In conversations about Bitcoin, many naysayers will cite energy consumption to argue that the Bitcoin network is morally and ethically detrimental to humanity. They look at the energy usage in a vacuum without considering what Bitcoin provides compared with alternative forms of money.
This article seeks to equip Bitcoin proponents with the correct arguments to counter environmental concerns and to enlighten those considering joining the Bitcoin network about why Bitcoin represents an important moral good for society and the world. The Bitcoin network's energy consumption is highly efficient when considering its utility. Furthermore, we explain why Bitcoin is a moral good for society regarding freedom and as a tool to suppress authoritarian governments and the expropriation of capital.
Money as a moral good
While greed may be the root of all evil, money is, without question, a moral good. It is a tool for facilitating exchange, promoting economic activity, and enabling the accumulation of resources. When viewed through the lens of morality, money can be considered a moral good due to its role in enhancing human flourishing and alleviating the constraints of subsistence existence.
At its core, money enables individuals to transcend the limitations of barter economies, where the direct exchange of goods and services is inefficient and restrictive. By providing a standardised medium of exchange, money allows for the specialisation of labour, where individuals can focus on their unique skills and talents, thereby increasing productivity and innovation. This specialisation is a cornerstone of economic development and societal progress, contributing significantly to human flourishing.
The concept of "revealed preferences" directly supports the idea of free market transactions as expressions of individual freedom and autonomy. Revealed preferences, an economic principle, asserts that people's true preferences are unveiled through their actions rather than their words. Essentially, what individuals choose to buy or sell in a market reflects their actual desires and priorities, even if they do not explicitly state them.
In a free market, consumers exercise their freedom of choice, spending their money based on their personal preferences. These purchasing decisions reveal what they value most, whether it is essential goods, luxury items, or unique experiences. This freedom of choice is a fundamental aspect of individual liberty, allowing people to allocate their resources in ways that best satisfy their needs and wants.
Revealed preferences also provide crucial information to producers. By observing consumer behaviour, businesses can adjust their production and marketing strategies to align with actual demand. This ensures that resources are efficiently allocated, meeting the real needs of the market. The continuous flow of revealed preferences creates a dynamic system that adapts to changing consumer tastes and needs. This responsiveness not only enhances economic efficiency but also promotes innovation, as businesses strive to meet evolving consumer demands.
Conversely, the concept of subsistence existence, where individuals are primarily focused on meeting their basic needs with minimal surplus, inherently limits the potential for growth and development. In such a state, people are often trapped in a cycle of survival, unable to invest in education, health, or other areas that contribute to a higher quality of life. Money, when accumulated and stored as economic energy, provides a buffer against the uncertainties of life, offering security and the possibility to plan for the future.
Finally, money serves as a tool for philanthropy and social good. Without the existence of money, individuals and organisations could not use their accumulated wealth to fund initiatives that address social issues, such as poverty, education, and healthcare.
Which Money?
Let’s say we can agree that a prosperous society needs money. The question then becomes, what form should that money take? We argue that money needs to be secure, decentralised, resistant to government debasement and moveable across space, time and on any scale.
Bitcoin's use of energy to secure its decentralised and immutable ledger is a critical aspect of its design, making it an efficient and robust form of money. This energy consumption is fundamental to the process known as proof-of-work, where miners compete to solve complex mathematical puzzles, thereby validating transactions, updating the blockchain and maintaining the ledger. This competition ensures that the network remains secure and resistant to attacks, as altering the blockchain would require an immense amount of computational power and energy. The mining of Bitcoin not only produces new Bitcoin but also secures all the important attributes that make Bitcoin a superior form of money.
One of the key attributes of Bitcoin is its ability to resist inflation and debasement. Traditional fiat currencies are always devalued through excessive printing by central authorities, and fractional reserve banking leading to inflation and a loss of purchasing power. In contrast, Bitcoin has a fixed supply cap of 21 million coins, making it immune to inflationary pressures. The energy-intensive mining process enforces this scarcity, as miners are rewarded with newly minted Bitcoin at a decreasing rate, adhering to the predetermined issuance schedule.
Moreover, Bitcoin's decentralised nature allows it to be accessed anywhere in the world, providing financial inclusion to individuals in regions with unstable or inaccessible banking systems. The energy used to secure the network ensures that this access is reliable and consistent, maintaining the integrity of the ledger across all geographic locations. This means that if someone needs to escape a warzone or an evil government regime, they can easily leave with all of their wealth. Contrast this to gold and bank account deposits which can easily be confiscated by governments.
The Cost of Gold
Gold has long been considered a reliable store of value, but its environmental and logistical drawbacks raise significant concerns. While gold has some real-world applications such as decoration and in technology, it is inferior to Bitcoin in every other category. There is enough gold in reserves to meet the practical applications of gold for several hundred years. The only reason why gold continues to be mined is because its price is elevated as a store of value.
Gold mining is notoriously harmful to the environment, involving processes that lead to deforestation, habitat destruction, and the release of toxic substances such as mercury and cyanide into the ecosystem. These practices not only devastate local environments but also pose severe health risks to surrounding communities.
Gold mining can have devastating effects on nearby water resources, introducing a cocktail of toxic waste containing dangerous chemicals like arsenic, lead, mercury, petroleum byproducts, acids, and cyanide. Around the world, mining companies routinely dump this toxic waste into rivers, lakes, streams, and oceans, contributing to an estimated 180 million tonnes of waste annually. Even without deliberate dumping, toxins often contaminate waterways when infrastructure, such as tailings dams that hold mine waste, fails.
In a single year, gold mines emit more greenhouse gases than all passenger flights between European nations combined. Additionally, gold mining is responsible for 38% of annual global mercury emissions, leading to chronic mercury poisoning among millions of small-scale miners. This exposure can cause debilitating illnesses, particularly in children.
The United Nations Environment Programme (UNEP) reports over 221 major tailings dam failures globally. These incidents have killed hundreds of people, displaced thousands, and contaminated the drinking water of millions. The resulting contaminated water, known as acid mine drainage (AMD), is a particularly destructive pollutant for aquatic life. One study notes that the multifarious impacts of AMD cause community structures to collapse rapidly and completely, even though no single pollutant alone would typically cause such severe ecological damage.
These multifaceted impacts also make recovery from such waste extremely difficult. This environmental damage extends beyond aquatic ecosystems, as AMD byproducts, such as mercury and heavy metals, enter the food chain and affect human and animal health for generations. In addition to contaminating drinking water, these pollutants pose long-term health risks, underlining the profound and enduring consequences of gold mining on both the environment and public health.
To take just one example, the Indonesian province of West Papua, located on the western half of the island of New Guinea, boasts Lorentz National Park, the largest protected area in Southeast Asia. This 2.5 million-hectare expanse, roughly the size of Vermont, was declared a National Park in 1997 and a World Heritage site in 1999. However, as early as 1973, Freeport-McMoRan Copper and Gold, Inc. had begun exploring nearby formations for gold.
This exploration led to the discovery of the world’s richest lode of gold and copper near the park boundary, resulting in the development of the Grasberg mine, operated by PT Freeport Indonesia, a subsidiary of Freeport-McMoRan. The mine's operations have had severe environmental and social impacts, including contamination of the coastal estuary and the Arafura Sea, potential damage to Lorentz National Park, local violence and strikes, the dumping of 110,000 tons of toxic mine tailings daily into the Ajikwa River, and triggering deadly landslides. The Grasberg mine, now visible from outer space, is projected to excavate a 230 square-kilometre hole in the forest and produce over three billion tonnes of tailings by the time it closes in 30 years.
Bitcoin, on the other hand, is mined using mostly cheap and stranded energy. Many Bitcoin miners utilise excess or otherwise wasted energy sources, such as hydroelectric power during low-demand periods or flare gas from oil extraction, which would otherwise be released into the atmosphere. This efficient use of energy makes Bitcoin mining more sustainable compared to the environmentally harmful practices associated with gold mining.
As a historic store of value, as the price of gold rises, it incentivizes increasingly destructive mining practices. Higher gold prices make previously unprofitable mining operations viable, encouraging the exploitation of lower-grade ores and more marginal deposits. These operations often involve more invasive techniques, exacerbating environmental degradation and leading to further ecological damage.
The verification process for gold is cumbersome and energy-intensive. To conclusively authenticate gold without the need to trust third-party verification, it needs to be melted down through “fire assaying” and recast after thorough testing. This procedure ensures purity and prevents fraud but involves significant energy consumption, adding to the overall environmental footprint of gold as a store of value. Furthermore, it means that investors of gold cannot personally verify their gold or easily trade between individuals.
Storing and transporting gold securely is also exceptionally expensive from an energy perspective. High-security vaults and transport methods, including armoured vehicles and specialised facilities, are necessary to protect gold from theft and damage. These measures require substantial energy input and financial resources, making gold an impractical choice for those seeking an efficient and cost-effective store of value.
Gold also limits personal freedom, as travelling with it poses significant risks. Carrying large amounts of gold is impractical and dangerous, exposing individuals to potential theft or legal complications. This restriction makes gold a less viable option for those who require portable and secure wealth storage.
Moreover, gold's supply is susceptible to disruptions. AI will significantly enhance the efficiency of discovering gold deposits by analysing vast amounts of geological data, identifying patterns, and predicting the most promising locations for exploration. Machine learning algorithms can process complex datasets faster and more accurately than traditional methods, enabling geologists to pinpoint potential gold deposits with greater precision. This reduces the time and resources spent on exploration, making the discovery process more efficient and cost-effective.
Once deposits are identified, robotics and AI will revolutionise the extraction process. Autonomous machines and AI-driven technologies can perform mining operations with greater accuracy and consistency than human labour, reducing errors and increasing productivity. These advanced systems can operate in hazardous environments, minimising the risk to human workers and lowering operational costs. Additionally, AI can optimise the entire mining process, from drilling to transportation, by continuously analysing data and making real-time adjustments to improve efficiency. As a result, the combination of AI and robotics will make gold extraction cheaper, faster, and safer, ultimately transforming the mining industry.
Additionally, as renewable technology advances and the cost of energy approaches zero, the economics of gold extraction will experience significant shifts due to the energy-intensive nature of mining operations. Lower energy costs will drastically reduce the expenses associated with extracting, transporting, and refining gold, making it more economical to mine even less accessible or lower-grade deposits. This reduction in operational costs will increase the supply of gold, as mining becomes more viable and profitable. Consequently, the increased supply will put downward pressure on the price of gold, as basic economic principles dictate that an influx in supply without a proportional increase in demand leads to a decrease in price. Thus, the decreasing cost of energy from renewable technology will likely result in lower gold prices, driven by cheaper and more profitable extraction processes.
One cannot claim that gold is a morally superior store of value to Bitcoin because the extraction and processing of gold have significant negative environmental and social impacts, such as toxic waste dumping, water contamination, and human rights abuses in mining regions. In contrast, Bitcoin, despite its energy consumption, does not involve physical extraction or the same level of environmental degradation and social harm. Furthermore, Bitcoin operates on a decentralised, transparent ledger that can potentially reduce corruption and provide financial inclusivity
Energy Cost of Fiat
FIAT, in the context of economics and finance, refers to "fiat money." Fiat money is a type of currency that a government has declared to be legal tender, but it is not backed by a physical commodity, such as gold or silver.
The mining and securing of fiat monetary networks involve a complex and resource-intensive system designed to maintain the stability and integrity of traditional currencies. This system encompasses various elements, including the operation of central banks, the production and distribution of physical currency, and the maintenance of extensive financial infrastructure, such as banks and electronic payment systems.
Central banks, which are the cornerstone of fiat monetary networks, consume significant resources to manage monetary policy, regulate financial institutions, and steer the economy. This involves extensive data analysis, policy formulation, and the operation of vast bureaucracies. All of this energy usage is a near complete waste as it functions in line with flawed and destructive Keynesian economic theory.
Additionally, central banks often engage in activities such as quantitative easing and interest rate adjustments to control inflation and stimulate economic growth, which can lead to the devaluation of currency over time. This sharply hinders the growth of economies by constantly redistributing wealth to the powerful and the governments. As it swings a wreaking ball through the economy it also promotes consumption and suppresses capital accumulation and investment.
Fiat is subject to further corruption by the banksters due to fractional reserve banking which allows banks to create money. In this system, banks are required to keep only a fraction of their deposits in reserve, with the remainder available for lending. When a bank receives a deposit, it sets aside a small portion (the reserve requirement) and can lend out the rest. This lent-out money then gets deposited into other bank accounts, which can then be lent out again, creating a multiplier effect.
For example, if the reserve requirement is 10%, a $1,000 deposit allows the bank to lend out $900. The borrower then deposits this $900 into their bank, which can now lend out $810, and so on. Through this process, the initial $1,000 deposit can generate a total of $10,000 in the banking system, greatly expanding the money supply and exacerbating inflation.
The maintenance of the financial infrastructure supporting fiat currencies involves a network of banks, ATMs, electronic payment systems, and regulatory bodies. These entities require large amounts of energy to operate data centres, power financial transactions, and ensure the security of the system. Despite these efforts, the fiat monetary network is inherently vulnerable to inflation and devaluation. The usage of energy and human capital fails to secure the ledger and is totally vulnerable to ongoing counterfeiting by the elite.
Fiat currencies are consistently devalued by the governments and central banks that issue them. Inflationary policies, driven by the guise of managing economic growth and public debt, result in the continuous issuance of new currency. This process erodes the purchasing power of money over time, meaning that wealth stored in fiat currency diminishes in value. For individuals who save their wealth in fiat currency, the persistent devaluation undermines the long-term preservation of capital.
When comparing the energy consumption of Bitcoin to that of fiat currencies, it is important to consider the effectiveness of each system in preserving value. The energy expended in securing the Bitcoin network directly contributes to maintaining its value and preventing inflation. In contrast, the resources devoted to securing fiat monetary networks do not prevent the devaluation of the currency, as the authorities controlling these networks continually issue new money, reducing its purchasing power.
The energy used in mining and securing fiat monetary networks fails to meet the criteria of a quality form of money because it does not preserve value over time. Fiat currencies are subject to devaluation through continual issuance by governments and central banks. In contrast, the energy consumption of the Bitcoin network, while significant, is the necessary investment in securing a decentralised and scarce form of money that resists inflation and preserves value. This fundamental difference highlights why comparing the energy consumption of Bitcoin to that of fiat currencies is misleading and fails to recognise the superior value preservation offered by Bitcoin.
Authoritarian Fiat
The fundamental doctrines of communism were articulated by Karl Marx, in collaboration with Friedrich Engels, in The Communist Manifesto, first published in 1848. In this foundational document, Marx outlined ten measures essential for the communization of a state, which he asserted would be "pretty generally applicable... in the most advanced countries."
His fifth requirement was:
"5. Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.
Fiat money is inherently authoritarian due to the centralisation of its issuance and control. Governments and central banks exclusively produce and regulate fiat currency, creating a system where a small group of entities holds significant power over the economic lives of citizens. This centralisation places immense power in the hands of a few, often unelected officials, who can influence the economy and the value of the currency.
Central banks can manipulate monetary policies, including interest rates and money supply, which can significantly impact the economy. Such policies can lead to inflation or deflation, affecting the purchasing power of citizens' savings. The ability to manipulate the economy in this way without direct input from the public demonstrates authoritarian control over economic conditions. Governments often finance their spending by printing more money, leading to inflation. This practice devalues the currency and erodes the purchasing power of citizens' savings. Inflation acts as a hidden tax, reducing the real value of money held by the public without explicit consent, underscoring the authoritarian nature of fiat money.
Governments enforce the use of fiat money through legal tender laws, which mandate that their currency must be accepted for the payment of debts within the country. This coercion eliminates competition from alternative forms of money, such as gold or cryptocurrencies, ensuring the dominance of the government-issued currency. By restricting freedom of choice in monetary matters, legal tender laws reinforce the authoritarian control of the state over economic transactions.
Fiat currency is necessary to pay for wars because it allows governments to finance large-scale military expenditures by creating money without the need for a physical commodity like gold. During wartime, the demand for funds increases significantly to cover the costs of weapons, supplies, personnel, and other logistical needs. With fiat currency, governments can quickly generate the required funds by printing money or borrowing from central banks, thus avoiding the limitations imposed by commodity-backed currencies.
This ability to create money enables governments to sustain prolonged military campaigns and address immediate financial requirements without having to deplete physical reserves. However, the increased money supply can lead to inflation, as more currency chases a limited supply of goods and services. Despite this risk, the flexibility of fiat currency provides a crucial tool for governments to mobilise resources swiftly and effectively during times of war.
The centralisation of fiat money facilitates extensive surveillance and control over financial transactions. Governments can monitor and track payments, enforce taxation, and impose financial regulations. In extreme cases, they can freeze accounts, block transactions, or impose capital controls. This level of oversight and intervention infringes on individual privacy and freedom, further illustrating the authoritarian nature of fiat money.
Citizens are dependent on the stability and sound management of the fiat monetary system. Mismanagement, corruption, or political instability can lead to currency crises, hyperinflation, or financial collapse, severely impacting the economic well-being of the populace. This dependency on a centralised authority for monetary stability exposes individuals to risks beyond their control.
In contrast, decentralised currencies like Bitcoin offer an alternative that mitigates many of these authoritarian characteristics. Bitcoin operates on a decentralised network where no single entity has control over the issuance or regulation of the currency. Its fixed supply and transparent, algorithmic issuance process prevent inflation and devaluation by central authorities. Additionally, the peer-to-peer nature of Bitcoin transactions enhances privacy and reduces the potential for government surveillance and control.
Morality of Storing Economic Energy
Bitcoin can be argued to be a morally superior form of money compared to fiat currencies and even gold due to several compelling reasons. Firstly, Bitcoin operates on a decentralised network, meaning no single entity, government, or central bank has control over it. This decentralisation protects against inflationary practices common in fiat systems, where governments can print money at will, devaluing the currency and eroding individual wealth. Bitcoin’s fixed supply of 21 million coins ensures scarcity and protects against inflation, preserving its value over time.
Secondly, Bitcoin promotes financial inclusivity and sovereignty. It provides a banking solution to the unbanked and underbanked populations worldwide, offering a secure and accessible means of storing and transferring value without the need for traditional banking infrastructure. This democratises access to financial services, empowering individuals in regions with unstable or corrupt financial systems.
Moreover, Bitcoin transactions are transparent and immutable, recorded on a public ledger known as the blockchain. This transparency reduces the risk of corruption and fraud, common issues in both fiat currency systems and certain aspects of the gold market. It enhances accountability and trust in financial transactions, as every transaction can be independently verified.
Additionally, Bitcoin supports privacy and individual autonomy. Users can hold and transfer Bitcoin without revealing personal information, protecting their privacy from intrusive governmental or corporate surveillance. This aspect is particularly crucial in an era where data privacy is increasingly under threat.
Finally, while gold mining poses significant environmental and social damage, Bitcoin mining, although energy-intensive, can be powered by renewable energy sources. Innovations in the Bitcoin mining industry are increasingly focusing on sustainability, with a growing proportion of mining operations utilising clean or stranded energy.
In summary, Bitcoin’s decentralisation, fixed supply, financial inclusivity, transparency, privacy, and potential for sustainable mining practices make it a morally superior form of money compared to fiat currencies and gold. It offers a robust alternative that aligns with principles of economic freedom, fairness, and autonomy.
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