Written by Robin Scher, the one and only article I read was published January 11th 2022 by Independent Media Institute. Mainly, it was about crypto currencies, mostly Bitcoin, and their carbon footprint compared to several aspects. It also covered some chunks of social sustainability and mentioned NFTs briefly.
The majority of Bitcoin's carbon footprint comes from validation processes which happen at any transaction. It tends to be energy intensive. Additionally, the rise of popularity increases how much Bitcoin is mined. In turn, this positive feedback loop results in ever rising carbon emissions. The article compared the energy used for one Ethereum transaction against VISA transactions. It's said to be 226,910 times more. Scher mentions that based on a recent study the energy consumption of Bitcoin is less than half of which is produced by banking and gold industries. On the other hand, there are various different numbers trying to describe how much of Bitcoin's energy consumption is from renewable sources. I guess it cannot be measured easily. Scher also wrote that there's a limited amount of Bitcoin available and going beyond that would mean even higher energy consumption per transaction.
Bitcoin is an extremely concentrated ecosystem and has been for the past 14 years it's been a thing Scher argues. It's not made to bring wealth for everybody but for some only. Decentralised system contradicts how traditional banking works. It's like giving power back to people but, instead, big companies are investing in Bitcoin. That would make them more powerful in a world where Bitcoin was the mainstream currency.
NFTs are bad. Austrian architect Chris Precht was intending to sell art using the blockchain technology. Based on his calculations, a set of 300 NFTs he was about to sell would consume as much electricity as he usually uses in two decades. The plans were abandoned based on this ridiculous energy consumption.
Analysis:
Bitcoin, other crypto currencies and NFTs have a lot to do to reach the United Nation's sustainable development goals. Needless to say, environmental issues are a keyplayer here. The applications of the blockchain technology also have both societal and economic issues.
Environmentally, the current implementations of blockchain technologies are devouring loads of electricity thus producing massive amounts of carbon dioxide emissions. And it's only the current situation. In the rise of popularity of Bitcoin we might see a demand for energy. Unfortunately, the only solutions quickly available are not renewable. Bitcoin miners would love to see energy prices go down as it means more profit for them.
NFTs are an easy way to make money for digital artists. The money revolving around NFT business is tempting and NFTs are traded like we used to trade Pokemon cards when we were young. The only difference being that each transaction consumes great amounts of energy.
Being a very condensed system, crypto currencies perform poorly in distributing wealth. As a matter of fact, they are more likely to increase the wealth gaps than to reduce them. This, in turn, increases poverty as the poverty line is dragged a bit higher than previously. Some developing countries have invested in Bitcoin. It might be good or it might be very bad. Developing countries are taking higher risks than what the risk would be for a private company: if a company goes bankrupt the employees will most likely find a new job but if a country does the same it's not good for the people. Also, it's required that you have electricity to make Bitcoin transactions work. Additionally, cryptos aren't necessarily enhancing economic growth, they're not producing anything real.
Using crypto currencies, such as Bitcoin, is much like gambling due to the fact that the value isn't backed up by anything though one could argue this is the case for the US dollar as well. Joe Scott and Knowing Better discuss more about the US dollar in Joe's podcast. On the other hand, this rise of currencies not backed up by gold might be good: if the price of gold drops it would be more accessible in electronic devices. What good does it do sitting in a vault of a bank? Moreover, cryptos have lower conversion fees than traditional currencies. This helps in transferring money from country to country. It's especially useful when you're working in a foreign country and sending money back home to support your family.
In a wildly dystopic future we could see a rise in the use of non-renewables as we would need more electricity to mine Bitcoins. Or we could see wars where countries, or even companies, will attack the enemies crypto currency farms in order to get more powerful themselves. If the crypto values are rising as they have been lately the threshold to start a crypto war wouldn't be that high. Let's hope this is not the future.
I'd argue the most valuable asset of crypto currencies and NFTs is the utilisation of the blockchain technology and studies with it. They prove that the blockchain has loads of potential and maybe there are other uses for it as well. There are issues that need to be taken care of but there's a mostly untapped source of potential. Whereas we could replace crypto coins with paper money we don't really have any viable lowtech or non-tech alternative for the blockchain.
In conclusion, Bitcoin does lots of harm but so does the traditional currency industries. The blockchain, on the other hand, is a very promising novel technology and it wouldn't have gotten this much attention without crypto currencies. The companies providing cryptos have been trying to make their currencies available for the users and in that they have succeeded. It's time for them to deeply acknowledge the emissions they are indirectly producing. It's really difficult to intervene in a business so rapidly growing: interrupting it is out of the question.
This article was originally written for the course Sustainable Development at Tampere University.