Bitcoin is not a currency
…It is an asset. There, done. This is not meant to be clickbait so I won’t make you sort through the entire article in order to find the punchline. This is a legal designation and has to do with how it is taxed and the term currency, at this point in time, is misnomer. It should be called a crypto asset.
I do think there is more here to discuss though so if you’re still with me, let’s dive in.
Before we go any further, I think it’s important to have a full disclosure statement. I have been learning about crypto now for a full month now. This means that I think I am an expert in all things crypto and have no idea yet about the other 99.9% of the knowledge there is to discover. Blissfully unaware. And I will not hesitate to lord over all of you no-coiner plebs with my mastery of this space.
I also should disclose that I do hold some bitcoin now. I won’t say how much… because I don’t actually know… because in the one month that I have held my handful of sats (Satoshis, for the uninitiated. The fractional unit of a Bitcoin), I have seen it go from $25 to $30 to $20 to $36 to …$14. Sometimes, in a single day. I have no idea where it is now and by the time you are reading this, it is possible that it has ceased to exist entirely.
I am not a Bitcoin maximalist by any means (Maxi, for you plebs) but, I do think something important is happening here. Another technological revolution, like the steam engine or the internal combustion engine, or the internet is happening right under our noses.
The real reason for this title is this recent tweet:
In case you’re thinking, wait hold on now she clearly didn’t mean aaaaaaalll cryptocurrencies, here are two more recent quotes from recent quotes from a Senate subcommittee hearing.
“We had a chance to talk with experts, bring in a lot of senators around it, but the bottom line was that what’s happening right now in cryptocurrency like Bitcoin and Dogecoin, it’s a Wild West out there, and it makes it not a good way to buy and sell things, and not a good investment, and an environmental disaster. So do we need some regulation around this? You bet we do.”
“Digital currency from central banks has great promise. Legitimate digital public money could help drive out bogus digital private money. It could help improve financial inclusion, efficency, and safety of our financial system if that digital public money is well-designed and efficiently executed. Which are two very big ifs.”
If you are now inclined to run to the comments and rag on Senator Warren, please go elsewhere. She has been unfairly attacked by both the Right and the Left for a while now and deserves more credit than she receives. I do think she’s wrong about crypto though, or she’s influenced by her role as chairwoman for the Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Economic Policy and the Senate Finance Committee Subcommittee on Fiscal Responsibility and Economic Growth. She is speaking directly on behalf of the centralized banking system on the topic of an emerging disruptive technology that threatens it’s sovereignty. She is the central banking system right now. I think there might be more to her comments than a simple misunderstanding.
Energy efficiency and “environmentally wasteful cryptocurrencies.”
A simple Google search will easily offer up dozens of articles purporting to debunk the claim. If you care about this issue, you have likely already read some of them and made up your mind already. There is no end to people clamoring on either side of this discourse. All I’ll say here is that coming from a place of seeing climate change as the key issue to address in todays world, one that transcends all others, I don’t see the Bitcoin discourse as more than a distraction.
Most of the discussion is around charts like this:
What this doesn’t show is the breakdown of that energy use in terms of carbon, or take into account the future of energy production, show any sort of comparison to the global banking system with all of the brick and mortar locations, people commuting to work, storing and moving around all of the money products and commodities, or any of the other components of the system it is seeking to displace. What is the percentage of energy consumption compared to that? I’m curious but don’t know how to find that out.
With so many forces trying to manipulate how and what we think and especially where our attention goes, Who can you ever believe anymore?
If Bitcoin becomes what it has set out to be, there will be an inevitable trade off with these industries. It doesn’t seem like a fair comparison to me.
Not to mention, the unique possibilities in that mining bitcoin could help to fund startup costs for alternative energy projects that were otherwise too expensive under the current system. This news came out on the tail end of Elon Musk tweeting about environmental concerns.
And then a couple of weeks later:
The drama some people manufacture in order to boost their brand.
It’s clear that the energy problem will not be solved overnight. And it is a problem. I just don’t see it as a problem compared to other contributing factors, like those first two bars on that first graph. Bitcoin uses more energy because it is an international project, the majority of which up to recently has been in China where they have mining pools that can be participated in from anywhere else in the world. The recent news out of China show that this also not always be the case but for now, zeroing in on a fraction of the power consumption of a nation with an absurd percentage of the world’s power consumption, (followed only by the other nation with an absurd percentage of the world’s power consumption), doesn’t seem like a good use of anyone’s time. Maxis will often point out, you may as well be concerned with electric driers.
This argument is only relevant if you think crypto is masturbatory techbro nonsense. I don’t know, and maybe it is but, I would like to explore the world of crypto and highlight some projects that use a different sort of consensus mechanism to mining (the real power consumption culprit), and how they compare with carbon emissions.*
*I am merely exploring a new world that fascinates me. I am in no way advocating for or recommending these projects. There are plenty of scams out there (one of the reasons we need some regulations). Make sure you know what you are participating in.
Algorand is a promising young network with lots of potential for both speed and security and, Pledges to be the Greenest Blockchain with a Carbon-Negative Network Now and in the Future.
SolarCoin, builds a foundation for the global energy transition by rewarding solar producers with an energy-referenced currency.
Cardano, chuffs about their “Ouroboros: The Most Environmentally Sustainable Blockchain Protocol” which they claim can “securely, sustainably, and ethically scale, with up to four million times the energy efficiency of bitcoin.”
Nano, is a community based project that says they are “feeless” and “eco-friendly” using their innovative Block Lattice which they claim allows “individuals to have their own blockchains, instead of using one chain altogether” and is “a 100% energy-efficient system”
Chia, claims they are “intended to be a “green,” eco-friendly alternative to Proof of Work” in reaponse to the news about Bitcoin.
There is at least one charity that purports to plant trees and accept crypto as a tax deductible donation, and even attempts to allow people to more directly affect real change in the world with charity coins. I’ve come across two on a brief search oriented towards reforestation. $TREE and $TREES.
You can read about more of these projects here.
And now finally, that brings me to,
My other pedantic reason for the title of course is that Bitcoin is merely one (1) cryptocurrency
…not cryptocurrencies plural. There are over a thousand of them and the number is growing all the time. We are rapidly approaching a cultural flashpoint where we may begin to use dollars for taxes but, buy our groceries with branded money. People might have to exchange for Disney Dollars to interact with anything in the Disney ecosystem. Amazon may reward us for using Amaz…onite(???) at their online store, at Whole Foods and Amazon Fresh, and invite small businesses to prosper under their umbrella through using their currency as a means of exchange.
Is this good? bad? I don’t know but it won’t really be a choice. Maybe it depends on your feeling about the organizations that hold sway over our lives. If this comes to pass though, it won’t really matter how we feel about it. It will just be the new way we interact with businesses. Maybe holding those currencies will be more valuable than holding the dollar. Maybe it will be cash back rewards, not just on your purchase but everyone’s purchases just for holding their tokens in your wallet. Maybe it will be because the tokenomics work out that these coins are less inflationary than the dollar, so merely holding it earns you more value over time. In the future we may also have a choice between Uber-ium and a completely open, decentralized transportation system that rewards those who participate in running it.
What could something be worth when it’s more desired than gold?
One of the arguments for Bitcoin from maxis revolves around a total global adoption scenario. It becomes such a good store of value that everyone adopts it, drawing in wealth from all around the world, a global city with limited real estate. AND your entire fortune could fit in your pocket where you are the sole custodian. No government or organization can interfere. For most of us this is not put biggest concern. For the wealthiest of us, the trillion dollar question is, what is this worth?
How this all shakes out is uncertain as of now. We do need regulations. Some kind of regulation in this space is necessary and could be very positive for everyone. However it develops though, I do think we are all in for a ride in the next decade or so. The technology driving Cryptocurrency is not fundamentally about currency at all. Crypto is merely the model T that will eventually lead to supersonic jets and shinkansen, and superyachts, connecting the world like never before. It is the printing press, the Turing machine, the Internet. One developing element is, decentralization. Organizations that are run and operate by people because they are incentivized to opt in, without a central body to take profits for themselves. Maybe decentralization is also one element of a larger movement. It is still unclear what decentralization will mean and what might be built on top of it, and what might be built on top of that. Something is on the horizon, for better or worse. Whether it’s more government overreach and an upgrade to the surveillance state, an advancement in the power corporations have over all our lives, or a more free and open exchange of goods and services, our next technological step forward may ride on how we react to (or continue to ignore) what’s coming.