The grand vision of bitcoin believers is a world where governments don’t control money, and banks and other financial institutions can no longer impose costs to hold and move money around.
It’s been easy to market the case for bitcoin and other cryptocurrencies because all you need to do is point to the problems of traditional money (of which there are many) and compare them to the untested and theoretical advantages of bitcoin (which hasn’t been around for long to show its warts).
But now a new study is starkly pointing at a huge, real-world drawback to the virtual currency. Scientists at the University of Hawaii at Manoa, publishing in Nature Climate Change, claim that if bitcoin is adopted at similar rates to other technologies, all by itself, it could raise global temperatures by 2 degrees Celsius within 15 years. That would drive climate change forecasts off the charts.
It’s true that as guardians of money, governments have had a spotty record. Take the hyperinflation of the Reichsmark in the 1920s or the Venezuelan bolivar now. Iin fact, Venezuela has offered its long-suffering citizens a cryptocurrency of its own, the petro, which has proven to be a worthless as the bolivar.)
But the big picture of world currency history has been one of generally good management, or the world economy wouldn’t have grown and developed the way it did.
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Rebels without a case
One of the key tenets of the bitcoin religion (and why not call it a religion, since it has is based on faith?) is that it will free ordinary people from the constraints on their wealth and spending imposed by governments.
Of course, one of those constraints is the requirement to report your income and pay taxes, thereby helping to ensure public services and a modicum of wealth distribution. A world where you can hide your income and wealth so easily won’t be a better one.
In any event, the libertarian case for bitcoin is baseless. Cryptocurrencies not only require a closely interconnected world of easy and affordable access to internet and computer hardware, but also a reliable source of electricity. And, who ensures that? The very governments and businesses that bitcoin libertarians despise and from whom they dream of liberating humanity.
The electricity issue is a particular problem for bitcoin libertarians because the currency is so power-hungry.
The process of “mining” bitcoins requires banks of computers continuously performing calculations in a race for the chance to be the next minter of new bitcoin. It’s a highly energy-inefficient process because each miner that loses the contest is expending as much computing power as the winner.
It’s not just the computers themselves, but the heat they generate as they calculate away, so that extra power is required to keep them cool.
Bitcoin miners are such electricity hogs that they can create local power shortages and raise electricity rates for their neighbors.
In a study published earlier this year, economist Alex de Vries forecast that Bitcoin would be consuming 7.67 gigawatts, or, 0.5% of world’s electricity, perhaps as early as the end of 2018. If the price of bitcoin continues to increase the way many have predicted, thereby attracting more and more miners, bitcoin could someday consume 5% of the world's electricity.
"To me, half a percent is already quite shocking. It's an extreme difference compared to the regular financial system, and this increasing electricity demand is definitely not going to help us reach our climate goals," de Vries says.
Pet Rock and problems
De Vries is right to be worried: The study published Monday in Nature Climate Change estimated that the use of bitcoins in the year 2017 emitted 69 million metric tons of carbon dioxide. It could wind up consuming so much power that it significantly contributes to global warming.
"Currently, the emissions from transportation, housing and food are considered the main contributors to ongoing climate change. This research illustrates that bitcoin should be added to this list," said Katie Taladay, a coauthor of the paper.
Indeed, the researchers predicted that if the take-up on bitcoin occurs at a similar rate to other technologies the cryptocurrency by itself could produce enough emissions to raise global temperatures by 2 degrees Celsius as soon as the year 2033.
It doesn’t sound like much, but the two-degree benchmark is regarded as the point where climate change becomes dangerous. Much of the world, including its present "breadbasket region," will be a lot drier at a severe cost to ecosystems, agriculture and infrastructure. Low-lying coastal regions and small islands worldwide are expected to disappear as sea levels rise.
On the upside, my guess is that bitcoin will probably never gain the kind of traction it needs to become such an environmental threat.
Either the attraction of cryptocurrencies will fade as people come to recognize that, like the Pet Rock, they are a solution to a problem that doesn’t really exist, or governments are forced to step in to halt the squandering of energy. Even the Trump administration, which dismisses climate change as fake news, won’t appreciate the demands bitcoin mining makes on the power grid and will act if it becomes real threat.
The bitcoin phenomenon reminds me of the 1960s-era “Whole Earth Catalog,” which showed the first generation of environmentally conscious Americans how to return to nature and become self-sufficient – by making use of technology and products produced by big industrial companies.
The world is growing more reliant on technology, and far from liberating humankind from centralized power, for better or for worse it is drawing us closer to it by making us more reliant on the network than ever. Even if it were to succeed, bitcoin would only contribute to the trend.