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During the last few weeks, a lot of discussion has been going on about Bitcoin’s energy consumption and how it relates to the fiat system’s energy consumption. I’ve read a few articles about it and some are really good. I added some links at the end of this post.

Most of them come to the conclusion that Bitcoin consumes less power than the gold industry, less power than the banking industry or less power than the fiat money systems.

However, I think they are all neglecting a very important aspect of Bitcoin: Bitcoin is deflationary. This means that the purchasing power of the currency will not decrease over time. This is contrary to fiat currencies: People managing fiat currencies all seem to have a goal of a few percent inflation every year. This means that people holding dollars will be more likely to spend their money than people holding bitcoins.

Bitcoin would thus decrease the ridiculous consumption patterns we see in the world today. Bitcoin is a double edged sword: On one hand, Bitcoin uses energy more efficiently to maintain the money system (as explained in the articles below). And on the other hand you have the calming effect on consumption.

My conclusion of this is that even if Bitcoin pollutes more than the systems it replaces, the planet may still be better off because people don’t buy as much junk.

I have no idea how strong this effect is. If you have any further insight into this, I’m very interested to hear your thoughts. Please ping me on twitter @kallerosenbaum or comment below.

Thank you for your attention!
/Kalle

Links comparing Bitcoin to legacy systems:

Elaine Ou: “No, Bitcoin Won’t Boil the Oceans”

Jon Buck: “Bitcoin Has Less Environmental Impact Than Fiat Currencies”

Nanok Bie: “Is Bitcoin Mining An “Energy Waste”?”

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