It’s been years since I’ve written about Bitcoin, cryptocurrencies and why we don’t “invest” (really gamble) in any of them. But in line with wallet activism, it felt like it was time to talk about the broader ethical considerations around crypto, namely whether the good it does is enough to offset the harm it does both environmentally and to our fellow humans.
If you’ve been holding out for Wallet Activism in audiobook form, it’s now available, and if you buy from Libro.fm, you can select your local bookstore and support them in the process. It’s a great option if you don’t feel good about shopping with a certain online giant. You can also buy the print or ebook version from your local store via Indiebound, or buy from Bookshop.org, which sends a portion of profits to local independent bookstores. If you’ve already read it, it would mean a great deal to me if you’d leave a review, and if you do that and send a screenshot of it to walletactivism [at] gmail dot com, you’ll get extra entries into the drawing for a chat session with me (details on that here).
But let’s talk crypto.
Crypto’s Energy Problem
By now, Bitcoin’s massive energy problem is well documented. Currently Bitcoin mining and blockchain processing consumes as much electricity as entire wealthy countries – more than Switzerland, more than nearly all the Scandinavian countries individually, more than New Zealand and Belgium put together. Until recently, experts estimated that 70% of all Bitcoin mining happened in China, but with Beijing cracking down on the practice, miners are moving to the places in the world with the cheapest, and often dirtiest, electricity. For example, Texas is now rapidly becoming a Bitcoin boom state, and Texas is notorious for embracing the fossil fuel industry, ranking 36th in its use of renewables for electricity generation and still relying heavily on coal and natural gas. But Bitcoin miners seem more focused on how cheap the electricity that they’ll be using is, not where it comes from.
The serious environmental toll Bitcoin takes has concerned many people who would otherwise be interested in cryptocurrency speculation, and there are now newer cryptos like Solarcoin, Bitgreen and Chia that claim to be “carbon neutral” or even “carbon negative.” And it’s true that any cryptocurrency that avoids mining and uses “proof of stake” instead of “proof of work” to prove ownership is inherently less demanding of electricity, and some rely on renewable energy rather than power from fossil fuel plants. But simply applauding any crypto that uses less energy than Bitcoin or uses renewable energy ignores the fact that that is renewable energy that can’t go to other uses, which still has the effect of driving our overall energy use up.
At a time when humanity’s greatest imperative is to cut our energy use dramatically to address the climate crisis, inventing new ways to burn energy – even if that energy burned is the “good kind” – is the last thing we should be doing. Of course, there are new uses of electricity that are absolutely justifiable, and improve the quality of life for people who haven’t had access to equitable services like health care and education in the past. But no cryptocurrencies meet that standard.
Gambling with People’s Livelihood
Though there’s not a central company promoting crypto in most senses, the entire ecosystem of crypto speculators and media talk about cryptocurrencies as though they are truly investment vehicles rather than, essentially, gambling. Investment vehicles and especially investment-grade currencies are relatively stable in value, and crypto is anything but, swinging 1000% from March 2020 to August 2021, from a low of $6,500 to a high of $64,000. When a single tweet from Elon Musk can dramatically change the value of a portfolio, that’s not something most people should be betting their livelihood on. However, lured by the promise of easy riches, innumerable people have fallen into the crypto trap. Promoting a product that makes it so easy for people to go broke is far from ethical.
There is now a growing movement for low-income countries to adopt cryptocurrencies, with El Salvador becoming the first country to adopt Bitcoin as a national currency earlier this year, and people in countries like Afghanistan, Vietnam, Cuba and much of Latin America embracing it widely. Proponents argue that the use of cryptos can improve equity in these countries, as they provide a frictionless way to move money across borders in countries that don’t allow Venmo, Paypal or international bank-to-bank transfers. However, this argument ignores the disproportionate harm cryptos can do in low-income countries where people can’t afford to lose any of their purchasing power. In El Salvador, the per capita income is less than $4,000 a year. If a person converts their money into crypto, expecting that it will be able to buy next week what it can buy today, they will often be proven wrong, given the wild swings in price that are all too common with Bitcoin and other cryptos. Many have argued that that shouldn’t worry anyone, as plenty of currencies have been unstable over the years and subject to hyperinflation. But those are the currencies we consider failures, not the ones we hold up as investment grade. Often, currencies that experience hyperinflation lead to the collapse of an entire country. Promoting unstable cryptocurrencies in countries with people who can’t afford even a little bit of hyperinflation is the opposite of ethical. With the world already in a deep inequality crisis, the last thing we should be promoting is a so-called investment vehicle that will as often as not make poor people poorer. (UPDATE: El Salvador’s crypto experiment is going badly.)
The Bottom Line: There’s No Ethical Justification for Crypto
It is no doubt exciting for those holding Bitcoin and other cryptos to watch them climb higher and higher, and they’ve absolutely enriched quite a few people. But at what cost? It is not a good use of our power supply to enrich speculators, many of whom are already doing well financially and don’t especially need enriching, while also harming those who can least afford it. It’s time to put the climate crisis and the needs of low-income people above the desires of those who can afford to gamble.
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Categories: we've learned