Many Catholics are aware of Pope Francis’ encyclical Laudato Si (Praise Be to You) which carries the subtitle “on care for our common home.” In this encyclical and in other documents the Pope critiques capitalism, not as an economic theory in itself, but in its divorce from the human condition and Creation. In Laudato Si’, Pope Francis wrote: “The economy accepts every advance in technology with a view to profit, without concern for its potentially negative impact on human beings. Finance overwhelms the real economy…Some circles maintain that current economics and technology will solve all environmental problems.” (#109).
Of course it always depends on the problem one is trying to solve. Some believe that the marketplace of capitalism is not really free because it is completely dependent upon nation state currency systems and a whole host of non-governmental actors: banks, credit-card networks and other middlemen who exercise control over the use of their financial networks and how/why they can be used. So, in 2008, an unknown person or persons using the name Satoshi Nakamoto published a proposal to create a cash-like electronic payment system that would cut out the middlemen (and for the most part the nation states). That’s the origin of Bitcoin.
Bitcoin (₿) is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified through cryptographic means and recorded in a public distributed ledger called a blockchain. But in the “big picture,” Nakamoto set a monetary policy based on artificial scarcity at bitcoin’s inception such that the total number of bitcoins could never exceed 21 million. New bitcoins are created roughly every ten minutes and the rate at which they are generated drops by half about every four years until all will be in circulation – expected in the year 2140.
The bitcoins are “mined.” What does that mean?…there are lots of explanations on the internet. Read one and follow the explanation down the rabbit hole. But if you want a straight forward article, try this one. A shortened summary of the article was produced by Jon Huang, Claire O’Neill and Hiroko Tabuchi:
Imagine you’re at a casino and everyone playing has a die with 1,000 sides. The winner is the first person to roll a number under 10. The more computer power you have, the more guesses you can make quickly. So, unlike at the casino, where you have just one die to roll at human speed, you can have many computers making many, many guesses every second. The Bitcoin network is designed to make the guessing game more and more difficult as more miners participate, further putting a premium on speedy, power-hungry computers. Specifically, it’s designed so that it always takes an average of 10 minutes for someone to win a round. In the dice game analogy, if more people join the game and start winning faster, the game is recalibrated to make it harder. For example: You now have to roll a number under 4, or you have to roll exactly a 1. That’s why Bitcoin miners now have warehouses packed with powerful computers, racing at top speed to guess big numbers and using tremendous quantities of energy in the process.
How much energy? The Bitcoin network uses about the same amount of electricity as Washington State does yearly. China has banned bitcoin mining because of the amount of electricity consumed. The “miners” moved their operation to Mongolia – but it is also banned there now. The largest miner is negotiating a move to relocate to Texas if they can negotiate a bulk lower electricity rate for heating and cooling. Others are looking to relocate to Iceland… bury the center deep enough and cooling takes care of itself….for now. Miners take advantage of super low prices for power, convert that power to coins, and sell the coins internationally for a big profit. Is there impact on the local economy commensurate with the use of resources? Probably not. That’s why Forbes calls crypto mining a new form of embezzlement.
Electricity costs can represent more than half of the value of the coins produced. One has to ask what is the carbon footprint of bitcoin mining operations? One might ask, what percentage of electricity used comes from renewable sources. Globally, estimates of Bitcoin’s use of renewables range from about 40 percent to almost 75 percent. But in general, one has to question if that is the best use. Those renewable resources would be dedicated to bitcoin mining and not available to power a home, a workplace or an electric car. Does it make sense for a national energy policy to dedicate so much energy to a concern that is of benefit to so few? Remember that the Bitcoin network uses about the same amount of electricity as Washington State does yearly.
Apart from energy usage, it’s a clean industry, right? No production waste and disposal problems, right? The mining centers are now massive warehouses of stacks and stacks of computers – and no computer that when they become “too slow” can be donated to the local schools. They are so specialized that every 18 months to 2 years, they are tossed aside. Recycled one hopes.
Who would have thought that bitcoin was its own environmental problem? In Laudato Si’, Pope Francis reminds us: “The economy accepts every advance in technology with a view to profit, without concern for its potentially negative impact on human beings.” One wonders what else is out there?