Critical Evaluation of Andrew Sorkin’s Press Article "Bitcoin’s Climate Problem"

Academic Paper, 2021

22 Pages, Grade: 1.3




1 Introduction and Summary of analysed article
1.1 Introduction
1.2 Summary of the press article 'Bitcoin's Climate Problem'

2 Significance and Importance

3 Literature Review
3.1 Explanation Bitcoin
3.2 Bitcoin's climate problem
3.3 Bitcoin's future energy consumption
3.4 Lightning Network

4 Research Gap

5 Conclusion

List of Figures

2.1 Gartner Hype Cycle for Blockchain Technologies

List of Abbreviations

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Chapter 1

Introduction and Summary of analysed article

1.1 Introduction

Every time Bitcoin reaches its all-time high, negative voices are raised about Bitcoin with very similar arguments. It starts with absurd accusations such as terrorism fi­nancing, money laundering, Bitcoin being used for drugs, all the way to the energy consumption of Bitcoin. While the first three arguments can be easily refuted by reading Pollock (2018)'s paper, this is not the case with Bitcoin's energy consump­tion. Bitcoin is one of 8,931 cryptocurrencies (CoinMarketCap, 2021a) and is the most popular. After Bitcoin was released in 2009 by Nakamoto (2009)'s white pa­per, there was a valuation explosion of marketability from zero on release to around 1.042 trillion on 23 March 2021 (CoinMarketCap, 2021a).

Bitcoin is a digital currency that is part of a worldwide decentralised payment sys­tem. Payments with Bitcoin are only transferred with P2P (person-to-person) trans­actions without using centralised banks or other financial institutions between the transactions. Bitcoin is based on the technology of blockchain. In order to validate transactions on the Bitcoin network for subsequent inclusion in the blockchain, a special consensus mechanism is required. This mechanism is called Proof-of-Work (PoW). Whereas participants (so-called miners) have to solve a complex mathemat­ical equation with the commitment of their computer hardware. The miner with the first correct solution can thus prove his work performance in the network. After the other miners in the Bitcoin network have been successfully verified the correctness of the equation, the transaction is transferred to the newly mined block and this will then have attached to the blockchain. Because every miner in the bitcoin network is trying to solve the equations first, a very high energy consumption is been needed. According to Criddle (2021), the electricity consumption used to mine Bitcoin and process its transactions are equivalent to the amount emitted by Argentina.

Therefore, this essay attempts to discuss the significance of Bitcoin's role in the fi­nance world, the energy footprint of Bitcoin and the possible positive impact for the environment.

1.2 Summary of the press article 'Bitcoin's Climate Problem'

The New York Times published a press article by Andrew (Sorkin, 2021) on 9th of March 2021, assessing the problem of bitcoins' energy consumption. Thereby, the press article refers to Alex de Vries (2020) calculations of Bitcoins market dynamics and power consumptions.

According to Laurence D. Fink, CEO of BlackRock, investors of stocks, shares, short-sells, futures or options will more likely invest in companies which rank highly in terms of environment, sustainable visions, and social components to achieve climate regulations. In addition, a Task Force on Climate-Related Financial Disclosures is working on a global standard to force companies to disclose their CO2 footprint. The question arises as to whether companies that either hold Bitcoin or do business with Bitcoins are having a negative impact on their stock value. Popular company examples of Bitcoin advocates are Tesla (Kovach, 2021), PayPal (Gould, 2020), and Square (Bursztynsky, 2021).

Although every investor is aware of the energy consumption of Bitcoin, it currently reaches a level of $55,687 per Bitcoin (CoinMarketCap, 2021a). However, Andrew Sorkin also describes the downside of the coin that many proponents of Bitcoin claim that the electricity used to mine the Bitcoins and verify transactions is drawn from electricity from renewable sources. Even the Bitcoin critical Bill Gates said, if Bitcoin is green electricity and it is not crowding out other use cases, eventually, Bitcoin could revolutionise the financial world. New future projects like Seetee (2020) are planned which will build wind turbines and solar panels. The overproduced energy can then be used for Bitcoin purposes. In addition to the use of renewable ener­gies, there are also technological changes in the Bitcoin environment, which the energy-consuming PoW consensus mechanism is expanded to include the energy­less lightning technology (Poon and Dryja, 2015).

Chapter 2

Significance and Importance

Bitcoin has been one of the most speculated financial instruments in the world since December 2017 at the latest. Every trader who is seriously involved in the finan­cial world must and has thought about whether or not to include Bitcoin in their own portfolio. The interesting thing about Bitcoin, apart from the limit of 21 million Bit­coins (Böhme et al., 2015, p.218) and the resulting impossibility of inflation, is the Blockchain technology behind it.

Since 2015, blockchain and thus also Bitcoin have been going through a classic course of the Gartner Hype cycle illustrated in figure 2.1:

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FIGURE 2.1: Gartner Hype Cycle for Blockchain Technologies according to Gartner (2020)

The development of blockchain from innovation trigger to the stage of trough of development has been carried out significantly within the last five years (Gartner, 2016). In addition to blockchain technology, other technologies have also been de­veloped that are based on the basic blockchain idea. The price of Bitcoin should also be viewed in parallel with blockchain technology. After an all-time high of $17.381 per Bitcoin on 21 December 2017 and the subsequent negative price development, Bitcoin stagnated with slight deviations to a price of $5,337 per Bitcoin until the ap­pearance of Covid 19 (CoinMarketCap, 2021b).

Since then, Bitcoin has risen in price with an increase of 943.41% from $5,337 to $55,687 per Bitcoin by 23 March 2021. Massive fiscal policy interventions by central banks, uncertainty due to Covid situation negatively affects traditional enterprises, well-known investors like Stan Druckenmiller, Bill Miller or Paul Tudor Jones and companies acknowledging the cryptocurrency, and decreasing inflation over time. As on the one hand there are big supporters (e.g., Tesla, PayPal, Square) for Bit­coin, on the other hand there are just as many if not more people who do not believe in Bitcoin and its future relevance. Therefore, now is the right time to discuss rele­vance and importance about the ever-growing importance of sustainability in relation to Bitcoin and to critically evaluate research which highlight the negative impact of Bitcoin to the environment. Accordingly, Sorkin's press article is a consummate op­portunity to underline the statements with facts.


Excerpt out of 22 pages


Critical Evaluation of Andrew Sorkin’s Press Article "Bitcoin’s Climate Problem"
Edinburgh Napier University
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critical, evaluation, andrew, sorkin’s, press, article, bitcoin’s, climate, problem
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Maximilian Linner (Author), 2021, Critical Evaluation of Andrew Sorkin’s Press Article "Bitcoin’s Climate Problem", Munich, GRIN Verlag,


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