The Environmental Myth: Proof of Stake

People who are able to work for low-energy services will not save the environment. Only proof of work can build a sustainable future.

This opinion editorial is by Level39, who is a researcher focusing on Bitcoin, technology and history.

It is a myth that Ethereum's recent Merge, from proof of work and proof of stake, has reduced energy consumption by 99.95%. This calculation does not include expensive enterprise server farms or corporations, nor the additional work required to complete proof of stake transactions globally. The cost of a transaction has not fallen, so follow the money. Fees won't decrease and any portion of the security budget used previously to buy energy for machines will now be used to purchase electricity for Ethereum's ruling classes — negating a lot of its lower energy bills.

Contrary to proof of work which encourages renewable energy innovation, and lowers methane emissions, proof of stake has no environmental benefit other than the fact that it obscures energy purchases made by those who enable its validating infrastructure. A neo-Luddite belief, that replacing inefficient people and their infrastructure by energy-intensive and economical machines is a net loss to the environment, is a key element of the environmental myth of proof-of-stake. This ideology dates back to the dawn of the Industrial Revolution.

The Age Of Luddites

The Luddite Rebellion (1811-1816) saw Ned Ludd inspire a group of skilled English textile workers to resist modernization, and to destroy a specific type of mechanized textile machine. Commonality was a reference to the common good or the tradition of commons. These machines were seen as a threat for communities and jobs that would soon disappear. The new machines could be more efficient than skilled artisans and work faster and cheaper. The machines could also cause mass unemployment and unequal power relations, it was feared. Protesting this technological advance, the Luddites attacked their owners and sabotaged the machinery.

Source: Penny Magazine 1884

Luddite fears proved to be wrong over time. The automation of work would not lead to job loss. It actually allowed humans to be more productive and creative with their time. The huge increase in raw material production meant that there was more work to create cost-effective and better products. Technology powered by economic energy improves life quality, wealth and creates more employment opportunities.

Automation offers many benefits

It is a long-standing practice to automate human labor using energy-intensive machinery. The English merchant fleet was 68,000 tons in weight and required 16,000 sailors to carry it. The commercial fees were used to buy energy, food, beer, clothing, heat, and medicine for thousands of sailors and their families. These fleets were known for their reliability, security, safety, and efficiency.

Global shipping is a highly energy-intensive process that requires very few people. The container ship OOC Hong Kong is the largest ever constructed. It can carry 200,000 tonnes and requires only 22 crew members. Instead of sourcing power to support sailors' populations, we create machines that use energy and free humans from mundane and repetitive tasks. This allows humans to be more productive, which leads to human flourishing.

Modern container ships, which are energy-intensive and efficient, are orders of magnitude more reliable and efficient than the merchant fleets from the Middle Ages. It would be foolish to think container ships are more wasteful than sailing ships simply because they consume more energy. While machines are more energy-intensive than humans, they can replace human energy-intensive tasks.

The Proof of Work is a Novel Technology

The energy-intensive machines used to prove work are energy-intensive and put people out of work in traditional finance. This allows them to be more productive for society, so they can also purchase energy-intensive products. The old finance jobs are automated, and the new energy-intensive work that is part of global settlement shifts to smaller groups of miners in rural areas who have access to stranded electricity. This reverses some of the negative power relationships that Luddites opposed over a century ago.

Instead of huge buildings filled with energy-intensive bean counters, which were secured and backed around the globe by energy-intensive governments or militaries, we now have proof-of-work mining devices that are energy-intensive and can accurately guess the amount of beans needed for global settlement every ten minutes. This allows for reliable, non-stop global settlement, without any rest and at a lower overall cost.

Legacy Technology Is Proof of Stake

Legacy technology is the best proof of stake — it is not new. This is a classic form of equity and governance, which has been in use for centuries. It is easy to capture proof-of-stake assets in large financial institutions, which makes them a target for regulatory capture. This in turn leads to more people working to ensure compliance and maintain control, as well as increased fees. The only way to reduce or eliminate oligopolistic governance, repressive fees, and ensure censorship resistance is physical work by machines.

Original artwork by UdoJ. Kepler for Puck 1902. Modified by Level39.

Economic Footprints are Energy Footprints

Vitalik Buterin, Ethereum's co-founder, stated that Ethereum may have a greater security budget than Bitcoin in a recent interview. He implied that Ethereum's elite validations will have significantly greater energy-purchasing power that Bitcoin miners. The network's security budget is the revenue, fees and rewards that it extracts from its users. This limits the ability to buy energy.

Source: Level39

This light reveals that the proof of stake is a group wealthy elites, a new breed bankers operating an inefficient database. They charge high fees and get greater revenue to make their efforts worthwhile. These elite insiders won't let you know that their security budgets and premined income will be used for energy purchases. It doesn't matter if the energy is bought for humans or machines. Accounting tricks are irrelevant to the environment.

The low energy cost of Ethereum is an omission from the security budget. It is an ESG trick of the hand — a deceit on the environmentally-conscious and gullible. It will cost you a lot to transfer your money, and Ethereum's elite can make huge profits by buying yachts, sports cars, and other carbon-intensive services. They'll be laughing all the way to their bank accounts.

Security budgets are energy budgets

Bitcoin's block rewards will be halved every four years, meaning that miners will become more dependent on the fees paid by users for open global settlement. Buterin expects that fees and network activity will decrease because Bitcoin's deflationary nature encourages saving rather than spending. Buterin doesn't mention the fact that miners wouldn't have the money to buy much energy in such an environment and would instead fall into an energy consumption equilibrium just like all automated technologies throughout history.

It was a difficult decision

Buterin predicts that Ethereum would have a greater security budget than Bitcoin's. This would allow Ethereum's elite to buy more energy than Bitcoin miners. It will not make humanity more advanced or solve the environmental problems. Instead, it will obscure the carbon-intensive energy that its insiders will buy with their high security funds.

Instead of encouraging services degrowth, it would be better for humanity not to focus on building cheap, renewable energy. The future will require more energy as more services are electrified, so it is far better for humanity that we invest in economically overbuilding cheap, reliable power. If Buterin's predictions are true and Bitcoin's power consumption decreases with coin issuance then excess renewable energy can be used for other purposes.

Revenues and Energy

One dollar of revenue is not enough to buy one dollar worth of energy, especially when Bitcoin is able to source the lowest cost energy in low demand. Even if everyone who benefits from Ethereum's premine, high fees, and staking rewards lives low-carbon lifestyles, the money could and will flow into more carbon-intensive activities.

Annually, Visa Mastercard, American Express and American Express consume less than 1% of what Bitcoin uses each year. But corporate energy consumption is not the whole story. Companies pay large salaries to employees, which they spend on energy-intensive tasks that machines can perform faster, cheaper, and more frequently. While traditional retail payments can take days to settle, and may not settle at all on holidays or weekends, Bitcoin payments settle consistently every 10 minutes. A payment rail's revenue is an indicator of how much resources it actually uses.

Source AR Invest

Critics might label Amazon's higher energy bills as an environmental disaster if Amazon replaced all its warehouse workers with robots. Robots, however, would consume raw energy instead of humans being paid a salary to purchase energy. There is no other way to get energy, and it's all energy purchases in one way or the other.

Bitcoin automates global settlement in the same way as robotization — trading energy intensive human bean counters for more cost-effective and efficient bean guessers with a transparent energy bill.

Nikola Tesla, who wrote more than 100 years ago, believed that efficiency from machines is a key to human progress and a growing need for energy. People can consume more resources because efficiencies reduce costs. It was essential to keep humanity moving forward through the availability of cleaner and cheaper energy. This vision is based on proof of work.

Engineers Face Environmental Problems

The flow of money that a company makes into the energy consumption of its employees is not considered in corporate carbon accounting. It would soon become obvious that corporate-based carbon accounting does not take into account the flow of money from a company to its human consumers of energy. There is no plan to supply cheap renewable energy for all people. Instead, wealthy people will virtue signal about their green businesses and get more money from their users to purchase more energy-intensive activities. This won't solve any real environmental problems, and it won't help humanity.

Environmental problems are often engineering issues that Luddism or degrowth can't solve. To reach their climate targets, countries must electrify and triple the amount of electrical production using sustainable energy. Around one-third of all energy generated is wasted, and only one industry has the ability to monetize the lowest valued 0.15%.

Bitcoin is a pioneering species that unlocks energy deserts for future uses and can help balance the renewable energy demand. It is the industry with the highest penetration rate of renewable energy. Only work can make methane emissions monetizable, grow greener plants, make stranded gas more economically feasible, capture energy from tires, and unlock the power to the ocean for one billion people.

Only proof of work is required to have a net-negative carbon footprint for the next ten years, for those who love carbon-accounting. Responsible human progress is only possible by converting waste into energy. Not less energy monetization is needed.

Human progress is made through economic use of energy. It also indicates the price users will pay for value. Greenpeace and "Change The Code", two groups that are against Bitcoin's proof of work mining, want you believe that enriching a new breed bankers will save the world. Either they don't have the time or conflict of interest to understand what it takes to encourage responsible stewardship or they are marketing a Luddite myth.

Level39 contributed this guest post. These opinions are not necessarily those of Bitcoin Magazine or BTC Inc.

Frequently Asked Questions

Who is entitled to the gold in a IRA that holds gold?

An individual who has gold is considered to be a “form of money” by the IRS and subject to taxation.

This tax-free status is only available to those who have owned at least $10,000 of gold and have kept it for at minimum five years.

The purchase of gold can protect you from inflation and price volatility. But it's not smart to hold it if your only intention is to use it.

You will need to declare the value of gold if you intend on selling it one day. This could impact how capital gains taxes you owe for cash investments.

It is a good idea to consult an accountant or financial planner to learn more about your options.

What are the benefits of having a gold IRA?

An Individual Retirement Account (IRA) is the best way to put money towards retirement. It is tax-deferred until it's withdrawn. You have complete control over how much you take out each year. There are many types to choose from when it comes to IRAs. Some are better suited to college savings. Others are designed for investors looking for higher returns. Roth IRAs, for example, allow people to contribute after they turn 59 1/2. They also pay taxes on any earnings when they retire. Once they start withdrawing money, however, the earnings aren’t subject to tax again. So if you're planning to retire early, this type of account may make sense.

The gold IRA allows you to invest in different asset classes, which is similar to other IRAs. Unlike a regular IRA where you pay taxes on gains, a gold IRA doesn't require you to worry about taxation while you wait to get them. People who prefer to save their money and invest it instead of spending it are well-suited for gold IRAs.

Another benefit of owning gold through an IRA is that you get to enjoy the convenience of automatic withdrawals. This eliminates the need to constantly make deposits. You could also set up direct debits to never miss a payment.

Finally, gold remains one of the best investment options today. Because it isn’t tied to any specific country, gold’s value tends to stay stable. Even in times of economic turmoil, gold prices tend not to fluctuate. It is therefore a great choice for protecting your savings against inflation.

How to Open a Precious Metal IRA?

First, you must decide if your Individual Retirement Account (IRA) is what you want. If you do, you must open the account by completing Form 8606. For you to determine the type and eligibility for which IRA, you need Form 5204. This form should not be completed more than 60 days after the account is opened. Once this is done, you can start investing. You might also be able to contribute directly from the paycheck through payroll deduction.

To get a Roth IRA, complete Form 8903. Otherwise, the process will look identical to an existing IRA.

You'll need to meet specific requirements to qualify for a precious metals IRA. The IRS says you must be 18 years old and have earned income. Your annual earnings cannot exceed $110,000 ($220,000 if you are married and file jointly) for any tax year. And, you have to make contributions regularly. These rules are applicable whether you contribute through your employer or directly from the paychecks.

You can use a precious-metals IRA to purchase gold, silver and palladium. However, you can't purchase physical bullion. This means that you will not be allowed to trade shares or bonds.

You can also use your precious metallics IRA to invest in companies that deal with precious metals. This option may be offered by some IRA providers.

However, investing in precious metals via an IRA has two serious drawbacks. First, they are not as liquid or as easy to sell as stocks and bonds. It's also more difficult to sell them when they are needed. Second, they don’t produce dividends like stocks or bonds. So, you'll lose money over time rather than gain it.

What Is a Precious Metal IRA?

A precious metal IRA lets you diversify your retirement savings to include gold, silver, palladium, rhodium, iridium, osmium, osmium, rhodium, iridium and other rare metallics. These precious metals are extremely rare and valuable. They make excellent investments for your money and help you protect your future from inflation and economic instability.

Precious metals are often referred to as “bullion.” Bullion refers simply to the physical metal.

Bullion can be bought through many channels, including online retailers, large coins dealers, and some grocery shops.

An IRA for precious metals allows you to directly invest in bullion instead of purchasing stock shares. This allows you to receive dividends every year.

Unlike regular IRAs, precious metal IRAs don't require paperwork or annual fees. Instead, you pay a small percentage tax on the gains. You also have unlimited access to your funds whenever and wherever you wish.

Is physical gold allowed in an IRA.

Gold is money and not just paper currency. It's an asset that people have used for thousands of years as a store of value, a way to keep wealth safe from inflation and economic uncertainty. Investors today use gold to diversify their portfolios because gold is more resilient to financial turmoil.

Many Americans now invest in precious metals. Although owning gold does not guarantee that you will make money investing in it, there are many reasons to consider adding gold into your retirement portfolio.

Gold has historically performed better during financial panics than other assets. Between August 2011 and early 2013 gold prices soared nearly 100 percent, while the S&P 500 plunged 21 percent. Gold was one asset that outperformed stocks in turbulent market conditions.

The best thing about gold investing is the fact that there's virtually no counterparty risk. You still have your shares even if your stock portfolio falls. If you have gold, it will still be worth your shares even if the company in which you invested defaults on its debt.

Gold provides liquidity. This means that, unlike most other investments, you can sell your gold anytime without worrying about finding another buyer. You can buy gold in small amounts because it is so liquid. This allows you to take advantage of short-term fluctuations in the gold market.

Is it possible to hold a gold ETF within a Roth IRA

You may not have this option with a 401(k), however, you might want to consider other options, like an Individual retirement account (IRA).

Traditional IRAs allow for contributions from both employees and employers. You can also invest in publicly traded businesses by creating an Employee Stock Ownership Plan (ESOP).

An ESOP offers tax benefits because employees can share in the company stock and any profits that it generates. The money invested in the ESOP is then taxed at lower rates than if it were held directly in the hands of the employee.

You can also get an Individual Retirement Annuity, or IRA. With an IRA, you make regular payments to yourself throughout your lifetime and receive income during retirement. Contributions to IRAs don't have to be taxable


  • You can only purchase gold bars at least 99.5% purity. (
  • Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (
  • Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (
  • If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (
  • The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (

External Links

How To

How to Keep Physical Gold in an IRA

The most obvious way to invest in gold is by buying shares from companies producing gold. But, this approach comes with risks. These companies may not survive the next few years. There is always the chance of them losing their money due to fluctuations of the gold price.

An alternative option would be to buy physical gold itself. You'll need to open a bank account, buy gold online from a trusted seller, or open an online bullion trading account. This option has many advantages, including the ease of access (you don’t have to deal with stock markets) and the ability of making purchases at low prices. It's also easier to see how much gold you've got stored. You'll get a receipt showing exactly what you paid, so you'll know if any taxes were missed. There's also less chance of theft than investing in stocks.

However, there are disadvantages. Bank interest rates and investment funds won't help you. You won't have the ability to diversify your holdings; you will be stuck with what you purchased. Finally, the taxman might want to know where your gold has been placed! offers more information on buying gold for an IRA.


By: Level39
Title: The Environmental Myth Of Proof Of Stake
Sourced From:
Published Date: Wed, 21 Sep 2022 13:21:34 GMT

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