- titty_baby_
- Nov 11, 2015
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quote: I came across this recently: https://www.somethingawful.com/news/attack-of-bitcoins/1/. So, after lurking a bit, I thought it was time to join the conversation.
Who am I? I'm a computer nerd, like some of you... I knew about Bitcoin in the early days, but like a lot of other computer nerds who didn't understand money, I let my wallet crash and burn with a long deceased laptop. I was agnostic about Bitcoin, but I was also allergic to finance, so until I had an actual use case in 2018, I wasn't convinced that I needed it in my life.
I've been through the stages. "Transactions fees are too high for micro-transactions!" and "Bitcoin is bad for the environment", are the big ones for me. Eventually, I had to decide whether I was a walking contradiction, because I'm also a physicist and I do research on climate change mitigation/adaptation (mostly feeling like it's adaptation these days). Like many people, I border on hope and despair. What I am sharing with you now, is the culmination of what I've concluded. I have citations for all claims listed, but it's a pain to add them into a forum post, so I can share them on a case-by-case basis, should someone need a source.
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Contents
Introduction / Financialization: A backdrop for understanding inaction on climate change and Bitcoin's role
Bitcoin as a vehicle for system change
Bitcoin's environmental impact
For a habitable future, we must stop financialization
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**Introduction**
We need a major system disruption in order to make the transformative societal change that is necessary to stop the planet from warming humans into extinction. Bitcoin, the decentralized digital currency, may be the very disruption that we need. Bitcoin is transferred over a peer-to-peer network and its' transactions are verified using network nodes that must solve cryptographic puzzles. Satoshi Nakamoto released the Bitcoin white paper in 2008, and the currency was first used in 2009. Bitcoin has the potential to disrupt the existing and entrenched financial system which has stymied climate change action, thus giving us an opening for transformative change.
Within certain circles, claiming that Bitcoin can save us from climate catastrophe is controversial. It is especially so to those who are keenly tuned into the issues that we face with respect to the unfolding climate crisis. After all, Bitcoin mining is a critical component of the coin's network, and its process of mining (proof-of-work) is designed to consume energy to secure the network. It is likely that if you dislike Bitcoin because of the energy concerns, it is because this use of energy sounds extraordinarily wasteful and therefore is only an added burden on our already carbon-overloaded atmosphere and ocean. It is only a negative if we assume that Bitcoin has no purpose, is merely another useless speculative product and which is an institution that cannot adapt to a net-negative emissions landscape. In fact, Bitcoin serves a very valuable purpose and already has significant experiments ongoing. Moreover, Bitcoin is not an institution that cannot adapt to external pressures.
I argue that Bitcoin, as designed, serves as a catalyst for system change because it aims to destroy the very central villain that is stopping us from preventing the planet from warming us into extinction. This villain is the financial system and its stranglehold on the entire globe through the financialization of our national economies and nature. In order to understand Bitcoin's role in this, we must first understand how our financial system and economy work.
**Financialization: A backdrop for understanding inaction on climate change and Bitcoin's role**
*Financialization Is Wealth Transfer from the Many to the Few*
Our financial system is run by a network of Wall Street players who move through a revolving door, from private to public, within the global banking system. Thanks to the 2007–08 financial crisis, many of these banks and their practices are well known to us. Banks like Wells Fargo, HSBC, Goldman Sachs and JP Morgan Chase, along with hedge funds and other major institutional players on Wall Street, are responsible for destroying millions of lives due to risky and reckless practices. Instead of their bad behavior putting them out of business, they were rewarded with bailouts and very little changes in the rules that govern their harmful practices. As a result, they continue to put our economies at risk and ergo, put nearly everyone at risk of financial ruin.
Not just banks, but the people who run them are part of this revolving door system. President Obama's own economic team during the 2008 crisis included many members of the banking system, here's just a handful: Mark Patterson, treasury secretary's chief of staff, a former Goldman Sach's lobbyist. Larry Summers, Obama's chief economic adviser, made $5 million as managing director of a hedge fund. Gary Gensler, Chairman of Commodity Futures Trading Commission, spent 18 years at Goldman Sachs where he was made partner. Gensler is now President Biden's SEC Chairman. Ben Bernanke, Chair of the Federal Reserve during the financial crisis, went on to work for Citadel, the hedge fund beleaguered by the GameStop short controversy and also joined Pimco, an investment firm, as an advisor. President Biden's Secretary of the Treasury, Janet Yellen, while seeming to be little more than a public servant, received over $7 million in speaking fees from banks like Barclays, Citigroup, Goldman Sachs and Citadel, after she left the Federal Reserve in 2016. Many of Biden's aides, as revealed in a 2020 CNBC investigation, have "deep ties to the business world". Republicans are no different, but Democrats are particularly hypocritical in this area.
These financial players do not care about the people they hurt, let alone the planet. They care only about short-term profit. Worst of all, as noted above, the same bankers who carelessly play God with our welfare are the same bankers who end up running our governments' financial institutions. In particular, they manage the central banks that nearly every country has and uses to control currency and interest rates. This sounds innocent and detached from the average person's day-to-day lives, but in reality, the actions of the central banks play a bigger role in our pedestrian lives than even our local governments do. The US Federal Reserve sets goals for employment, for inflation, and for interest rates which affect your ability to take out a loan to buy a car or a home, for example. Through certain monetary policies and (in)actions, the Federal Reserve can destabilize markets, causing market crashes and recessions. In fact, in late June of this year, Boston Fed President Eric Rosengren warned that the "long periods of very low interest rates [which the Fed introduced in response to the pandemic] do encourage people to take risk" and that the Federal Reserve needed to watch for financial stability risk and rising home prices as a result of its own monetary policies.
In post-industrial societies like the United States, financialization has entrenched the grip and power of the banking system. The history of financialization can be traced back to the fall of the Bretton Woods agreement and Nixon taking the US dollar off the gold standard in 1971. Other factors come from the rise of neoliberalism in response to failing Keynesian policies. Neoliberalism promotes a free-market and anti-democratic agenda under the guise of "human dignity and individual freedom" (sounds a lot like right-wing libertarianism, doesn't it?). Ultimately, its ideology claims to be against the state, but really it relies on state violence to open markets for the free-flow of capital. Financialization is a process in which the financial sector becomes the dominate factor in an economy. It is a process in which income is transferred from the real sector to the financial sector, leading to wage stagnation and income inequality. According to Thomas I Palley of the Political Economy Research Institute, "there are reasons to believe that financialization may render the economy prone to risk of debt-deflation and prolonged recession." John R. Balder, a global strategist who has investigated the links between financialization and rising income and wealth inequality, noted in an article that the result of 40-years of financialization of the US economy has been wage stagnation for the bottom 90% of U.S. households, rising debt loads and overall economic insecurity. He argues that "the role of speculative finance (financialization) and the complicity of the central bank" is driving this growing inequality. Since the 1980s, financialization caused a divestment from factories and production coupled with an increase in investment in financial tools that would increase profit from securitization.
Indeed, during the pandemic, we saw a type of recovery known as a K-shaped recovery, in which one group saw the crisis dissipate much faster than the other. The wealthier you were, the more disconnected you were from the plight of the average worker because your recovery was likely dependent on the stock market's recovery and thus the recovery of various financial assets. The stock market's COVID-recovery was the fastest recovery ever seen (thanks to the central bank's use of quantitative easing). This was great for the banks, investors and hedge funds. For everyone else who isn't in the higher income brackets, especially those who were labeled "frontline workers" (farm workers, grocery store workers, etc.), the recovery may only be a distant dream.
The point must be well understood that financialization is bad for 99% of the global population. While my examples are mainly focused on what has happened in the United States, similar is happening across the globe under the economic ideology of neoliberalism, which came into being in the 1980s. Moreover, US monetary policy has historically set the stage for international monetary policy. Financialization and the public and private banking systems as they operate today not only harm people but also our planet, the only habitable world that we have. No matter what Elon Musk and Jeff Bezos think, there is no planet that we can move to that will serve as a second Earth; a feudalistic and franksteined Mars is not the dystopian reality that we should want for future generations.
*Financialization Harms the Environment and Prevents Climate Change Related Solutions*
According to the Institute for Policy Studies, banks are the largest investors in fossil fuels. Not only this, but central banks who adopted quantitative easing (QE) in response to the 2008 financial crisis pumped $6 trillion globally, but this additional liquidity did nothing for "green" investment. Instead, according to the Institute, QE funneled money toward polluters. Financialization has weakened the so-called free market and the ability of private firms to successfully develop competitive low-carbon or zero-carbon technologies. According to the Bank for International Settlements, financialization harms innovation. Max Jerneck, at the Mistra Center for Sustainable Markets, wrote in a study that this happens because innovative firms "operate by creating intangible future assets that are difficult to collateralize".
Tamra L Gilbertson notes in a 2020 paper, that the rise in finance in the role of climate change mitigation parallels the rise in financialization. She writes that "the role of powerful states and their capitalist allies are central to the process of expanding capital accumulation through financialization" and that this is also true for the financialization of climate change policies. In her paper, "Financialization of nature and climate change policy: implications for mining-impacted Afro-Colombian communities", she writes that the marketization of nature is a result of documents produced at the 1992 United Nations Conference on Environment and Development. Here, the partnership between public and private sector "satisfied the interest of states and extractive corporations under the rhetoric of sustainable development" and that the resulting new nature-derived financial instruments were "often written, guided, lobbied for, and organized by representatives of fossil fuel corporations and northern-based conservation NGOs." The most apparent example of a climate mitigation instrument is carbon trading, which allows "polluting corporations to buy their way out of reducing pollution."
Both Gilbertson and Jerneck give practical examples of how financialization has stymied and hurt our ability to stop climate change. Gilbertson highlights the effect of carbon trading in Colombia where a carbon tax with a provision for using carbon emission offsets allows polluters to claim carbon neutrality and avoid taxation. As a result, polluting companies like coal mines in the region can continue to pollute the local Afro-Colombian communities and release CO2 emissions into the atmosphere. Furthermore, these coal companies are involved in commodifying local forests to be sold as units of credit on a carbon market. The polluters understand that through creating these financial assets, they can also generate wealth without having to shift their mining practices because they are "carbon neutral". This of course, is a fallacy, because there is a limit to what forests can sequester, forests are not an infinite carbon sink. As temperatures rise, the ability of forests to sequester carbon diminishes, thus, creating a carbon positive output.
Jerneck highlights how during the 1970–80s, financialization stymied the development of the solar industry in the United States. Because venture capitalists lacked interest in investing in innovation that would not provide short-term profit gains, there was little money available for entrepreneurs to develop the technology. The entrepreneurs who understood the technology best, were locked out of the financial sphere and eventually were forced to become part of financial conglomerates, which were highly centralized and did not understand the technology. This gave Japanese photovoltaic entrepreneurs an advantage and ultimately the conglomerates failed to make photovoltaics economically viable. In Japan, production and financial capital were not as disconnected as they are in the United States. Jerneck argues that in the United States there exists an "inherent tension between entrepreneurial and financial components of innovation. Recognizing this tension is crucial to understand the challenge of industrial transformation required to avoid catastrophic climate change." So long as it is easier to make money from speculation, investments in innovation will be avoided. Today, China generally dominates the photovoltaics industry.
The combination of the dominance of speculation over enterprise and the increasing role of the stock market in corporate control undermines our society's ability to innovate its way out of a crisis like climate change. When the main goal of a corporation is for short-term enrichment of investors, what money is left for improving long-term technological research and development? Jerneck makes it clear, "Instead of serving industrial development, finance had come to serve itself."
As a result, we are on a high-speed train that is about to take 8 billion people off a climate catastrophe cliff. Financialization has created a system that is no longer attached to the real world. It is strictly based on increasing one's wealth without actually creating new wealth (also known as rent-seeking) rather than through production and innovative technologies. This likely explains why Bill Gates bought up a large amount of farmland and why Americans are being outbid on single family homes, when giant investors move-in and buy up blocks of houses for the sole purpose of renting them to the very people they out-bid. If we are feeling like our future is being stolen from us because of inaction from political leaders on climate change, then there is one obvious reason for this, and that is the stranglehold of the financial sector on our society. Keeping the planet from warming us into near-term extinction is irrelevant while you can still turn a quick profit and build a rich-person's oasis on Mars. After all, the space race is now a dystopian one among the wealthiest men on the planet. First one off this hellscape wins the prize.
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**Bitcoin as a vehicle for system change**
The goal here isn't to focus on all the details of the shifting economic landscape but to argue why Bitcoin is the kind of disruption that we need to stop the global climate from warming beyond 1.5 degrees Celsius. However, the reader must understand the dire situation we are in before such an argument can be made. We are living through an entrenched financial system that has no regard for our environment nor for people. Protests have put some pressure on the financial markets (such as the divestment movement), but as shown, the worst crimes in this sector go unpunished and allow corporations and banks to escape responsibility. The players involved have an unquenchable thirst for profit and they also make economic policy for our governments. The central banks are complicit and contribute to the financialization problem. Our political leaders can only imagine incremental steps toward change so long as these small changes do not upset the entrenched financial system. Even some self-described socialist leaders are unable to conceptualize a world without the system as it exists today. Their vision is only a modification of the one that exists now, based on a belief that if they control it, they will do better. There is no evidence that a shift in leadership will do this because the problems are institutionalized, much like racism is institutionalized in the justice system. Therefore, we are only left with drastic choices.
Continuing with the high-speed train analogy, there is only one way to stop the train from taking every human on this planet with it over the cliff of climate change tipping points and irreversible feedback loops. The solution is radical, and it is to derail and cripple the existing financial system. This is where Bitcoin comes in.
*Bitcoin's threat to the existing system*
Bitcoin is deceptively simple. The point of Bitcoin is to create a monetary system that exists outside of the current system that among other things, gave us climate change which is the greatest market failure in the history of humanity. The rest of what makes Bitcoin compelling is up to interpretation and there is a diversity of reasons to be attracted to the idea that it is. As a result, we must dispel with the myth that Bitcoin is a system without value because the value comes from its sole purpose to exist.
There is a lot of misunderstanding of Bitcoin because of the proliferation of other cryptocurrencies and the fact that among the first people to get Bitcoin are right wing libertarians and followers of Austrian school economists like Mises and Rothbard ("anarcho"-capitalists). Moreover, because Bitcoin's price has skyrocketed, there are many people who wish to replicate it for the sole purpose of getting rich quickly. Therefore, we have seen many scams come out of the cryptocurrency space (and plenty of shills, like Spike Lee shilling for a high-fees ATM). Scams and shills, however, do not mean Bitcoin is useless or just speculation.
Beyond the scams and shills, there is no other cryptocurrency that has done what Bitcoin has done thus far. There is no other cryptocurrency, controversy aside, that can claim to be a country's legal tender, for example. With the addition of the Lightning network as a layer 2 protocol, there is also no need for nearly all other blockchains that are currently in existence (Monero stands out as a worthwhile alternative and complement).
The Lightning network, first proposed in a white paper in 2015, solves issues related to scalability, rapid settlement, low transaction fees, and privacy through the implementation of channels which operate similar to the Tor network. Of course, Lightning is not an immaculate conception of perfected money transactability, it is not without its issues, but through community development, these can be either improved, or Lightning can be replaced with something better, as that is invariably the case with digital technology.
Let's examine Bitcoin from a more technological perspective. We must consider Bitcoin in a different light from what many of us who are concerned about the climate have traditionally viewed it, namely fake money that increases CO2 emissions and which serves only to produce pump-and-dump speculative behavior. First, we must think of Bitcoin in the historical context of the Internet and the Transmission Control Protocol/Internet Protocol (TCP/IP). TCP/IP are a set of rules that make communication possible between computers. Without TCP/IP, we would not be able to watch movies on Netflix, receive e-mail, or chat on Discord. Most people are not aware of the power of these communication rules, but the World Wide Web would not have been possible without them. TCP/IP existed before the World Wide Web was created, and the World Wide Web is a layer that improved on TCP/IP, making it possible for interconnected web pages to exist. The Web introduced a new computer protocol to the world called the Hypertext Transfer Protocol (HTTP) and revolutionized the way society interacts on nearly every level. In the same way, Bitcoin is like the TCP/IP layer for a type of electronic monetary system and a layer 2 protocol like Lightning is like the World Wide Web, but in this case, it interconnects quotidian financial transactions. Like the Internet and Web, Bitcoin has the potential to disrupt and improve lives, but it can potentially allow for new kinds of monsters to be born. The difference between the Web and Bitcoin, however, is that because Bitcoin is based on a decentralized blockchain, it is therefore part of a greater movement toward the re-decentralization of the Internet. As a quick aside, what this means is that there is a lot of room left for human rights minded people to get involved and have an impact on technology and society in a way that was not previously possible (see getdweb.net for more information).
Second we must acknowledge its real-world use cases. As mentioned, Lightning network makes it possible for Bitcoin to be used in regular, everyday purchases because fees are much lower than on the main network. Today, using the Lightning network and Bitrefill, Bitcoin can be used to buy groceries, airplane tickets, or dinner. Bitcoin can be used to pay podcasters by the minute. While you stream a podcast, you can stream revenue back to them over the Lightning network. This happens instantaneously, without a payment processor like Stripe or PayPal taking a minimum 3% cut. More importantly, without fear of being de-platformed because a payment processor doesn't like the kind of content you produce. Sex workers in particular are at risk of de-platforming from the payment processing system. Recently, a supporter of the Tor network, which provides Internet anonymity for those living under oppressive regimes, was banned from PayPal for using his account to pay for cloud hosting of Tor nodes. Finally, when the US government pressured payment processors including credit card companies and PayPal to de-platform Julian Assange, he turned to Bitcoin to keep Wikileaks alive. To reiterate, the mere fact that an alternative, decentralized and censorship-resistant Internet money exists outside of the financial system gives it value.
Given the the historical, technological and use case examination, it starts to become clear that Bitcoin is disruptive and transformative in the same way that the Internet was at the turn of the last century. Carol Alexander, a cryptocurrency expert at the University of Sussex in the United Kingdom was quoted in Foreign Policy this year as saying, "They're reinventing what finance is, and it's sort of going under the radar of the establishment…They're not using standard products. They're not using standard trading protocols… It's a revolution led by young people, computer science geeks…" This means that the central banking system is already a decade behind the Bitcoin community when it comes to digital currency.
This is why Bitcoin can potentially help us stop climate change from getting worse. We know that the financial sector is strangling innovation, that the banks are funneling money to oil companies, and that the central banks are complicit through projects like quantitative easing. We cannot expect the existing structure to give us the opportunity we need to transform the system when we ask them to. So far, they have made it clear through our politicians, that very little will change. As stated, Bitcoin's goal is to exist outside of the current monetary structure, and this alone is disruptive enough. In fact, we know that it is having a disruptive effect because central banks are starting to get nervous. The Bank for International Settlements (BIS) wants central banks to develop and issue their own central bank digital currencies to compete with Bitcoin. While BIS correctly understood that financialization undermines innovation, they incorrectly claim that Bitcoin is harmful to the public good when it is in fact an innovation the undermines financialization. Bitcoin undermines financialization because it threatens the main players (bankers, institutional investors, hedge funds) who run our global financial system.
Greek economist Yannis Varoufaukis is well known among progressive and socialist circles. He is opposed to the adoption of Bitcoin because he believes it will cause a kind of feudalism where early adopters will run this new world. There is evidence that suggests this may not be true and Varofaukis makes a valid point, but arguing this is not within the scope of this paper. From a climate change perspective, Bitcoin serves primarily as a vehicle to disrupt the existing system enough to create an opening for transformative change, hopefully enraging populations enough to take real action against those who have sent us down this path of self-destruction.
There is one issue with Varoufaukis's anti-Bitcoin stance that is worth addressing here. He is a proponent of a central bank digital currency. He agrees that we need to cut out the middleman, but he overlooks some important aspects of what this would mean. Mainly that a central bank digital currency (CBDC) in no way prevents the further entrenchment of the surveillance state. Varoufakis makes the outrageous claim that a CBDC would be anonymous. This is a huge claim without any basis in reality because governments abhor encryption and privacy. He also ignores the reality that a CBDC would not prevent a new form of feudalism because the central banks are complicit in the creation of what Varofaukis calls, techno-feudalism, which he argues has replaced capitalism. The same Wall St players that currently move through the public and private banking sectors would still be running the central banks, thus propping up the very system that is making this new economics possible. The same problems with financialization would exist in a CBDC world, making it impossible for us to act quickly to stop the planet from warming even more.
Furthermore, a central banking digital coin, with all the qualities of Bitcoin, but only under the power of a central authority, would mean states have much more power and control over our lives than ever before. We can no longer accept incremental changes or these sleights-of-hand.
One might claim that the central point of this argument is somewhat incorrect because institutional investors and bankers are paying attention to Bitcoin and other cryptocurrencies. Goldman Sachs recently published a pamphlet on investing in Bitcoin and Ethereum as stores of value. Yet, it seems that these investors are only looking at cryptocurrency as a high-risk asset class in which to generate short-term profit during periods of high market volatility. The Wall Street institutional investors appear to not be interested in Bitcoin as a viable currency. Their role in the community tends to exist outside of Bitcoin's. In particular, JP Morgan Chase, Microsoft and Intel formed the Enterprise Ethereum Alliance, which should make anyone serious about challenging the existing system suspicious of Ethereum.
Bitcoin is as revolutionary as the World Wide Web was at the turn of the century. The Web was misunderstood early on as well. Over 30 years later, it has completely transformed our way of life. Bitcoin has the potential to do the same. Bitcoin's base layer combined with the Lightning network opens up a world of possibilities, including empowering the most vulnerable who are considered too unsavory for the banking system, which easily bends to government pressure. As argued, because Bitcoin exists as a functioning money transfer system outside of our de facto financial system, this is enough of a threat to the existing banking structure. If it succeeds, it can upend the way banks work, including the central banks, which will likely be terrifying but also provide a unique opening for action on climate change once the banks are crippled. At the same time, Bitcoin can also create new problems, especially if it remains popular only among right-wing libertarians. The main point to remember is that Bitcoin itself is just money, it does not come with a right-wing ideology right out of the box. What happens with Bitcoin will depend entirely on the community. This is why it is imperative that we understand what it is and how to use it.
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**Bitcoin's environmental impact**
I have alluded to some issues related to the digital currency, but the most important one for the climate change community is that of its environmental impact. There are issues with mining companies and underlying energy sources that drive the high-computation costs. The Cambridge Center for Alternative Finance estimates that today, Bitcoin uses roughly 70 terawatt hours per year or 0.31% of the total global electricity production (although estimates peaked at over 130 terawatt hours during the recent bull run). To put this into scale, Austria and Colombia, with populations in the tens of millions use similar amounts. In comparison, the Center reports that refrigerators in the United States use around 100 terawatt hours per year of electricity and global air conditioning use requires 2199 terawatt hours per year of electricity. Cement, a problematic source of CO2 emissions, requires 384 terawatt hours.
In some cases, Bitcoin mining companies claim to rely on excess electricity in the system to run their hardware. This suggests that mining could be a buyer of last resort, but it is difficult to know how many miners operate this way. It is true that not all Bitcoin mining is renewable energy derived, but Bitcoin is not an entrenched institution, it is malleable. Miners will move to wherever energy costs are cheapest and with the right incentives and external pressures, it is not hard to see mining being fully renewable in a very short period of time. As it stands, the Bitcoin Mining Council estimated in June 2021 that around 56% of mining is based on renewables. A lower bound from a 2018 study puts it around 28%. For perspective, roughly two-thirds of California's energy production is renewable and in Georgia it is 9%. Further, there exists historical precedent from a different energy intensive technology sector from which Bitcoin miners can learn from: data centers.
In 2010, data centers faced criticism for its rightly concerning, fossil fuel-based energy consumption. Did data centers ignore the pressure? No, the data center industry is now the largest user of renewable energy on Earth. Due to pressure from Greenpeace and other environmentalists, companies who relied on the industry, like Google, Facebook and Microsoft, compelled data centers to shift. To quote some statistics from Data Center Frontier, "Electricity usage by global data centers grew just 6 percent from 2010–18…while the number of physical servers rose 30% and compute instances rose by 550 percent. This marked a complete reversal from the 90 percent growth in data center energy from 2000–2005." In other words, the more we understand the operations of Bitcoin, the better we can situate ourselves to put pressure on Bitcoin miners and electricity providers to switch to renewables.
In a 2017 study, data centers - the infrastructure backbone for our Internet-based data sharing needs - were found to use 416 terawatt hours per year or approximately 3% of the total global electricity production. The Cambridge Center reports 200 terawatt hours for data centers based on a different study, so the estimates do vary. Using the Cambridge numbers for data centers, data centers have a lower bound of around 1.5% of global electricity production. This means that data centers alone use roughly 40-percent more energy than the United Kingdom. This is 1.2-2.7% more than the Bitcoin mining network uses (~0.31%). This means that Bitcoin's energy use is within and below the industry standard for computational purposes. If Bitcoin is truly the resilient and adaptive disruptive technology that its proponents claim it to be, then there is no reason to believe that Bitcoin will not follow the data centers' path toward renewable energy reliance. Plus, with continued pressure from climate-concerned members of the community, the shift to renewable energy will be difficult to escape. In fact, since Elon Musk declared that Tesla would no longer accept Bitcoin until it adopted a renewable energy standard, there has been intense discussion around alternative approaches and solutions within the Bitcoin developer mailing list.
Finally, there are a number of additional possibilities for improving energy efficiency in Bitcoin without compromising the proof-of-work algorithm, although within a transition from fossil fuels framework, these would be temporary. A few examples are mining stranded energy, or mining from flared methane. The wasted energy from flaring alone would power almost 10 times the amount of miners currently online.
There is an additional environmental concern, and that is the built-in obsolescence of Application Specific Integrated Chip miners (ASICs). Like a lot of technology devices that we use, devices are built to be thrown away within a few years of use. For example, consumers are incentivized to upgrade their smart phones every two years and ASICs has a similar lifespan. ASICs are designed to do only one task and to do it well. Once they burn out or become outdated due to faster chips on the market, they will be thrown away. Some miners are sold for scrap metal, but I do not doubt that most end up in a landfill. ASICs are not the only device that contributes to e-waste. The EPA estimates that in 2009, US consumers and businesses produced 2.37 million tons of e-waste. Only 25 percent was collected for recycling and the rest went to landfills. We, humans, are wasteful. The EPA reported that if we recycled 1 million cell phones, we could recover more than 35,00 pounds of copper, 33 pounds of palladium, 772 pounds of silver, and 75 pounds of gold. Given the design of ASICs, which are metal boxes filled with 3–4 large circuit boards and two or so plastic fans, there is so much potential for metal recovery and reuse. ASICs do not need to contribute to landfills and environmental pollution.
There have been some questionable claims thrown at Bitcoin over the e-waste that mining causes. Alex de Vries, found of Digiconomist published data based on back-of-the-envelope calculations that claimed that Bitcoin miners were major e-wasters. For now, we will assume his assumptions to be true. Based on his calculations, he concludes that Bitcoin's e-waste generation is 6.37 kilotons per year, roughly half of the waste generated by Luxembourg. Based on the EPA's 2009 numbers for the United States, this makes up 0.27 percent of American electronic waste (2.37 million tons). De Vries makes a second estimate, which is where he assumes erroneously. First, de Vries does not compare the VISA network's e-waste to city-sized countries. Second, he concludes that for each individual Bitcoin transaction, approximately a little more than 80 grams of e-waste is generated (we assume this is true for now). He then says that this is in comparison to the approximately 45 grams generated per 10,000 VISA transactions.
However, this argument is incorrect because it ignores transactions generated on the Lightning network. As more users move to Lightning for day-to-day transactions, the number of transactions that happen with just one transaction on the Bitcoin layer become competitive with VISA. VISA can handle 60,000 transactions per second, whereas the Lightning network is capable of millions or billions of transactions per second. Therefore, de Vries' argument breaks, because it shows that Bitcoin is no more wasteful than the existing sector, if anything, it has the potential to be less so. To be clear, this is not to excuse the e-waste problem, but only to put it within perspective. E-waste is a byproduct of a single-use society and not a Bitcoin-only problem. We must transform our society consumption habits if we want to see an end to e-waste.
*Mining Alternative Has Network Security Risk*
Proof-of-stake is a well-known alternative to proof-of-work. Its proponents claim it is less energy consuming and that it works as well as proof-of-work. However, a big concern with proof of stake is that it is based on who has the most money staked in the network. Therefore, if you are already extraordinarily wealthy, what stops you from becoming the biggest stakeholder in the network? With Bitcoin mining, you need some technical expertise and a willingness to chase down the cheapest energy sources.
What we know from financialization is that proof-of-work is not easy money so trying to take over a proof-of-work network like Bitcoin's to attack it would be difficult given finite resources and very expensive. It is much easier for Dimon to stake money than mine. In fact, that is what the ultra-rich do already, they stake their money in shares and other financial assets. Moreover, the benefit of tying proof-of-work to a physical resource, is that it is finite, and electricity must obey the laws of thermodynamics. However, any government could simply inject more liquidity to purchase more of a proof-of-stake currency until it and major banks hold the greatest stake in the network. With majority stake, they can now perform an attack on the network and take it over. In Bitcoin, even if a government owned the majority of coins, it would still not have control of the network, because mining and transaction verification are external to the number of coins owned.
Bitcoin mining is without a doubt energy intensive, however, as discussed in this section, it is not an outlier per se when compared to other industries, especially if we believe that Bitcoin and the network provide a certain value to us. E-waste is an issue, but as discussed, mining is not a lone contributor to this problem and accounts for a small percentage of overall annual e-waste production. Moreover, solutions already exist, such as recycling, which would reduce mining metals and be overall a positive for the environment. In the end, so long as we believe Bitcoin provides value, as I have tried to argue, then focused external and internal pressures, through grassroots campaigns and community discussion and innovation are worth our effort in the goal of keeping global temperatures below 1.5 degrees Celsius.
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**For a habitable future, we must stop financialization**
The end goal here is not to push a libertarian or Austrian economic wet dream of a Bitcoin reserve currency future, but to disrupt the financial system through Bitcoin in order to create a window of opportunity to transform the financial system to meet the needs of a climate change world. Bitcoin is the only cryptocurrency that is in a position to be this threat. Unlike the alternative cryptocurrencies, Bitcoin does not belong to any one organization and despite the benefits of some of these alternatives with respect to energy efficiency, the other options like Cardano, Algorand, and Hedera Hashgraph (to name a few) are vying for a spot to be the backbone for future central bank digital coins. These organizations choose to work within the financial system as it exists today where elites control the central banks in order to save each other from disaster when they play a too risky game and lose. Therefore, they cannot be trusted to be disruptive nor transformative in the way that we desire.
In June of this year, El Salvador became the first country to make Bitcoin a legal tender. No other cryptocurrency has achieved this status. Consider the shift in El Salvadoran monetary policy along with whatever very valid controversy and concerns you may have about the adoption but realize that El Salvador's adoption of Bitcoin is also an attack on neoliberalism, financialization and the International Monetary Fund (IMF). The IMF exported, worldwide, policies that led to the systematic transfer of power from the public to private sectors, imposed austerity measures in exchange for loans, and caused the greatest economic downturn in Latin America during the 1980s. The IMF now admits its actions increased inequality and failed to create economic growth. Unsurprisingly, the IMF did not approve of El Salvador's recent Bitcoin adoption. The response from the global banking system already indicates that the thesis that Bitcoin is a threat is true. If we can cripple the banking system, we can at least temporarily put an end to financialization, and use this opening to apply economic solutions, that benefit the climate and people, which were not possible before.
Beyond arguing that Bitcoin is a tool to disrupt the status quo, I want to add a few suggestions regarding how the reader can engage with Bitcoin in order to accelerate its disruption of the financial sector. First, because it is a new technology, you do need to be ready for being a little bit overwhelmed. Spend some time watching videos or reading tutorials on how Bitcoin works. Second, download a wallet, preferably one that has both a regular Bitcoin wallet and a Lightning wallet built in. BlueWallet is one such wallet and I have used it with great success. Most wallets have a built-in way to purchase Bitcoin, so don't bother with exchanges because they will hold your money, you can also look into Bisq, which is a pro-privacy exchange. More importantly, learn how to setup your own node, you can use Umbrel which is plug-and-play, or you can install RaspiBlitz or RaspiBolt, if you are looking for a more hands on experience. Both require the Linux operating system to run. If you want to use Bitcoin to make real world purchases, you can use Bitrefill which runs on the Lightning network. Finally, and most importantly, get involved in the community. Attend meetups, post on Bitcoin related forums, create Bitcoin-related content, and teach others about its' disruptive potential and how to use it.
Bitcoin is a powerful weapon against the financial system, but Bitcoin alone cannot be the solution to everything. We must use every tool available to save ourselves from catastrophic climate change. In my opinion, Bitcoin provides only one solution, the rest is up to us to shape what happens next. As I have tried to argue, Bitcoin has real value and can provide an opening for transformative and systemic change to our financial system. If we do not transform the way our economy works and the power the finance sector has over it and our governments, then there is little hope for keeping the planet from warming beyond habitable levels. Using Bitcoin as a tool for fighting for a habitable future is undoubtedly a kind of Hail Mary pass for the climate, but we are running out of time and mass demonstrations and a failing representative democracy are not doing enough. We have to fight the system on the digital landscape, too. You must decide for yourself which way forward is best, but I know that I will use all available options to reach the goal of keeping this planet from warming beyond 1.5 degrees Celsius.
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Jul 31, 2021 17:22
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