The True Cost of Cryptocurrency
[Music] amidst the low hum of computers digital gold is born churning and churning hundreds of computers mine for a new form of currency one that professes to be the decentralized deflationary disrupter of the modern banking system it goes by many names dogecoin vibeucoin ethereum and bitcoin but they all can be called cryptocurrencies this is the story of the new digital gold how it works its consequences and what a crypto future looks like this video was made possible by the people who support me on patreon get early access to all my videos by becoming an occ patreon supporter in the digital age money is taking a new form if you're like me you've probably heard people talk about bitcoin mining or the volatility of crypto or tesla's recent 1.5 billion dollar bitcoin investment and just nodded your head obligingly without a clue as to what any of that really means so here's a quick overview in very simple terms cryptocurrencies like bitcoin or ethereum are decentralized monetary systems that rely on cryptography for security and validity and the acquisition of this digital currency involves hundreds of specialized computers run by miners to solve math problems in what's called a proof-of-work model there are other models like proof-of-stake too but we'll get into that later for this video all you need to know is that cryptocurrencies are valuable much like real gold because they are finite and cracking math problems requires a lot of energy and time and it's here in the physical space where crypto is created that these digital currencies run into problems drive three hours north of sydney australia and you'll run into a coal-fired power plant one that up until recently was shut down but now is churning out electricity for a single company a bitcoin operation that's right the bitcoin mining subsidiary of australian tech company iot penned a deal to gain exclusive access to the coal plant to satiate the energy appetite of its mining operations this deal was born out of the simple reality of cryptocurrency mining the cheaper the energy the more money you make that's because cryptocurrencies require a massive amount of energy cambridge university's bitcoin electricity consumption index estimates that global bitcoin mining operations consume an average of 136.33 terawatt hours of electricity every single year while another bitcoin energy consumption tracker estimates that the consumption level is a bit lower at around 87 terawatt hours per year to put that in perspective you could power all of sweden for a year with that kind of electricity consumption and that's just for bitcoin there are hundreds of other types of cryptocurrencies out there that also require large amounts of power and the concerning aspect of this massive energy consumption is that only an estimated 39 of it runs on renewable energy which includes hydropower as a result if bitcoin electricity consumption rises to 184 terawatt hours per year which a recent paper from alex devry's suggests it will the carbon footprint of mining could be as much as 90.2 million metric tons of co2 equivalent which is about the same yearly emissions footprint as belgium or chile and again that's just for bitcoin according to christian stole at all understudied cryptocurrencies add another 50 on top of bitcoin's energy consumption while another study goes so far as to say that bitcoin emissions alone could push global warming above 2 degrees celsius but here's the thing because bitcoin and other cryptocurrency mining operations are scattered throughout the world it's hard to get solid numbers on energy usage while these estimates are definitely accurate it's hard to know for certain the real scale and energy intensity of cryptocurrencies especially as bitcoin prices skyrocket and new mining operations continue to come online regardless we are adding energy consumption demands equivalent to whole countries in a time when we need to be doing the exact opposite despite these numbers there seems to be a level of optimism in the bitcoin and cryptocurrency community indeed as i mentioned before tesla recently invested 1.5 billion dollars into bitcoin in regards to energy usage crypto proponents argue that precisely because mining operations require so much energy they are incentivized to find the cheapest source which means that as renewables continue to plummet in price crypto miners will naturally gravitate towards them while this does seem to make sense in theory and indeed is happening right now with some miners an energy researcher at the technical university in munich christian stoll puts it bluntly coal is fueling bitcoin at the moment roughly 65 of bitcoin mining happens in china and most of that is run on coal despite this crypto enthusiasts point to the industry's tendency to seek out quote-unquote wasted energy and once again while this does seem like a great quasi-sustainable solution it's not capturing and using wasted energy like flared gas only prolongs the existence of the oil and gas industry by monetizing their waste products essentially oil and gas companies can make even more money than they have before which fossil fuel operations are loving in an article from oil man magazine they delineate step by step why bitcoin is great for the longevity of natural gas operations and finally cryptocurrency wonks often point out that our current banking system most likely has a similar footprint you should probably be comparing that to the whole dollar system and all the externalities that entails while that could be true it misses the broader issue bitcoin is not currently replacing the global financial system nor will it in the next 10 years the time when we need to be drastically reducing our emissions footprint in fact banks are using investments and gold to hedge against the volatility of bitcoin in short cryptocurrencies are adding on top of not replacing the current system both in terms of energy and finances and at a time when we need to decrease global energy consumption to ease the transition to renewables this addition means we're doing the opposite we're adding more and more demand on top of an already bloated electricity consuming world [Music] after hurricane maria puerto rico was reeling people were swept away by violent storm surges and power went dark throughout the country puerto rico was in shock and like any good capitalist venture worth its salt crypto entrepreneurs moved in quickly quite literally new billionaires rich off the back of crypto mining like brock pierce it's in these moments where we experience our greatest loss that we have our biggest opportunity to sort of restart and upgrade descended on puerto rico with visions of transforming the island into a crypto utopia buying up post-disaster land for cheap privatizing public assets and enjoying the low tax rates of the island this is the new crypto-centered version of what naomi klein calls the shock doctrine and this digitally driven capitalist colonialism seems to be spreading across the globe in the democratic republic of congo for example foreign bitcoin miners get special access to the cheap clean energy of the hydroelectric dam in vironga national park a dam originally built to supply needed electricity to help locals find livelihoods beyond poaching and stop them resorting to scouring parkland for wood fuel but those bitcoin mining operations aren't supplying jobs they're just sapping energy to enrich people halfway across the world in a paper on crypto colonialism peter hausen senior lecturer at northumbria university concludes that blockchain technology is enabling new forms of resource appropriation from the global south these appropriations include land labor data and other resources needed to facilitate economic growth elsewhere so while cryptocurrencies are just the technology they're being used in ways that increase global inequality and exploitation most of the problems that cryptocurrencies face are not necessarily due to the nature of the digital currency instead they seem to be grappling with the harms inherent in making money in a capitalist imperialist world one that is addicted to fossil fuels and as a result subsidizes them to no end there are some potential solutions to crypto's outsized energy footprint however transitioning from a proof-of-work to a proof-of-stake model cryptocurrency could theoretically reduce the digital currency's energy requirements by eliminating the need for mining operations and replacing them with a weighted lottery system of sorts based on the amount of stake or coins of the validator it's a little more complicated than that but i'll put some links in the description if you're interested in learning more it looks like a promising solution but at the end of the day it seems to me that in their current form bitcoin and many other forms of cryptocurrencies are unsustainable especially in a world that can't keep itself from guzzling fossil fuels at the same time it's important to note that cryptocurrencies are relatively new technologies meaning that there are potential avenues to shape it for the better but for those avenues to succeed cryptocurrencies need to transition away from a high energy consumption model drenched in fossil fuels and end all exploitative relationships with the majority world whether they'll be able to extract themselves from these harmful paradigms is hard to predict but it needs to happen if cryptocurrency wants to truly disrupt the world of finance unfortunately videos like these while very important do terribly with the youtube algorithm and sponsors don't want to touch them but there is a way you can help becoming an occ patreon supporter helps our changing climate stay afloat and independent as an occ patron you'll not only gain early access to videos but also special behind the scenes updates and a members only discord channel in addition each month my supporters vote on an environmental 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