social benefit.

Criminal Activities

Another argument often used by the media is the use of bitcoin for criminal activities. As always, we need to do a more comprehensive analysis and put things in context. Let's start by measuring the total value of bitcoin in the market. At the time of this publication, the market price of bitcoin is $65,000. The circulating supply is 19,66 million, which means a total value of 1.28 trillion dollars.

The value of all the gold in the market is around 14 trillion dollars. Thus, more than 11 times the value of bitcoin. The value of the amount of dollars is about 30 trillion dollars, while the second currency, the Euro, is thought to be about 10 trillion. Therefore, considering only these 2 currencies, we reach amounts over $40 trillion. About 40 times more than the total value of bitcoin. In the case of currencies, we have not considered public debts, bonds, and other financial instruments, otherwise the figure would be much larger.

Criminal activities are carried out with various world currencies as well as with gold, bitcoin, and other cryptocurrencies, but the majority fall on the currencies of different states like the dollar and the euro and gold, being collectively 50 times more than bitcoin.

Another factor to consider is the distribution of the amount of bitcoin in circulation meaning that the part which could be used for criminal activities is further reduced:

• The part that is not involved in transactions. This is the share of those who blindly believe that the value of bitcoin will reach much higher levels than it is now, and they do not transfer it.
• The part that is in digital exchanges. These are usually regulated, and accounts are identified. So, it's difficult for criminal activities to take place.
• The public ledger of bitcoin transactions is transparent, and bitcoin was not created with the intention of facilitating illegal activities.

During the year 2022, the volume used for illegal activities, considering all cryptocurrencies (not just Bitcoin), was about 26 billion. This amount represents about 0.24% of the total value of all cryptocurrencies combined. On the other hand, in traditional financial systems, it is estimated that money laundering amounted to somewhere between 800 billion and 2 trillion dollars. Therefore, traditional financial systems (banks, etc.) are used more than 50 times for money laundering and illegal activities.

The argument of its use for illegal activities is unfounded and simply used by anti-bitcoin interest groups. As a reference, I provide some examples of large fines imposed on banks for money laundering in recent times:

• Danske Bank: In December 2022, the United States Department of Justice (DoJ) settled a long investigation against Danske Bank, Denmark's largest bank, resulting in a fine of over 2 billion dollars for investor fraud. This case was related to a major money laundering scandal involving its branch in Estonia.
• Deutsche Bank (USA): In 2020, Deutsche Bank was fined 150 million dollars for its relationships with Jeffrey Epstein and its involvement in Nordic banking scandals. The German bank has faced numerous controversies and fines over the years, with settlements exceeding 10 billion dollars.
• Santander UK: On December 8, 2022, the UK Financial Conduct Authority (FCA) fined Santander UK 107.7 million pounds for failures in its anti-money laundering framework, which resulted in at least 298 million pounds (about 365 million US dollars) passing through its accounts in potentially suspicious transactions.

These cases highlight significant breaches in anti-money laundering protocols by traditional financial institutions themselves.

Regulatory Frameworks

Although various countries have not yet regulated bitcoin or have banned it, such as China, a significant number of western countries have regulated it through law, This is the case for the European Union, Switzerland, UAE and also USA. Most recently, in USA a number of ETF funds were approved and this removes all doubts previously existing on the future of such an asset. These corporations who applied for ETFs, collectively manage over 30 trillion dollars in investment funds and represent a powerful lobby even for major governments like the American one. Thus the approach is regulation and taxation and not prohibition.

Transaction Speed

In cases where the volume of transactions in the mempool is high, completing transactions can take more time. Certainly, if the world were to use Bitcoin for every transaction, it would indeed be a problem because the very nature of bitcoin does not allow for high number of transactions. On average we can do 8 transactions per second. For a big transaction (in terms of amount being transfer) this is not a problem, and Bitcoin would indeed be ok. For smaller transactions and many transaction, the problem is solved with second-layer applications based on bitcoin. An example is the Lightning Network. To give an idea of how lightning network compare to some other solutions, see the picture below.

Lightning Network has the highest speed, with 40 million transactions per second. Compare this to Visa, which only processes 24,000 transactions per second (as a best case). So, this argument also falls.

Technology-Related Risks

Some think that a weak point is the dependency on technology. The possibilities of hacking, lack of internet, and electricity are considered vulnerabilities.

• Hacking: Attempts have been made throughout the years without success. The Bitcoin protocol has proven to be resilient ever since its inception. What might indeed be a real problematic advancement is in the field of quantum computers. These have the potential for hacking passwords, but in the generation of passwords, there is both the creation and the hacking aspect. If hacking becomes simplified by quantum technology, then creating passwords in the classical world and hacking them in the quantum world would also be possible, meaning the use of quantum technology in creating passwords. Therefore, a problem as simple as hacking in the quantum world could still be challenging because password creation would shift from the classical world to the quantum world. Also, if this really were achieved, then there would be bigger problems. A hacker with bad intentions would have access to codes of ballistic and nuclear rockets, all the world's banks, and could hack Apple, Google, Microsoft, Amazon, CIA, FBI, among others in succession.
• Lack of internet and electricity: This is indeed something that would create significant issues, but putting it in context, I believe that in the absence of the internet and electricity, bitcoin would be the last problem you should worry about. A lack of electricity would send society into civil unrest as electricity, along with the internet, control water distribution, the food supply chain, heating systems, and are integral parts of basic and emergency services.

Lack of an intrinsic value

Very often we hear that there is no intrinsic value in Bitcoin. The comparison clearly most of the time is done with a commodity such as gold. Gold can be sued in industry and in making jewellery. This critics do forget that state currencies have also no backing. The only thing providing a guarantee/value for them are the government and their central banks by means of law enforcement.

Ideal money does not have to be at the same time something else. It must do only well the function of money. While value is always subjective and we can clearly highlight something which is indeed intrinsic to Bitcoin, even if critics will fail to recognise it. These are:

• You can take custody like no other assets
• You can do permission-less transactions.

Volatility

Some individuals view Bitcoin as a highly speculative asset where its market value changes so rapidly that it is impractical to use it as a stable reference. Indeed, the price fluctuates significantly, but it depends on the time frame considered. In the short term, the price can vary, but in the long term, the price has been on an upward trend.

An investor who would regularly purchase Bitcoin, would be in a profitable situation most of the time and an asset with this attribute is very valuable and makes Bitcoin not only a highly profitable asset but over time a good collateral for loans.

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