Greenpeace USA Will Now Accept Your Bitcoin Donations

Some have criticized because Bitcoin uses the proof-of-work (POW) concept to ensure currency units are not generated in an arbitrary amount. Basically, generating new Bitcoin units requires a lot of computation and this requires electrical power. And people argue that this can’t be more energy-efficient than backing money by a state and, ultimately, its military power.

The thing is that POW turns out to be an engine for adaption and spread of solar power as it is now cheaper to mine bitcoin using solar and wind energy. Source to that:

http://en.wikipedia.org/wiki/Grid_parity

This is good because bitcoin allows investors into solar power to monetize the energy they generate. And the latter is important because – similar to nuclear power – most of the investment comes long before enough energy returning the value can be harvested, which makes it difficult to prepare for the coming scarcity of fossil fuels. With Bitcoin, such investments can be paid much sooner. To some extend, bitcoin is energy investment paid by its seignorage.

Bitcoin also helps to work temporarily around the issue that it is much cheaper to generate electricity from solar power than to store it, because you can convert electricity to bitcoins and store these.

All in all bitcoin will become a huge boost to renewable power once ASIC hardware is cheap enough that electricity costs are dominant again – and the latter is already happening. Bitcoin will simply boost innovation and investments in cheap power generation and the sources will be increasingly renewables, simply because renewables are cheaper.

There’s another neat aspect with proof-of-work: Generating bitcoin requires a certain amount of physical work in terms of electricity. In this way, the value of bitcoin is coupled to the value of energy – if energy prices go up, bitcoin’s value will grow, too, while the dollar will crumble.

However, bitcoin units **are not equivalent** to a certain fixed amount of energy. This is because the price of bitcoin (and the energy expended to create new ones) depends on the *current* market price, which is growing. It is more correct to say that bitcoins **symbolize** energy, because the energy required to create them is is measured by the current difficulty of creation. For example, Satoshi’s first coins today have the same value, and thus represent the same amount of energy, as newly generated coins. But **Satoshi’s coins (and nearly all bitcoins generated before) required a vastly lower expense of energy to create them**. By this way, Bitcoins symbolize energy (which is a good approach for a more sustainable kind of money), but in an efficient way.

To put the extend of this into some perspective, look at this logarithmic plot of bitcoins price evolution over time:

http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25zvzl

You see that until about January 2013, the bitcoin price was mostly below 10 dollars. Consequently, before that time, it was never economical to expend more electrical energy than with a cost of 10 USD to generate one bitcoin. And more than half of all bitcoins were generated before that time. That means that today, a bitcoin with a price of around 400 USD was generated using energy of less than 10 USD, and with some probability even less than 0.1 USD.

Some have criticized because Bitcoin uses the proof-of-work (POW) concept to ensure currency units are not generated in an arbitrary amount. Basically, generating new Bitcoin units requires a lot of computation and this requires electrical power. And people argue that this can’t be more energy-efficient than backing money by a state and, ultimately, its military power.

The thing is that POW turns out to be an engine for adaption and spread of solar power as it is now cheaper to mine bitcoin using solar and wind energy. Source to that:

http://en.wikipedia.org/wiki/Grid_parity

This is good because bitcoin allows investors into solar power to monetize the energy they generate. And the latter is important because – similar to nuclear power – most of the investment comes long before enough energy returning the value can be harvested, which makes it difficult to prepare for the coming scarcity of fossil fuels. With Bitcoin, such investments can be paid much sooner. To some extend, bitcoin is energy investment paid by its seignorage.

Bitcoin also helps to work temporarily around the issue that it is much cheaper to generate electricity from solar power than to store it, because you can convert electricity to bitcoins and store these.

All in all bitcoin will become a huge boost to renewable power once ASIC hardware is cheap enough that electricity costs are dominant again – and the latter is already happening. Bitcoin will simply boost innovation and investments in cheap power generation and the sources will be increasingly renewables, simply because renewables are cheaper.

There’s another neat aspect with proof-of-work: Generating bitcoin requires a certain amount of physical work in terms of electricity. In this way, the value of bitcoin is coupled to the value of energy – if energy prices go up, bitcoin’s value will grow, too, while the dollar will crumble.

However, bitcoin units **are not equivalent** to a certain fixed amount of energy. This is because the price of bitcoin (and the energy expended to create new ones) depends on the *current* market price, which is growing. It is more correct to say that bitcoins **symbolize** energy, because the energy required to create them is is measured by the current difficulty of creation. For example, Satoshi’s first coins today have the same value, and thus represent the same amount of energy, as newly generated coins. But **Satoshi’s coins (and nearly all bitcoins generated before) required a vastly lower expense of energy to create them**. By this way, Bitcoins symbolize energy (which is a good approach for a more sustainable kind of money), but in an efficient way.

To put the extend of this into some perspective, look at this logarithmic plot of bitcoins price evolution over time:

http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25zvzl

You see that until about January 2013, the bitcoin price was mostly below 10 dollars. Consequently, before that time, it was never economical to expend more electrical energy than with a cost of 10 USD to generate one bitcoin. And more than half of all bitcoins were generated before that time. That means that today, a bitcoin with a price of around 400 USD was generated using energy of less than 10 USD, and with some probability even less than 0.1 USD.