What were they thinking?
When billionaires Elon Musk and Michael Saylor met behind closed doors with some of North America’s biggest Bitcoin miners on May 24 they were asking for trouble. The two Bitcoin champions were certainly confronting a big problem: In recent weeks the long simmering concerns about the soaring amount of power consumed to process transactions on the blockchain had exploded into a crisis, casting cryptocurrencies as yet another carbon-spewing industry and Musk as a climate change hypocrite.
Yet forming an ersatz coalition called the Bitcoin Mining Council to promote energy usage transparency and accelerate environmental sustainability initiatives worldwide smacked of greenwashing. And it wasn’t long before Musk, the founder and CEO of electric vehicle juggernaut Tesla, and Saylor, the co-founder and head of software firm MicroStrategy, got an earful.
“Why didn’t you livestream this for the whole Bitcoin community?” wrote designer Ric Burton in response to Saylor’s tweet.
“Closed door meetings do not typically have any good outcomes in Bitcoin’s history,” chimed in the popular Bitcoin archival account “Documenting Bitcoin.”
The issue is that decentralization and open-access to information have been gospel in the crypto community ever since pseudonymous Bitcoin creator(s) Satoshi Nakamoto published the whitepaper entitled “A Peer-to-Peer Electronic Cash System.” It’s no wonder, then, that the prospect of a secret meeting amongst select ultra-wealthy, corporate CEOs and miners would ruffle the feathers of many crypto devotees.
Musk and Saylor may have felt they had no other choice. On May 24, Musk tweeted that he had spoken with North American Bitcoin miners who “committed to publish current and planned renewable usage and to ask miners worldwide to do so.” In coordination with Musk and Saylor, the Bitcoin Mining Council includes executives from Argo, Blockcap, Core Scientific, Galaxy Digital, Hive Blockchain Technologies, Hut 8 Mining, Marathon Digital Holdings, and Riot Blockchain.
Saylor announced that the organization aims to “standardize energy reporting, pursue industry ESG goals, & educate+grow the marketplace.” ESG, an acronym for environmental, social, and governance, has become a multi-trillion dollar push to address climate change in the asset management industry.
The private meeting was held at the tail end of a massive downturn in the crypto market, which saw nearly $1.3 trillion lost from the total crypto market cap. The crash was triggered by Musk’s May 12 tweet announcing that Tesla was reversing its decision in March to accept Bitcoin due to concerns over fossil fuel usage from mining.
While the Bitcoin Mining Council’s initiative may be a laudable attempt to address Bitcoin’s carbon footprint, the private meeting has drawn the ire of many in the crypto community who view wealthy elites making executive decisions amongst themselves to be the antithesis of decentralized cryptocurrency.
The Council’s introduction seems out of touch with the support for more innovative solutions.
Bitcoin is processed in what’s known as a proof-of-work system, meaning that computers race to solve complex math problems to record transactions and mint new tokens, a global endeavor that now uses as much electricity as Argentina, according to a Cambridge University report. Many leaders in the crypto community, especially in the Ethereum ecosystem, say there’s an alternative called proof-of-stake mining. By not utilizing computer processing alone to handle transactions, this approach uses less power — and emits fewer greenhouse gas emissions — to propel blockchains.
The DeFi community is increasingly rallying around this tack. Ethereum’s upcoming transition from a proof-of-work consensus algorithm to a proof-of-stake one promises to make the network significantly more energy-efficient. Various Layer 2 solutions like Polygon are already utilizing proof-of-stake to scale DeFi applications without consuming as much energy.
Considering the fact that Bitcoin uses a proof-of-work consensus algorithm, it would seem reasonable that transitioning to proof-of-stake might be an attractive path forward. Saylor’s post-meeting goals announcement, however, makes no mention of proof-of-stake, or any specific green counter-measures.
Of course, Musk, Saylor, and the Bitcoin Mining Council might have wonderful green solutions on the board to better align Bitcoin with clean energy goals. And the Council is brand new. But they should be mindful of the decentralized and egalitarian ethos at the heart of the crypto community. After all, drawing ridicule and accusations of greenwashing for a project with such an urgent mission isn’t going to help anyone. And if they don’t have any viable solutions, well…the Bitcoin Mining Council is welcome to “standardize energy reporting” amongst themselves.