Bitcoin’s green turn: An investment thesis for climate change mitigation

Bitcoin’s green turn: An investment thesis for climate change mitigation

Since discovering Bitcoin in 2016, Harald Rauter has been focusing on developing the investment case for Bitcoin as a mechanism for achieving superior economic- and environmental returns. Harald Rauter advises ESG-sensitive capital pools like foundations, HNWI and enterprises in developing tailored investment strategies that leverage Bitcoin’s unlocking potential for higher risk-adjusted returns while simultaneously achieving unrivaled CO2 emission reduction. For the past 10 years he has been an investor and portfolio manager for climate-positive investments both in the public- as well as the private sector. Harald Rauter holds a PhD in Natural Sciences from ETH Zürich and a master’s degree in economics from the Vienna University of Economics.

Learn more about his work at www.bitcoinfirst.work or contact him at harald@bitcoinfirst.work.

Seven questions and an introduction

Marcus Dapp: Welcome, Harald! Thanks for talking with me about the grand questions of energy transition, climate change, and how Bitcoin fits in all of this – which to many people feels like a contradiction. As we cover a complex topic, let us kick-off with some “simple” yes/no -questions. 

Is climate change real? 100%.

Is global warming caused by humans? Predominantly, yes.

Are we as humanity using too much energy? No, we are using too little.

Are we effective in the way we combat climate change today? Absolutely not.

Is Bitcoin a waste of energy? Not at all.

Is Bitcoin an environmental disaster? It is exactly the contrary.

Will Bitcoin contribute to mitigating climate change? It has an incredible potential to do so, yes.

These few answers will certainly trigger some people, for several reasons. Why are you quali- fied to talk about these controversial and complex issues?

Harald Rauter: This is an exciting opportunity to talk about a very controversial topic. It looks more controversial than it really is because we want to have a regenerative and a sustainable future for us as humanity on this planet. My background is in natural sciences, I hold a PhD in biochemistry. I am not working in this field anymore, but what scientific education gives you is a very analytical way of looking at a problem and the skillset to do so, which comes in handy for a very physical-chemical challenge like climate change. Then, for almost 10 years I worked in the climate innovation field. I have been working for an institution which was a subsidiary of the European Commission looking at ways of how a regenerative economy and societal fabric can look like to move from a carbon-intensive present into a carbon-extensive future. This touches many different dimensions: policy, innovation, questions around social fabrics, theories of change, and so on. I felt very privileged to be in this phase of climate change related questions incredibly early.

Things started to change 2018 when Greta Thunberg started her movement where it became socialized to a broader public. From this moment onwards, I did not have to explain anymore what climate innovation and climate change means, because it was in front of everybody. If you think about it, it is not that long ago, 5-6 years, when this desensitization with regards to the problem started. Now we are scrambling to find answers to this challenge. And it feels like we are treadmilling on the same spot and are losing the ability to have constructive conversations about what the desirable future looks like and how we can build it.

And the last missing piece: how did I end up in Bitcoin? The truth is, I came from quite a different angle to most. I was writing my master’s thesis in 2017 for my MBA education and was starting to get interested in the question, why is it getting harder and harder for us to organize ourselves in an increasingly complex world? Complexity driven through digitization and globalization. Legacy institutions, it seemed, are unfit for purpose today. I started to dig deep into questions around cybernetics, regulation and self-regulation, and gained a good understanding of why these legacy institutions are not able to cater to the needs that we will have in the future.

I had this light bulb moment when I stumbled upon Bitcoin, and I realized this could be an infrastructure that allows us to build new ways of interaction, new ways of interacting with each other, be it money or information, or knowledge, or whatever. How does Bitcoin fit into a thesis of moving from a more structurally organized society to a networked based society?

Today, I am negotiating both spaces. I am 100% convinced that climate change is a real threat to our viability on this planet and that we need to look deeply and honestly at how we go about the problem of institutions unfit for the future. We need to ask openly: is this the whole spectrum of possible solutions that we have or are there more? I am advocating for there is much more and that Bitcoin can and should play a prominent part in this conversation about the mitigation of climate change in a way that is not oppressive but empowering, not limiting, but enriching, and that ultimately gives us prosperity and abundance not in a controlled, but in an empowered way.

Setting the context: Climate change and energy

Marcus Dapp: This is a remarkable answer and a position very few people have. Let us structure our chat in parts: from the role of energy in the climate change mitigation field, to the role of Bitcoin mining in general, to the thesis that Bitcoin mining has the potential to make climate-positive contributions. To kick it off:

Can you help us understand how climate change, its mitigation and the energy question are interrelated?

Harald Rauter: I’m a firm proponent of climate science. We have sophisticated tools that allow us to synthesize various sources of information; we do not need a thermometer to interpolate the temperature situation 150’000 years ago. We also have sophisticated tools that help us to print and plot tra- jectories for the future. The scientific picture only leads to one logical conclusion, which is that we went through a success story of hydrocarbons, and we need to call it a success story becau- se it led to an enormous amount of prosperity for human flourishing. However, we have paid a long-term price by continuously enriching the atmosphere with greenhouse gases. Greenhouse gases are defined as gases that can interact with light and bind heat in a certain confinement. This confinement, due to the atmospheric conditions, is close to the surface with all kinds of secondary and tertiary effects which in the long run will create a lot of problems, and already do.

When we talk about mitigation, we need to ask ourselves what are the main drivers of this atmospheric enrichment of carbons? If we look at the data sets, the sectors that contribute most to the enrichment of hydrocarbons in the atmosphere – 75% of the emissions that we produce as humanity – are related to energy generation and consumption. That could be energy gene- ration in its various forms, electricity, heat, but also energy for buildings, for mobility, etc. If you aggregate all, we end up with about 75% of emissions in the energy sector.

If we want to build a mitigation strategy and if we are open about it, then all cards are on the table. For instance, you can advocate and say: “Marcus, you’re only allowed to fly once per year, and in order to do so, you have to eat 5 steaks less.“ That is a very top-down policy. Is it desirable? Personally, I do not think so. I am looking for ways of how we can achieve the necessary outcomes without sacrificing the values that make our society a desirable society: freedom, privacy, freedom of movement, personal liberties, and Bitcoin. Bitcoin mining, just by chance, happens to have these interesting properties that come into effect here.

Marcus Dapp: Before we come to Bitcoin, in the yes/no questions, you said that the current ways in which we are trying to mitigate the climate change problem internationally are not very effective. Could you elaborate on that?

Harald Rauter: Getting a bit technical, but I think it is worth it: What are we observing? One group of scientists investigate the physical and chemical relationships and effects of atmospheric composition, and how they have changed over time, and what we can expect in terms of consequences. Another group is thinking about: How do we now go about this? What are we doing now with this information?

The deeper I dig in understanding the rationales and decisions of these groups over time, I realize that they’re not only scientifically driven, but also politically driven. We talk about custo- dians to governments like the United Nations, so they are in a way not free in agenda-setting and decision-making, because they’re funded by governments that pursue their own interests. Inevitably, all decisions taken are also politically informed. Looking at the different decisions that have been taken over time – which mitigation strategies are desirable, and which are less desirable – we see a political influence. I will give you an example. There has been a paper in Nature, a scientific journal, from ETH Zurich, which has studied alternative mitigation pathways, and has found that, for instance, if we would adopt a degrowth strategy, we grow less and we consume less, we would likely achieve 1.5-degree-compliant outcomes. However, governments ignore these pathways because they are politically not feasible. If you are a government and you need to tell people on the Saturday night prime time news, that they must travel less, eat less, move less, spend less... That would be a hard sell. So, political viability informs the decisions about which mitigation pathways are considered viable and which are not.

Once we approach this from an apolitical perspective, an entirely new spectrum opens. I as Harald, a Bitcoiner and climate-conscious person will look at what brings me climate impact and the possibility of economic return! Suddenly, we can start to discuss new mitigation pathways that have not been considered for the past 40 years because nobody digs deep into the- se UN reports, and we have been socialized to not think about the decision-making process.

But it is our responsibility as people who are in this privileged position to look at those cracks and those decisions, to re-examine them and ask were they good, were they right? As we now have better instruments to go back and tools to think about alternative mitigation path- ways, I say we need to look at alternative mitigation pathways, too. These pathways need to assume realistic geopolitical boundary conditions – the fact that states are not necessarily each other’s friends. So, we call that geopolitically “competitive“ scenarios instead of “cooperative“ scenarios.

Marcus Dapp: This idea sounds logical – the international community must come together and cooperate and discuss and find solutions together, and compromise. Are you saying this basic assumption about the will to cooperate is the problem?

Harald Rauter: Yes, because the cooperation is not real, and we see that the cooperative consensus is eroding over time. The intergovernmental panel for climate change (IPCC) has terminologies for this: “Shared Socioeconomic Pathways“. The cooperative model SSP1 assumes certain coo- perative and collaborative boundary conditions.

On the other end of the spectrum you have competitive scenarios, called SSP3, which assumes that states are egocentric, sacrifice long-term goals for short-term survival, emphasize on energy defense and deprioritize education and empowerment. Does that sound familiar? We also need to see the geopolitical realities evolving. What has worked potentially for the signing of the Paris Agreement in 2015 (SSP1) might not necessarily apply in 2023 (SSP3).

Cost of capital is playing a role in this. If a government can print its way out of problems, then they can avoid and procrastinate the resolution of conflicts that underneath the surface. We need a more robust pathway that works in cooperative scenarios but also works in competitive scenario, and Bitcoin is one of these pathways. One of Bitcoin’s beautiful features is that it is for everybody, and nobody can hijack the system. It is a social infrastructure designed for an incentive-driven, competitive environment. We see the game-theory play on the individual level and increasingly on the institutional and state level.

Who comes first? Who feels the pressure to join the network first? Who needs to have and secure a part in the network? We see this game theory playing out, but the Bitcoin network then coordinates like a magnet those actions into certain outcomes. While I would assume that it has never been intentionally designed to create climate-positive outcomes, the irony is that Bitcoin actually does - and you cannot change it. It does not matter whether you believe in climate change or not, by investing and saving in Bitcoin, by contributing in one way or another to the network, you create net-positive outcomes both for society and for the climate.

Unique properties of Bitcoin mining

Marcus Dapp: Let’s dig a bit deeper: Bitcoin’s uniqueness is revolving around the mining process. Processing transactions, rewarding miners, and spending a lot of energy in the process is all to secure the network. What is special about the energy dynamics of Bitcoin mining in the context of climate change?

Harald Rauter: There are a lot of beautiful innovations in the Bitcoin protocol. Immutable economics is very powerful, that leads to very net-positive social outcomes. In an inelastic supply, cooperation is rewarded. Your win is my win. Inelasticity, risk rewards, and cooperation are all extremely powerful.

As to mining, I think the real innovation happened in a combination of how the Bitcoin protocol has been designed: proof-of-work plus the difficulty adjustment. Those two are the key innovation elements and they create all these positive externalities. What do I mean? We know every four years, whatever you do as a miner, your block reward will be cut in half. That puts a lot of pressure on your operations and your economics as well. But at the same time, we have the “difficulty adjustment.” We adjust every two weeks how much hash power is in the system. To really understand the dynamic of how this has been playing out, we need to go back to the days when difficulty adjustment was low, energy was abundant and energy price was not really an issue. You plugged in your GPU, you mined, and you had much wealth. Soon, many people had the same idea. What happened? The difficulty adjustment skyrocketed, and sud- denly a very interesting dynamic came to play because mining is designed to be expensive from the start through the machines that you need to deploy to be competitive in the race, but also – and this is the main determinant – the operational costs under which you can run your machines.

There’s a big argument that mining uses an enormous amount of energy, the same amount as Argentina or whatever the country comparison is at the moment. But these absolute numbers are useless and misleading. They are irrelevant because you need to ask where this energy is coming from. In the past, when the operational costs for the kilowatt hour were on par, miners might have consumed energy that was competing with your toaster. Then you can decide: do I use the toaster, or do I use my miner? As an incentive driven individual, you will say it depends on what I want: to save or toast. Now, let us fast forward: difficulty adjustment increases, block reward decreases. Suddenly the economics and your incentive structure are changing. Because now, you deploy this amount of input energy, but you get way too few Bitcoin out of it to be economically viable. So you go for the toaster, and you are right. Yet, you still want to mine, you still want to save. What is the next logical step? Asking yourself: what is the next most accessible, non-demand competing energy source that I can tap into that the toaster cannot use?

Marcus Dapp: Are you disagreeing with the common opinion that the energy Bitcoin uses is taken from other people who would need it?

Harald Rauter: Yes, because the more difficulty adjustment increases, the lower the block reward gets. And the miners’ capital expenditure (capex) is a bit of an inelastic measure, too, so it averages out the at a very reasonable price. The only variable that you can influence is the operational expenditure (opex) of your energy which determines your profitability. I am just looking for the cheapest. Once we understand that we can have a fantastic environmental conversation because now we shift gears: we focus on the design of energy systems. Our energy systems are typically designed in a very centralized way with a few big actors, because that reduces the complexity to better ma- nage grid stability. Grid stability translates into reliability, and all incentive structures in an energy system are designed towards reliability. Costs do not really matter, reliability does.

However, over the past 15 years, we have seen a new game in town which is called renewable energies, and we have seen the price deflation of photovoltaics (PV), and we have seen the efficiency gains in terms of wind. There is a lot of wind and PV that is now cheap and accessible. This allows you to generate the kilowatt hour of power for less marginal cost than in the legacy system. If you take oil, for example, you need to dig deeper, build more complex infrastructure; you need to transport it, refine it, transport it again, and you need to store it. All that adds to the marginal cost of the kilowatt hour. We observe this divergence between cost depreciation for renewables and cost appreciation for fossil fuel.

Marcus Dapp: Based on this insight, would you say it is correct to claim that Bitcoin mining fosters renewable energy sources because they are cheaper?

Harald Rauter: That is one part of the equation. Let me dissect the different arguments that could come up here. First, the marginal cost of production for a kilowatt hour from a fossil energy source gets more expensive, renewables get cheaper.

Second, an argument that is brought up very often: there is a big advantage to the expensive energy that fossil fuels and natural gas can provide. It is “baseload“ energy because it is continuously available. We need this because if we are only on variable energy sources, this generates problems to stabilize the energy grid. So, fossil fuels have a particularly important role to play to provide the baseload energy that is necessary for a system to work, which is one of the major arguments against renewables, because obviously, you need wind to produce wind energy and sun to produce sun energy.

But now, we have a dilemma. We have energy generating infrastructure that gets cheaper and cheaper and cheaper. People and institutions want this energy. Not because it is environmentally friendly, nobody cares. It is incentive driven. It is economically driven that on your property in Switzerland, in Germany, in the Netherlands, you can have sovereign power based on those renewable energy sources that gets cheaper and cheaper. Yet we have this problem that it is an intermittent energy source.

Marcus Dapp: You are saying there is a maximum percentage of renewable energy that can be feasibly integrated into the grid due to their intermittent nature despite their cost-effectiveness and environmental benefits compared to fossil fuels?

Harald Rauter: That is a particularly good question. The answer is yes and no. We also need to think how this dynamic plays out over time. Let’s assume you are a miner, and you now identify that there is a lot of intermittent energy that the grid cannot use because it cannot handle the variability.

For example, the UK currently has about 100 gigawatts of wind energy infrastructure which is not online on the grid because the grid infrastructure is not able to handle it. Now, someone has incentivized building out this infrastructure. A pension fund that you and I are insured with, could be holding those projects on its balance sheet. But it is producing zero economic value! That is a problem. Not only now, but also for follow-up projects. What hap- pened in the UK? They did not find any investors for the new wind infrastructures anymore because they were not willing to accept the minimal cost for the kilowatt hour, given the project risk and costs.

Marcus Dapp: Are you saying that the barrier in the transition to renewables is economics?

Harald Rauter: Yes, 100%. We have the same situation for photovoltaics. We have an enormous amount of photovoltaic infrastructure in Europe. The problem is that across Europe the sun shines at about the same time. That means we have a surplus of generation which coincides around lunchtime right when demand is the lowest because we’re at work: we’re not consuming, not watching television, not using our toaster and so on. So, high demand in the mornings and evenings and high supply around lunchtime. This leads to a demand-supply mismatch: the energy produced and generated at lunchtime needs to be consumed there and then! The first law of thermodynamics says energy cannot be destroyed, only converted.

If you cannot bend physics, what is the only variable you can shift? It is economics. If I hold a hot potato in my hand and ask you to hold it for me, but I want twenty cents for it, you will say: no, I am not taking the hot potato. Then I change tactics and say, take it and I give you twenty cents. You still decline. So, how about one hundred cents? Okay, you take it for one hundred. So, I need to have the costs of generation and distribution, which is self-cannibalization. That puts a natural limit on the scalability of the rollout and deployment of renewable infrastructures.

This is where Bitcoin mining comes in. For me as a biochemist, miners are like mushrooms: If you have a hostile environment, the first species that comes to pioneer this hostile environment are mushrooms and algae. They prepare the ground, prepare the soil, so higher species can come to live there. When the higher species die in the end, the fungi come in again and regenerate the carbon of the higher species to make it accessible again for new life. And so, fungi have this enormous role in biology to make carbon cycles circular and get the most out of the chemical properties of the carbon itself.

Bitcoin miners have the same role in electricity cycles. They are not competing. They are pioneering, for instance, the wind farms in the UK. But once these wind farms get access to the grid, higher utility purposes will come in. Demand that is willing to pay more than a miner is ever able to pay, so they will marginalize the miner out. Then, the miners can come in again and say, you do not have to pay me anything, I do not have to pay you anything. I just take your energy, and it is even more economically viable than any other form of economic action you could think of.

Role of Bitcoin mining in climate change mitigation

Marcus Dapp: Does that mean the strategy for renewables in connection with Bitcoin mining is to increase the build-out much more, so we have much more capacity in renewables?

Harald Rauter: Yes. Renewables are still intermittent, but we will raise the bar and have much more capacity, because that will help us to have a higher degree of renewables in the overall mix and still have as few blackouts as possible.

This is where the longitudinal component becomes so vital. Contrary to the climate narratives that say we will need less energy in the future, I say: We will need much, much more energy in the future! Even if it is for productive energy only: we need more houses, more roads. Humans consume energy, and we will be more humans. So, we will need more energy. The narrative, we will be more people and live of less energy, is not viable.

The question is how much more do we think we will need? If we want to service all the utility needs in terms of energy, then we have a different conversation. Only renewable intermittent energy on the grid will not do. But we have hydro and nuclear, which the IPCC sees as an integral technology to climate change mitigation, contrary to what is discussed out there. I am convinced that nuclear will, as the economics become clearer, serve as baseload energy, and play an integral role in climate change mitigation.

But the fraction of the intermittent renewable energy will grow. Not because we think it’s so great, but because the economics drive us there. Mining can play a critical role in unlocking the scaling mechanism that keeps the economics and the scalability of the technology linear.

The more photovoltaic build-out you have, and the more you compete with supply in low-de- mand times like noon, the more the economics will bend, and even go back because some will capitulate and say, this is not a good business, I am out. We need to find unlocking mecha- nisms that help us to grow the build-out steadily and Bitcoin mining will and can unlock this.

Now, a critique may say: “Why use the ‘useless’ Bitcoin mining? Let us make green hydrogen instead.” Well, countering this is easy: have you looked at the economics of how much energy and reliability you need? Have you looked at the capex of a green hydrogen plant? Have you looked at the final cost of sales for a ton of green hydrogen? You will see that the economics do not play out. You need something that is more flexible in terms of demand when demand is needed or can be curtailed at the benefit of some other demand.

Harald Rauter: One example for co-location: AI rendering centers. Do you want this query rendered in chat- GPT, but don’t mind if it’s now or in 5 hours? Do you just want to have the answer by evening time? Now the cost structure changes again, instead of 3 cents in 5 hours you pay nothing - this is desirable. We want Bitcoin mining to come first, pioneer it. But then there should be higher value services that can be built on top, which marginalize the Bitcoin miners again and force them due to difficulty adjustment, decreased block rewards, and higher pressure on their operational costs, to seek for new stranded energy, electricity that they can use and develop to productivity.

Marcus Dapp: Usually, Bitcoin miners go to places where the energy is cheapest: that is, not to Switzerland, but different and difficult places, politically and/or socially. Are you saying that a mining facility and an energy provider, both located in Switzerland, could cooperate in an economical way?

Harald Rauter: 100%. You know, we have different vox populi decisions in Switzerland that signal that the population wants to embark on a renewable future in different ways. So, the question is: how can energy reliability and energy abundance be combined with the challenges of decreasing marginal returns? However, the intermittent nature of renewables is the same for Switzerland as it is for any other country.

The cool thing is the challenges are the same, but predicaments are a bit different in every country, but we have a protocol that works on one standard globally. We have an enormous richness of learning, of how we can tap into the different ways how Bitcoin mining can play a role in this build-out, in this pioneering phase of unlocking the economic potential. When marginalization of Bitcoin miners in favor of better and more competitive demand plays out, we can learn and share knowledge and achieve a faster, more robust build-out than if we were to do this alone.

Marcus Dapp: In order to make this happen, we need to reallocate capital resources in a different way. Tell me about your ideas. If this is a viable path, investments into Bitcoin mining domains will change. What do you see in terms of investment and capital allocation needs?

Harald Rauter: That’s a very good question. I think we can build right on what we have just discussed and give very concrete examples. Bitcoin miners look for the cheapest source of electricity. One paradigm shift that has happened over the past 2-2.5 years was to go from stranded electrical energy, essentially arbitrage market inefficiencies in the electricity markets, to building economic pathways with stranded chemical energy.

Miners were forced to look for non-competitive and non-competing sources of energy. One source of energy that nobody has ever looked at was methane, methane from landfills or me- thane as a side product of oil and gas production. Previously, we have just vented that methane into the air, because in the classical language, methane is considered waste. As a scientist, I tell you, it’s not a waste! It’s chemically bound energy and you can, in a controlled way, harvest that gas. You can purify it, combust it, and drive a turbine. You transform it into electricity which you can use for any appliance you can possibly think of.

But not everything works well, because I do not know how much gas will vent off from a landfill. As it is a chemical transformation, depending on the composition of the feed stock, it changes with temperature. Bitcoin miners, however, do not care. They can easily co-locate with a land- fill, extract the gas, purify it. It is all off-the-shelf technology. No secret, no magic. But they can provide a demand that is flexible enough to use this variable energy when it’s available, and when it’s not, no problem. If my cost of electricity is virtually zero, I don’t mind if my miner gets shut off half the day, because the other half of the day I am profitable.

Plus, there is another argument we should not forget. Because you have this extremely efficient access to electricity, you can ask yourself, what can I do to reduce the capex? Well, you are not looking at the most modern mining rigs, but you are looking at inefficient older rigs. Why? You get them for free! Now you have reduced your capex to zero and you have almost reduced your opex to zero. So, it doesn’t matter whether you mine half a day, 3 hours, or 5 hours. The return and the break-even of the capex that you needed for the piping, and everything that you need to do up front, is clear.

Marcus Dapp: Are you saying, the lifecycle of Bitcoin mining equipment will be extended as a side effect? Would that address the e-waste issue if we can make use of old mining rigs – which we switch off today because of the difficulty?

Harald Rauter: Exactly, let us look at the environmental side of things. As a miner, I look at methane only from the perspective of chemical energy which I can translate into Satoshis. But the climate looks at methane as a greenhouse gas, which is 25 to 80 times more potent than CO2. So, by burning one molecule of methane, I have technically eliminated 24 molecules of CO2. This is not only good for the climate, but it also offers new alternative revenue streams by issuing high quality carbon credit certificates, and we will need those.

Harald Rauter: To give you an extension and an idea of how important that is: One of the biggest threats to us as a society issocietyhas, that we come to a methane inflection point where the earth has warmed enough so that it defrosts the permafrost in the Arctic. Permafrost holds so much soil carbon, which would then be released as methane and suspended into the air. One of the tipping points is that we warm the earth enough so that the permafrost defrosts and emits enormous amounts of methane into the air. We need to slow the defrosting, but we are already on a trajectory that we cannot revert, at least in the short term.

However, we now have an economically viable option to say: who wants to live and build a business somewhere in the Arctic? You can have a fully automized mining center there which harvests methane, purifies it, combusts it and drives economic value while mitigating a climate threat at least over a certain period and give us more space and time to think about structural ways of how we can mitigate the broader problem of CO2.

It is a very complex conversation. But one of the things that I find so intriguing is that if we accept that climate change is real, if we accept that current political top-down approaches are not working because they are building on the wrong premise, and if we broaden our lens, there are new technologies and approaches emerging that work towards climate impact and economic impact.

And Bitcoin is the instrument for that. Suddenly, we have an unlocking mechanism for climate change mitigation. That is the story that I want to tell. You know, the capital for the transition exists anyway. I am working to build a venture capital vehicle that allows capital that under- stands this theory of change to identify and invest in companies that do exciting stuff with Bitcoin mining, knowing that it will create climate-positive outcomes, which they can use economically. Suddenly we built a climate change mitigation thesis around Bitcoin.

What really drives it home for me is to think that the thesis is independent of language and jurisdiction and builds on an open monetary layer which is globally accessible, permissionless, and immutable. So, climate change mitigation agents are the entrepreneurs that build on this standard around the world.

I am taking a future trade in terms of capital allocation that is not looking for the crowded trade in terms of the “fifth Soy milk and the sixth dairy-free milk”, because they will not cut it. By chance Bitcoin has this ability and these properties to impact the different sectors that matter most for climate change. And as it is exponentially growing, I am looking at exponential economic and climate returns. This story needs to be told, also by building bridges to existing institutions, to help them understand the value of this infrastructure and this technology, and what it can do for the purpose that concerns us all the most.

Hopeful message: Climate activism through Bitcoin

Marcus Dapp: While Michael Saylor’s “Bitcoin is hope” statement is based on the monetary narrative, inflati- on hedge against fiat, you just opened an entire new narrative.

If Bitcoin would not exist today, what would be the solution to the climate change problem?

Harald Rauter: That is an immensely powerful question for me because ... I would not know. Because all the challenges that we see in terms of limitations of building out stranded energies, linea- rity of value chains, are very much linked to the observation that we do not have answers for these things.

Knowing that we have this technology that sits as a standardized, immutable thing in the heads of creative venture builders and educators and core developers is extremely powerful because in our chaotic world, it’s a coordinating thing, and it all caters to the same outcomes.

This is what I find so fascinating. If you stack Bitcoin, you help someone be a better agent for the climate. If you withdraw supply, you make Bitcoin more desirable, which means that you help someone to build the methane mitigation plan in Utah, in Africa, or in Siberia.

Harald Rauter: And all that while preserving the things that we value so much as liberal societies, freedom of speech, self-sovereignty, and privacy. There is an environmental context and a social context that makes Bitcoin this powerful ESG tool.

Marcus Dapp: If an investor comes to you and says: “I really like Bitcoin. I read about its monetary properties, and the problems with fiat money. I am keen to invest, but there is this energy problem with Bit- coin mining that holds me back”. What do you answer these people in short, easy language?

Harald Rauter: I would say: I appreciate your concern, because it shows me that you are concerned about the future of our society and what it could mean to live a regenerative and sustainable future for us as humans on this planet. I applaud you for that and because you think like that, I encourage you to study – you need to study a little – what is driving this transition economically? What are the challenges that arise from this irreversible trend? And then study what are meaningful solutions to this challenge.

Maybe think back a hundred years. We moved from a horse to the car, it was an irreversible trend from organic energy, horse meat, to carbohydrates. Today you can make the same ar- gument with your car. You can ask: what happens if your car breaks down, if you are out of energy? Well, this is true, but we will solve that. The hopeful message is: Yes, we had a hydro- carbon-based economy which served us well, but there’s a new kid in town. Technology has advanced and it has valuable properties on many fronts. And it is true, we have a couple of challenges that come with this transition. Once we accept that, we know that we can solve it.

Harald Rauter: If you are an investor mostly in for the returns, not minding good environmental outcomes... study Bitcoin! If you are an investor who cares about nothing else but Bitcoin’s monetary properties, still study Bitcoin! Because, again, in an inelastic system every withdrawing of sup- ply creates a new price balance with increasing demand. The economics drive those use cases, not politics, not regulation, not subsidies. It is pure economics, incentives, and human ingenuity... and slowly but steadily, we will start to see how this creates a picture that serves humanity better on the social layer, but also incredibly well on the environmental layer.

I would advocate for these financing institutions and services like custody, easy access, but also infrastructures like the one on which I am working. These use cases can create a portfolio that gives us an idea of how a congruent picture can look like that tells the story how climate change mitigation can happen through Bitcoin at scale.

Marcus Dapp: Thanks for this insightful conversation, Harald.

Check out the video interview with Harald Rauter Bitcoin Researcher, about Bitcoin's green turn.