If your primary goal as a publication is to uncover “the unintended consequences of digital trends,” then Digiconomist hit the jackpot when cryptocurrency entered the mainstream. Starting 2022 with a bang, the tech blog shared on Twitter last year’s results of its “widely cited” indices that have been tracking the mammoth energy wastage of Bitcoin:
This will damage Bitcoin’s status in the public eye, especially given that it was once considered by enthusiasts as the “gold standard” of cryptocurrency. Now, it is now losing favor, with anyone failing to convert to “Bitcoin maximalism” adopting other tokens.
These tokens, of course, still have limited functionality. It’s difficult to buy or sell anything other than links to JPEG images, virtual land, game characters, and other cryptocurrencies — which also have zero real-world application, but at least these have more “utility” than Bitcoin. Meanwhile, crypto’s dying star can only handle seven transactions per second, twice as slow as rival Ethereum, and more than three times slower than Western Union transfers a decade ago. Thus arguing Bitcoin is the “future of finance” is a bit like trying to peddle Sony’s 1992 Minidisc Player as an iPod killer.
Still, despite the unfavorable coverage, Bitcoin maximalists are dedicated to the cause. When several years are devoted to building an identity around a cult-like object, you won’t leave without a fight. Since Bitcoin doesn’t work as a currency, store of value, or “inflation hedge”, maximalists have embarked on a last-ditch effort to conceive a pragmatic use case, this time: “wasted energy.”
The idea is that Bitcoin miners will consume unused power from sources other enterprises can’t utilize, including hydropower, flared natural gas, and even volcanoes. Capturing wasted energy sounds like it could legitimize Bitcoin mining. But that’s until the public finds out you’ve been consuming fuel to mine cryptocurrency, instead of allowing other entities to develop methods to capture these energy surpluses for productive uses.
It’s unclear why society would allow a defective technology to add further stress to climate objectives, especially when cheap and renewable energy sources could be in short supply.
That said, even if Bitcoin became a net positive for the environment, there’d still be little justification for its other destructive qualities, like how it possesses elements of both 1990s Albanian-style pyramid schemes and multi-level marketing scams. It’s hilarious to presume that governments will embrace crypto as a net plus for the environment when it’s backed by so-called “Ponzinomics”: a fraudulent scheme which, in this instance, pays out to its early adopters (Bitcoin miners) while generating zero cash flows or revenue for real asset holders (Bitcoin holders).
If Bitcoin’s publicity machine somehow markets wasted energy as an authentic use case successfully, we could see global power structures embrace a carbon-neutral Ponzi.
Thanks for the newsletter. I agree with quite a lot that you said. I bought into Bitcoin in 2014 and held until May last year.
Unfortunately I was part of the cult until the beginning of 2021. It was articles like this that made me question Bitcoin. I also found r/Buttcoin to be a great resource.
It’s mainly greed and speculation that drives this market. There’s so much hype and shilling it drives me crazy. It’s only profit motive and trend following that keeps me following crypto.
I also believe that if the market is not ever fully and properly regulated there will be more bull runs in the future as people love to gamble and speculate under the guise of being a savvy investor. Crypto is a rush for idiots with cash in this cheap money era.
Imagine if we had a carbon tax. Cost of mining > reward. No more mining (or much higher cost to carry - like other commodities).