Why Does Bill Gates Hate Bitcoin?

After the unprecedented surge in recent months, Bitcoin continues to occupy the headlines across the globe. The largest cryptocurrency is touted by many as the best investment currently available. Plenty of financial experts see it as a hedge against the upcoming inflation. We’ve already seen mainstream investors and major Wall Street players making significant investments in Bitcoin. However, there are also plenty of voices opposing the worldwide Bitcoin craze. One of those voices belongs to one of the richest people in the world, Bill Gates.

Why Does Bill Gates Hate Bitcoin?

Microsoft co-founder has recently expressed concerns about the amount of energy Bitcoin gobbles up. Speaking to CNBC’s Andrew Ross Sorkin, Gates said that Bitcoin uses more electricity than any other means of financial transaction currently in use. He’s extremely worried about the effects it may have on the planet’s climate. His claim is nothing new and similar concerns have been expressed before.

How Do Bitcoin Transactions Work?

Bitcoin is a cryptocurrency. It means that it’s an encrypted and shared form of money made by building links in a blockchain code. Blockchain records all Bitcoin transactions on computers of volunteers across the globe. Those computers run software that verifies the transactions and makes sure that they are valid. It’s called mining and these volunteers receive some percentage of the currency as a kickback. Once enough computers confirm the exchange as valid, it creates a “block” that’s added to the rest of the world’s transactions.

The math operations required to perform these exchanges are so complicated that it requires multiple computers to perform them. Miners sometimes run these operations in the background of their machines, but, more often have dedicated computers for this purpose. To be able to do this, they need to have top-of-the-line graphic cards, GPUs, and high-end fans to keep computers from overheating. Of course, performing these tasks consumes a lot of electricity and that is the main point of contention for Bitcoin opponents.

The Energy Cost of Bitcoin Mining

Several recent studies point to the real energy costs of Bitcoin mining. University of Cambridge’s research showed that Bitcoin consumes more energy than the whole country of Argentina. Mining uses 130.00 terawatt-hours compared to Argentina’s 125.03 TWh. The same study also puts Bitcoin consumption above Netherlands and United Arab Emirates.

However, the pro-Bitcoin camp also has some data supporting their stance. According to them, Bitcoin’s carbon footprint constitutes only 2.3% of the overall digital tech emissions. They argue that Bitcoins’ footprint of 37Mt CO2 is peanuts compared to the 1600Mt emission digital technologies produce worldwide. Still, they fail to mention that Bitcoin use is optional. A large part of the digital carbon footprint is made by necessary technologies supporting infrastructure and essential utilities. The real question is where to draw the line and what amount of energy consumption by Bitcoin and similar tech is justified.

What Alternative Does Gates Propose?

Bill Gates has already dabbled in “digital money”. His foundation has been involved in creating digital local currency transactions in poorer countries. These transactions are not secret. Besides, they’re reversible. This should prevent them from being used for criminal activities. One of the main issues with Bitcoin is that it has often been used in illegal transactions. Also, this method removes transaction fees making them more affordable for the poorest.

What Gates proposes looks much like loyalty rewards programs or the video games transaction system. He wants to use similar infrastructure and direct towards the poorest nations. This kind of economy could remove class and structural barriers making many essential services much more affordable. What differs this system from cryptocurrency is a lack of “crypto” elements. There are no “hashes’ requiring complex arithmetic operations. It’s, basically, just another format of currency, like the paper money is.

Bill Gates Skepticism Towards Bitcoin Is Logical?

A large part of Gates’ skepticism towards Bitcoin comes from a very logical place. You should be skeptical of every kind of speculative investment. A lot of people still don’t fully understand how Bitcoin works. The main takeaway of his stance should be to always be careful with these sorts of investments and educate yourself before making any significant financial decision.