Bitcoin: A Disaster for the Environment and Humankind

Bitcoin: A Disaster for the Environment and Humankind
By Luan Do
Epoch Times Staff


As one of the top 10 countries most interested in Bitcoin (BTC), February 5 must have been a tumultuous day for many Singaporeans.  Plummeting over 60% from its peak in less than 2 months, the Bitcoin craze sent chills down the spine of its investors.

Perhaps it is time to revisit the nature of Bitcoin and decide if it is, after all, an “irrational exuberance”.

Bitcoin as Currency

Currency is commonly recognised as a basis of trade for goods and services. By definition, BTC has fallen short.

The majority of BTC buyers do not intend to exchange it for goods and services. In fact, people generally buy BTCs expecting to sell them at a higher price to someone else.

At the other end of the spectrum, goods and services providers – including Bitcoin conferences themselves – often do not accept payment using cryptocurrency.  This is mainly due to the high volatility in prices.

“As a currency, bitcoin should be a serviceable unit of account, means of payments, and a stable store of value. It is none of those things”, said Nouriel Roubini, a renowned economist who predicted the 2008 financial crisis. “And it is a poor store of value, because its price can fluctuate by 20-30% in a single day”, he added.

On top of that, long transaction time also acts as another great barrier. In early 2018, transaction time was typically half a day on average, with longest recorded being over 1 week before the transaction is confirmed.

Although government tax-free transactions have been used as one of the perks for using BTC, BTC transaction fees were reported to have hit over 50 SGD per transaction in December last year.

With mounting transaction volumes and diminishing BTC rewards for transaction verification, longer transaction time at higher cost can be expected. There are massive obstacles to overcome before BTC is apt for day-to-day transactions.

Bitcoin and Environmental Sustainability

If there is an attribute of BTC that does not wildly fluctuate, it is the energy consumption index.

Energy consumed by Bitcoin mining is on an unsustainable trajectory. At the moment, BTC mining rate is at 12.5 BTC per 10 minutes. As the number of miners increases with time, mining difficulty is mathematically increased to keep this rate a constant. The higher the difficulty, the more computational power, hence energy, is required.

You may ask, how much energy can a computer consume anyway?  BTC mining difficulty has long transcended the capability of household computers. The current difficulty has required a computational device that is specifically designed only for BTC mining, running 24/7. A popular version of such devices is Antminer S9, whose energy consumption is known to be equivalent to a combination of 2 fridges, plus a plasma TV.

Last year, over 20 TWh is known to have been consumed by BTC mining alone. In perspectives, this is tantamount to almost three times the total energy consumed by all households in Singapore. According to Morgan Stanley, a financial consultant, BTC miners can consume up to 140 TWh in 2018, a 7-fold increase from the previous year.

Another study by Credit Suisse, a financial services company, has predicted that should BTC price surpass $1.1m, miners will be incentivized to gobble up the entire world’s power supply. With 35 million millionaires around the world and a limited supply of 21 million BTCs, such possibility is not unthinkable. In fact, various financial experts, such as MGT Capital Investments, have predicted that the $1 million threshold can be surpassed by the end of 2020.

BTC mining is a serious business.

Over 60% of BTC miners are in China.   Bitman, a Beijing-based company that also fabricates mining machines, has a mining facility in Inner Mongolia that is known to be equipped with 25,000 mining machines. Cranking through calculations 24 hours a day, the electricity bill from these machines exceeds $1.5 millions monthly.

In order to maximise profits, BTC mines often uses coal-fired energy. With escalating competition while BTC reward is expected to halve in June 2020, the incentives for clean energy is expected to be further diminished, posing a real concern for environmental sustainability in the near future.

The Zero-sum Game

Strictly speaking, there is virtually no value-add from the existence of BTCs.  Unlike traditional investments, BTC transactions have no appreciable benefits in the development of our society.

It is pure speculations that drive BTC. “With the insane short-term fluctuations, bitcoin is short-term gambling, not investing”, said Grant Sabatier, a BTC millionaire.

In fact, BTC investment advices are indeed similar to that of gambling, such as “don’t borrow to buy BTC”, “buy BTC with what you can afford to lose”, etc. Such advices can be easily found online, or in BTC investment courses – which can cost thousands of dollars.

Furthermore, reality has shown that BTC promises from decentralized systems are rather short-lived, and in certain circumstances, have been detrimental.

“Until now, Bitcoin’s only real use has been to facilitate illegal activities such as drug transactions, tax evasion, avoidance of capital controls, or money laundering”, cautioned Roubini.

In actuality, there are various instances where individuals attempted to fund terrorist organisations, such as ISIS, using BTC – an unregulated medium, as a result of a decentralized system. In effect, “Bitcoin is a terrorist’s dream come true”, said Rosenberg, former US Treasury advisor and Saravalle, researcher at Centre for a New American Security.

Would you still invest in BTC?

If you are determined to pursue BTC, bear in mind the nature of the zero-sum game: You are ultimately earning at the loss of others, and in return, others are waiting to earn at the loss of you.

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