Critics state that Bitcoin mining, being an energy hog, is a terrible thing to the global economy, because electricity is a vital resource that could be used for a better end… and because carbon emissions are not ethical, as they change the Earth’s climate unfavourably.
But let’s not forget the fundamentals of economics. Such a high energy consumption is only possible because of speculative value of cryptocurrencies. It’s value is derived from their superiority to traditional money and banking system:
- Political independence, payment channels which cannot be blocked by government, which promotes economic freedom and has potential to starve crony capitalism.
- Convenience, no need to transport money physically with use of heavily armored vehicles… no need to go to ATM to get cash. No advertising from Bank.
- No need for brick-and-mortar banks, no need to hire bank clerks, which is a waste human capital.
- Promotion of saving over spending. Potential ability to stop inflation, which in turn forces people to invest more into real estate, which costs much energy to build and maintain.
- Cost saving, because money can be cheaply sent worldwide. Of course Bitcoin network is a bit expensive now, but there are many alternatives to Bitcoin (such as Bitcoin Cash, Ethereum, Dash, Litecoin) with superior characteristics in terms of transaction cost… and potential to scale massively with no greater energy cost.
- Increased competition and access to global markets. Creative freelancers from around the world could now work for everybody in the global economy, just by using a computer. Private payment option allows an unprecedented freedom.
There are some drawbacks of course, which socialists and democrats like to point. Firstly, financial freedom allows people to freely support terrorist groups. But should that be the domain of blocking? In my opinion no… governments should rather inoculate people to dangerous ideas, educate, promote productivity and track actual bandits, than try to starve them financially. A criminal should be certain that he will get prosecuted in 100% of cases (because of cameras etc.) not blocked from having a gun and money.
Some say that trade sanctions are needed to promote a fair world, where rouge states don’t get to trade with the “noble” West, such as EU or NATO. But is that really an average Russian’s fault, that he or she lives under an authoritary government? Is this an African’s fault? No… rather I feel these people will behave nicer if allowed to trade and earn money by selling services to us. Starving people only promotes passivity and allows wrong systems to persist.
Then there’s a question of the environment. Firstly, the States that want to shut down cryptocurrencies have invested heavily in coal-powered generation themselves. They have subsidised energy, to let people run various industries, and then… if energy goes to Bitcoin they are upset about it’s environmental impact. Seriously? Better think of ways to account for CO2 and pollutants from the energy you produce. Higher energy price, ability to trade it freely, and demand from crypto miners can only help promote building of PV, wind and water-based generators. Energy market is not innovative partly because of administrative overhead of trading energy. Not because of lack of technical means of generating and storing them…
Energy will be even more sustainable, if you allow people to trade it between neighbors. Right now you cannot just sell electric current to a neighbor, or to a local factory. You need to sell it to a monopoly first.
And finally, energy usage will have to be more in proportion to transaction volume if cryptocurrency inflation decreases with time. Bitcoin has a cap o 21 million units, and there will be never more Bitcoins than that. Now it’s energy use is high due to the simple formula:
MINING REWARDS = VALUE * (INFLATION + TRANSACTION FEES)
But as soon as inflation decreases and only transaction fees drive miner’s rewards, energy cost will have to be in proportion to it.
But you ask, how about energy poverty? How about people that cannot afford some electricity? Well… they do have to pay for monopolies currently anyway. And they do pay consumption taxes even for goods that don’t have many adverse environmental effects. And they do pay for bank fees, if they have an account.
And they cannot just produce goods and services for a populace. I would like to have my relatively poor neighbor to cook some food for me. Or to sell me wine, beer and other drugs. Or even go to the local wholesale grocery market, and sell some fruit/vegetables on the street as they used to do in the good old times. But now they cannot. You can park hundreds of idle cars in the street, but if you try to sell something from a van without a license – you will get a fine. Especially if you don’t want to pay taxes for that sale.
They get a welfare benefit if they are really poor, but as soon as they earn some money, they not only must legally stop getting benefits, they will get taxed. Especially if they try to work as an independent business, they will have to pay relatively high social security contribution, regardless of the profit they have. Despite theoretically progressive tax system.
What a sad world, which fights merit and production, but promotes cronyism, idleness and inflation.