Critics like Greenpeace argue that Bitcoin mining consumes too much energy, often sourced from fossil fuels, contributing to climate change and exacerbating environmental issues.

However, when you dig deeper, it can be argued that these concerns are primarily based on misconceptions and a lack of understanding of Bitcoin’s true potential.

To balance the debate, we also need to look at the environmental benefits of Bitcoin - yes, they exist, albeit they are lesser known!

1. Embracing renewable energy

2. Reducing energy wastage

3. Decentralising the energy grid

4. Driving innovation in energy efficiency

5. Offering an alternative to the banking system

1. Embracing renewable energy

Unless you live under a rock, you’ll have noticed that oil and gas prices shot through the roof last year. As Bitcoin miners profit by converting electricity into Bitcoin, this was terrible news for their profitability.

The cheaper the energy, the more profit miners can make, leading them to search for affordable alternatives.

With the price of renewables, such as solar, dropping against the cost of fossil fuels like gas over recent years, it doesn’t take a genius to tell miners which option to favour.

In places abundant with renewable energy, Bitcoin mining boosts demand, spurring further investment in renewable energy production.

For example, the state of Washington in the United States, known for its abundant hydropower resources, has attracted many Bitcoin mining operations. This increased demand has, in turn, led to further investment in renewable energy projects in the region.

Ultimately, Bitcoin mining is incentivising the adoption of renewable energy sources. By seeking out low-cost energy options, the mining industry is helping to drive the global transition towards a more sustainable future.

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2. Reducing energy wastage

However, one issue with renewable energy sources is that they are often intermittent — sunlight and wind availability vary throughout the day. As renewable energy is difficult to store or transport, this often results in surpluses in supply and subsequent waste.

By adjusting mining operations to align with high energy generation periods, Bitcoin miners effectively create a valuable sink for excess energy, optimising energy consumption and reducing wastage.

Bitcoin also helps mitigate the environmental impact of fossil fuel extraction, particularly in the case of natural gas. In remote oil wells, excess natural gas is often flared off due to the lack of infrastructure needed to transport it.

Flaring releases greenhouse gases which contribute to climate change. Bitcoin miners, like these two Texans who made $4m, can harness wasted natural gas to generate electricity, significantly reducing greenhouse gas emissions.

In essence, the industry contributes to a more efficient and environmentally conscious energy landscape by using excess and stranded energy.

3. Decentralising the energy grid

Traditional energy grids rely on a few large-scale power plants to create electricity. This centralised approach causes inefficiencies and vulnerabilities, as power generation is concentrated in specific locations. 

Europe experienced this first-hand with the war in Ukraine recently, when sanctions and the blowing up of the Nord Stream pipelines led to a full-blown crisis in many countries.

The risks aren’t limited to geopolitical events either - winter storms in Texas recently left millions without heat or water for days when storms overwhelmed the state’s centralised energy grid. 

In contrast, Bitcoin mining can be set up anywhere with the internet, creating demand for energy in dispersed locations worldwide. This, in turn, encourages the development of a decentralised grid to meet that demand and the needs of the wider global population.

By creating a decentralised mining network, Bitcoin can foster greater grid resilience, promote local renewable energy projects, and increase energy efficiency. Take that, Russia!

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4. Driving innovation in energy efficiency

Bitcoin mining drives innovation in energy efficiency, as miners continuously seek to maximise profits by minimising energy consumption. 

As the mining process becomes more computationally intensive, the demand for high-performance, energy-efficient hardware grows.

In response, technology companies have designed increasingly sophisticated mining equipment, such as Application-Specific Integrated Circuits (ASICs), optimised for energy efficiency and mining performance.

These advances in hardware reduce the overall energy consumption of the mining process. In fact, Bitcoin mining has increased efficiency by almost 5,814% since 2013.

Bitcoin mining has also spurred innovation in energy management practices. For example, miners now use advanced cooling systems to reduce the energy required to maintain optimal operating temperatures for their equipment.

These innovations are not limited to the cryptocurrency industry; they can also be applied to other sectors. For instance, the advances in cooling technology developed for Bitcoin mining can be utilised in data centres, reducing their energy consumption and environmental impact.

Therefore, technological innovation sparked by Bitcoin miners' demand can reduce global production's environmental impact as these technologies become more widespread.

5. Offering an alternative to the banking system

Critics tend to ignore traditional finance's environmental challenges when focusing on Bitcoin's energy consumption.

Traditional banking requires a vast physical infrastructure of branches, ATMs, offices, and data centres notorious for their high energy consumption and reliance on fossil fuels.

Moreover, banking generates substantial waste in the form of paper statements, receipts, and marketing materials. This waste contributes to deforestation and the associated release of greenhouse gases.

Finally, emissions associated with bank employees commuting to work, armoured vehicles transporting cash, and the movement of physical documents add to the overall carbon footprint of the traditional banking system.

As a digital currency, Bitcoin can streamline financial transactions and reduce the need for energy-intensive physical infrastructure, paving the way for a more sustainable and efficient financial system.

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Bitcoin’s new mascot

I’m not claiming that Bitcoin mining is a net benefit to the environment. It obviously uses electricity. But misconceptions and limited understanding have often obscured the prevailing narrative around Bitcoin's environmental impact.

We must also recognise its potential to contribute to a more sustainable future by:

• Promoting renewable energy adoption

• Curbing energy waste

• Decentralising and stabilising the grid

• Fueling innovation in energy efficiency

• Offering a greener alternative to traditional banking systems

Not only did Greenpeace's provocative jab amuse Bitcoiners, who embraced the skull as their mascot, but the artist has now admitted he was wrong about Bitcoin’s environmental impact.

Bezos selected the reference to the world’s largest river because he wanted Amazon to be ‘an everything store’, not pigeonholed to only peddling books. Amazon expanded to become one of the largest companies in the world by dominating a variety of fast-growing industries, from cloud computing to grocery shopping.

Recently rumours have emerged that Amazon has set crypto in its sights as the next fast-growing industry to dominate.

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NFT gaming

Sources at Amazon have suggested the retail giant is preparing to launch an NFT and blockchain-based gaming initiative as soon as April this year. The company reportedly plans to encourage users to play crypto games to win, collect and trade NFTs.

NFTs (non-fungible tokens) are unique digital assets such as art which can be verified on blockchains. They allow creators to monetise their digital content and for collectors to own and trade unique digital items.

Blockchain games exploded in recent years, with the likes of Axie Infinity giving players a chance to ‘play-to-earn’ by earning cryptocurrencies as they play the games.

Besides registering a few crypto-related domains, Amazon has done little to develop a presence in the industry in recent years. However, Amazon recently announced a partnership between their cloud services division AWS and Ava Labs, the founders of Avalanche, to help bring services to users of the blockchain.

Short of the fact that Amazon plans to launch something NFT and possibly gaming-related in the space, we don’t know anything else at this stage. But what we do know is Amazon’s entry would bring a tsunami of capital and users into the fledgling world of crypto and blockchains.

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Explosive growth

The market capitalisation of all cryptocurrencies currently sits at about $1 trillion; while that’s nothing to be sniffed at, the market cap of Amazon alone is around the same. It has been estimated that there are roughly 420 million crypto users worldwide, and it was estimated in 2022 that there were approximately 310 million active Amazon customers.

It’s not hard to imagine that the impact on the space would be astronomical if a company with almost the same market capitalisation and volume of users became involved.

Crypto is currently in a bear market after drawing down drastically from all-time highs, companies dying, and frauds being exposed. But prices are starting to rise again, people are getting more interested, and that one annoying friend at the pub is lecturing you again about how Dogecoin will change the world.

Amazon’s entry into the space could be the catalyst for a new bull run and unimaginably higher prices. When Facebook rebranded to Meta in 2021, an indication of their plans to go full force into the crypto-adjacent world of the Metaverse (don’t worry, I don’t know what it is either), prices soared, and people went crazy for all things crypto and NFTs.

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The wild west

The crypto industry, also known as Web3, is not dissimilar to the unregulated internet of the 90s. Legal and regulatory uncertainty has caused large institutions to keep the space at arm’s length up until now.

Can you blame them? Just this week, the SEC (Securities and Exchange Commission) fined crypto exchange Kraken $30m as they accelerated their crackdown on digital assets in the light of the collapse of the fraud-fuelled FTX. Governments worldwide are increasing their scrutiny of the industry and trumpeting the need for more regulation to protect users.

Dapper Labs, the creators of the licensed NFT trading card project NBA Top Shot are currently embroiled in a legal battle which will dictate whether NFTs are considered securities in the US. The effect of this could have massive financial implications for the company as well as the industry as a whole.

The new influx of crypto games offering chances to earn and sometimes even gamble poses a considerable risk regarding violating gaming and gambling laws across different jurisdictions worldwide. Currently, there is little to no guidance or precedence to help institutions like Amazon mitigate the risks of establishing themselves within the space.

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With great power comes great responsibility

Did you know that quote was from Spiderman? If I had a penny for everyone who thought it was from one of history’s great thinkers, I would be up there with Jeff Bezos.

Amazon is a gigantic behemoth compared to any other entity in the crypto space. Its impact would be mindblowing, but with this great size comes enormous risks. Amazon will want more regulatory and legal clarity as it dips its toes into the space.

Given the fallout from the ongoing crypto winter, regulators are coming. Many in the space see this as a negative, but to be honest, this is a prerequisite for massive institutions like Amazon to enter.

Lack of legal and regulatory clarity isn’t the only problem facing the crypto space; a lack of safe and convenient storage options has also been on the minds of users and projects alike.

It might be a while before Amazon, and other tech giants fully enter the industry. Nevertheless, they are planning on it, and regulatory action and clarity will encourage them to accelerate the process.

Once they do, the industry will progress to a new phase; we will see all-time highs in prices, user bases, and innovation. Growth will kick into overdrive.

Luke Dashjr describes himself as the longest contributing bitcoin core developer having been involved with the project since 2011. Core developers are considered masters in the fields of cryptography and software engineering. Their job is to code and implement the various upgrades that enable bitcoin to maintain its dominance in the space.

So how does such an expert fail to secure their crypto?

Luke was understandably distraught as he took to Twitter to reveal that his data encryption program, Pretty Good Privacy (“PGP”), had been compromised resulting in the draining of most of his wallets.

If you’re familiar with crypto, chances are you have heard this slogan again and again. Never more so has this phrase been bandied about than recently with the ongoing fallout from the implosion of FTX.

If even the most skilled and experienced bitcoin developers can succumb to this rule and suffer losses, what hope do the rest of us mere mortals have?

How can we talk about banking the unbanked if we don’t have a custody solution that’s safe and convenient? From the biggest exchanges to the methods employed by the smartest developers, nowhere seems to be safe at the moment.

This post examines the various storage options available for your crypto, and why honestly, none of them are particularly secure or convenient.

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Centralised Exchanges

Most beginners store their coins on exchanges like Binance or Coinbase. However, when these exchanges are hacked or go bankrupt, it becomes clear that those assets don't truly belong to the users. When storing on an exchange, what you really own is a ‘right’ to the underlying assets, hence the phrase “not your keys, not your coins”.

If an exchange goes bankrupt while holding onto your funds, it's even worse. You'll be treated as an unsecured creditor in the proceedings, meaning you'll be treated the same as any other entity that loaned them money and will likely receive little to no compensation.

In a filing with the SEC, Coinbase said that “in the event of a bankruptcy” the crypto assets that the company holds in custody for its customers “could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors.”

In 2022, FTX collapsed due to fraud and recklessness, leading to the loss of over $1 billion in customer funds. It's unlikely that these customers will ever see their funds again. If they do, it will take years and they will only receive a small percentage of what they are owed.

In addition to the risks of bankruptcy and fraud, there's also the threat of losing assets through hacking. FTX itself was hacked, and back in 2014, Mt. Gox, a Japanese exchange handling over 70% of all bitcoin transactions, announced that a large portion of their coins had been stolen. It's been eight years, and customers are still waiting to be made whole.

Hacks are alarmingly common and not limited to centralised exchanges. Here are some of the most significant to occur on various crypto bridges, protocols and exchanges:

• Roin Network 2022: $625m

• Poly Network 2021: $611m

• FTX 2022: $600m

• Binance 2022 $570m

• Coincheck 2018: $534m

• Mt. Gox 2011: $473m

• Wormhole 2022: $325m

• Bitmart 2021: $196m

• Nomad Bridge 2022: $190m

• Beanstalk 2022: $182m

• Wintermute 2022: $162m

Hot Wallets

If exchanges can’t be trusted, you might be forgiven for thinking a desktop or online wallet such as MetaMask would be safer.

Hot wallets benefit from being easy to set up, accessible anywhere, and convenient for making transactions quickly. However, this convenience comes with a price.

What has been the most pressing concern for Elon Musk since his acquisition of Twitter? Bots.

The bot armies are so persistent and advanced that it feels like a game of whack-a-mole; as soon as Twitter closes one security gap, the bots return even stronger within a week or two.

The vast majority of these bots relate to crypto and specifically target tweets that mention hot wallets.

Why? Because hot wallets are much easier targets than exchanges. All a trickster needs to do is convince you to connect your wallet to the wrong website and *poof* - your coins are gone.

Hacks and phishing attacks surged in 2022. There are countless stories about people losing their NFTs after trying to claim a new NFT drop or entering their details into sketchy support websites.

Bored Ape Yacht Club (“BAYC”) NFTs were particularly appealing to bad actors. In August 2022, it was reported that 143 BAYC NFTs had been hijacked since the project began, totalling an estimated value of $13.5m at the time. The majority were stolen from hot wallets.

Cold Wallets

Hardware wallets, also known as cold wallets, try to resolve that issue. These devices, like those sold by Ledger and Trezor, stay offline which makes them more difficult to hack.

The problem with hot and cold wallets is that they require you to hold onto your own recovery seed phrase. A seed phrase is a set of words that can be used to recover the funds if you forget your password or lose access to the device. The phrase can be memorised, written down, or backed up elsewhere.

The problem is, it’s pretty easy to forget your 12 or 24 word seed phrase. Even the most dedicated memory expert could have a stroke one day, causing all recollection of their keys to fade away.

You could jot it down on a scrap of paper, but what if someone finds it? It doesn't matter if you have a hardware wallet, they can now plug your seed phrase in online and drain it in minutes.

What if a fire ravaged your home or storage, reducing the paper to ashes? Your crypto might as well have gone up in smoke with it!

Lost bitcoin is often celebrated, as this decreases the overall supply and boosts the value of individual holdings. However, the unfortunate reality is that most of those coins belonged to everyday people who invested and believed in the project. They have now lost access to their funds and find themselves penniless.

Stefan Thomas, a programmer in San Francisco, lost the password to a wallet that holds 7,002 bitcoin, which would be worth over $100m at today’s prices. He has two guesses left on his device that he lost the password to years ago.

Finally, imagine that a nefarious individual threatens you, coercing you into handing over your wallet or seed phrase. Whereas a typical mugger might only make off with a watch or wallet, this person could steal your entire net worth with nothing more than a $5 wrench.

Multi-sigs

Multi-signature (multi-sig) wallets require multiple keys to access. More than one person must give their approval before funds can be transferred. They are mostly used by organisations to ensure that funds are not accidentally or maliciously transferred without permission.

While multi-sigs improve security, they are costly and complicated. The fact multiple people are required also makes it slower to make transactions. If you are an individual wanting to regularly trade altcoins or NFTs, this solution just isn’t viable.

Which to choose

While it currently makes sense for institutions and high net-worth individuals to use expensive and complicated solutions to store their crypto, there’s no easy solution for the average Joe.

The main options are exchanges, hot wallets, and cold wallets. Exchanges go bankrupt, hot wallets get hacked, and people lose their keys to their cold wallets.

The biggest risk with self-custody is the seed phrase. Whilst there are companies out there offering alternative solutions, they are in their infancy and their products can be costly and difficult to set up.

Despite this, for the average crypto user, a basic hardware wallet like Ledger or Trezor is the way to go. These devices keep your crypto under your control and offer an extra layer of protection by keeping your wallet offline. Plus, they are the most user-friendly and convenient to use.

You should, however, consider diversifying storage through multiple wallets and exchanges, that way, if one is compromised, only a small portion of your assets can be lost.

Crypto is an amazing technology that can and likely will change the world, but asset custody comes with huge risks and issues preventing the mass adoption required to do so.