Almost all the popular media narratives about Bitcoin are misinformed, and of those, the ‘Bitcoin consumes too much energy’ trope is one of the more ludicrous. Smart people in the Bitcoin space have been steadily debunking, deconstructing and explaining away these exaggerated and false narratives for years, but perhaps none have so far argued the issue in Bitcoin’s favor more concisely than a new shareholder letter penned by Norway’s 2nd wealthiest individual alongside the founding of his new Bitcoin-focused company, SeeTee.
I cannot stress enough how much I recommend reading the entire letter for yourself, but here I will try to help deconstruct why I think this letter will help people begin to understand the merits of Bitcoin’s energy use — and how it will eventually drive the necessary innovation to meet the world’s loftiest green energy goals.
For a quick background, this week’s major news comes from Kjell Inge Røkke, one of the richest persons in Norway and the main shareholder of Aker, the country’s primary oil and gas giant. He announced the founding of SeeTee, which is a three-pronged move into the Bitcoin space: the newly-founded subsidiary will use bitcoin as its treasury asset, establish mining operations, and invest in projects in Bitcoin’s ecosystem.
The company is quick to highlight something that you might find interesting from a longtime oil industry player in the second tentpole:
Second, Seetee will establish mining operations that transfer stranded or intermittent electricity without stable demand locally—wind, solar, hydro power— to economic assets that can be used anywhere. Bitcoin is, in our eyes, a load-balancing economic battery, and batteries are essential to the energy transition required to reach the targets of the Paris Agreement. Our ambition is to be a valuable partner in new renewable projects.
Right off the bat, SeeTee is dispensing with ‘Bitcoin will boil the oceans’ narrative and instead points at economic incentives. SeeTee gets that there needs to be real incentives in place to change these deeply entrenched systems, and it sees Bitcoin as a key to that lock for the green energy revolution. In this oil magnate’s own words, it will be ‘essential to the energy transition required to reach the targets of the Paris Agreement’.
How so? Bitcoin serves as a way to generate revenue on stranded and unused energy when it is not immediately profitable. This is the foundation for SeeTee’s interest in the Bitcoin mining space.
The company expands on the battery idea later, on page 8:
To achieve the ambitions in the Paris Agreement, we need to vastly increase electrification of society, which will drive higher demand for electrical power. But we need that electricity from renewable sources. Wind and solar are now cheap enough. But they are intermittent, meaning we can only produce when the wind blows and the sun shines. To transform it into baseload power that can be supplied at any given time, there is a tremendous need for batteries in all forms.
Is Bitcoin a literal battery? Can it store energy to be used at a later time? Of course not — but it is an economic one, and that may be just as powerful for making green energy projects more economically viable. Even Elon Musk talks often about the incentives required to drive these changes, and here SeeTee is illustrating how Bitcoin could be a major piece of the puzzle.
Bitcoin then acts like an economic battery. What otherwise was of little value locally, is turned into an economic asset that can be used globally. Extremely flexible demand from miners can optimize the local supply and demand for electricity, which may accelerate the energy transition by improving the economics for new renewable projects.
The letter then dives into a long-winded argument on pages 10, 11, and 12 for the energy use of Bitcoin even ignoring these major potential advantages, but that’s something you’ll have to read for yourself and decide whether you agree.
It all beautifully concludes with this paragraph, though, and I think this captures the essence of the Bitcoin energy conversation better than any other — that is, if you have a decent underlying understanding of what makes Bitcoin so technologically advantageous as a money, which this letter also outlines.
If it’s a bubble, it dies and consumes nothing. If it’s digital gold, it’s more efficient and will emit much less than the asset it disrupts. And if it’s really successful, it’s because of demand from truly value creating applications that define our future and should be worth the electricity.
In other words, if Bitcoin is a speculative bubble that is simply a game of greater fools adopting a money that has no long term future, then it will fail and the arguments against its energy use are moot. If Bitcoin replaces gold as a store of value and strips the ancient metal of its monetary properties, it’s a net-positive in energy use and environmental impact — that’s how bad gold is. And if it’s successful in bringing about the revolutionary changes as outlined in this letter and across intelligent Bitcoinery, the energy use should be worth it — even if you dismiss the potential to drive the next major wave of green energy adoption via economic incentives.
The letter goes far and wide on all these topics and makes a coherent case for the last of these as being the most likely outcome, but you’ll have to read the letter yourself for that. None of these arguments are new. But I’d bet that one day we may look back at this letter as one of the most prescient of anything penned by an institution adopting bitcoin as a reserve asset up to this point.