In the likely case that you’ve never heard of me: I am both a Climate Activist and a Blockchain Enthusiast. For many people this sounds like a contradiction, as Bitcoin is often branded as a disaster for our environment. However, in my belief, Blockchain and Sustainability go perfectly together. It’s the first real solution that I have heard of in over a decade. In this article I would like to dive in some of the misinformation that has been spread, and elaborate on my own view on why Blockchain might our best way out of this mess.
Is Bitcoin bad for the environment?
For those of you who are not familiar yet with Bitcoin, it uses energy. Lots of it. In fact, it user so much energy that it could probably power up a small country. With Climate Change running out of control and CO2 levels around the world rapidly rising, this feels like a big problem. After all, we need to urgently decline our emissions, not come up with inventions that generate even more!
Your initial response will probably be that therefore Bitcoin needs to be banned. The last thing we need right now is increased energy usage, but like always, the discussion is a little more complicated. For starters, what and who determines which technology is allowed to use energy (good) ; and which ones are not allowed to use this (bad)? It is wasteful to use energy to play videogames? To look at cat video’s? To watch porn? Who chooses what is worth it and what is not? Second, if you’d like to compare the energy usage of Bitcoin to anything, you might want to look at the systems it is aiming to replace. Whether this is FIAT money (USD, EUR, etc.) or Gold; in both cases Bitcoin actually uses less energy compared to it’s ‘competitors’. And finally, the way Bitcoin energy works; is that it always is searching for the cheapest form of electricity. Unlike videogames and other uses of energy, Bitcoin miners have a high incentive to find cheap and reliable energy. As it turns out, often this is where renewable energy is in abundance. This could actually help the transition to more renewable energy.
However, by talking about these specific points I feel we are missing the bigger picture. If you ask me, these things are not even really relevant to the discussion. What we need to ask, is why Bitcoin is here in the first place.
Sustainability is a System problem
Over time we have learned that Sustainability is a very complex problem that does not have one cause, and therefore not one solution. It’s not just airplanes, it’s not just meat, it’s not just heating our houses. There are always multiple causes and multiple proposed solution. The deeply desired silver bullet is, and always will be, missing. This is because the challenge of Climate Change is a direct consequence of the underlying system that we all live in. Climate Change was not caused by one individual or by one decision, but by a system that has kept promoting choices that are bad for the Climate. It’s probably unfair to blame to the founders of the system, as it was perhaps impossible to look ahead. But anno 2021 there is no denying that the underlying system is the cause of many of the challenges we are facing today, including Climate Change, inequality, and financial instability.
In order to tackle Climate Change, we cannot just fix one thing and be done with it; we need to go deeper. We need to overhaul the system that results in millions of (bad) decisions made every single day. We need to move away from a system of unlimited growth, greed and consumption that has been so detrimental; and develop a system that actually works for the average citizen, not just the few billionaires at the top. And it’s my belief that with Blockchain, we got a unique opportunity to develop a system that gives the power back to the individual. Blockchain technology is still young, and it’s too soon to tell what is will achieve. But to me it seems the best shot we have at solving some of the biggest challenges we are facing, including Climate Change.
In a real brief summary it goes something like this:
- Our current system has lead to Climate Change, and is making it worse by the day.
- We need to overhaul our system.
- For the first time in history, we have a technological solution that can give power back to the people.
- If executed correctly, blockchain can actually be the solution to Climate Change
What can Blockchain solve?
Blockchain has amazing potential, but it’s still in our hands to make it happen. Just having the ability, does not always mean we do the right thing. And in our current system, there is lots of old power clinging on to their position. This includes governments and central banks, but also wealthy individuals or powerful industries. People are afraid of change, and there is a massive change ahead of us.
Blockchain is such a wide topic, that it would take many books to describe all the things it could potentially achieve. So in this article I would just highlight a few that are relevant to our Climate discussion.
1. End an economic system of unlimited growth
Capitalism has brought us great things, but it is time to move on. A system that in its foundation is designed to have unlimited growth, can by definition not work on a finite planet. At some point we will run out of things to mine, build or grow; or we will destroy ourselves on the way. But for our current system to work, unlimited growth is required. This has created a impossible scenario, where we rapidly need to decrease our resource-usage to fit within our planetary boundaries, while growing our economy to prevent the whole thing coming down.
When the economy slows and people actually diminish their consumerism (something we need), the system cannot handle and governments and central banks feel obligated to take action. Also known as ” Money printers goes brr”. And then because money is being printed, inflation increases and the money you have today is worth less tomorrow. This forces people to spend and increase their consumption, instead of settling down and being content with what they have today.
Ever time this happens the governments (or central bank) takes up more debt, and has even more incentive to cause inflation. Because if they would increase interest rates to decrease inflation, they would go bankrupt themselves. And so we end up with the most powerful government in the world, having a $20.83 trillion debt. A little increase in interest rates might already cause them to default, or simply print more money.
Now the Romans already knew that if a government has unlimited money, sooner or later they will destroy themselves and the system with it. It is inevitable, as the temptations are too big and the downsides too scary. Therefore, for most of history, we have tied our money supply to something physical. For most of the time this was gold, but it could also be goats, shells, or whatever was rare and immutable at the time. The six desired properties of money are 1) Durability (how long will it last), 2) Portability (can I carry it), 3) Divisibility (can I break it in smaller pieces), 4) Uniformity (are they consistent in ‘appearance’, 5) Limited supply and 6) Acceptability.
If you take goats, they are not durable, portable, divisible; and are also not great when it comes to uniformity and acceptability. In that sense money is a whole lot better. It can have all six properties, and is a great way to exchange value. To achieve number 5, limited supply, we tied our FIAT money to gold for a long time. This forced governments to always have the gold-equivalent of the total money supply in their vaults. However, to pay for all kinds of things, in 1971 the USA decided to decouple the USD from gold, and since then the money printer has been making overtime.
Blockchain has the potential to end this, by creating a new kind of money that has all 6 desired properties. Bitcoin is currently durable, you can easily take it with you, you can break it up in smaller pieces (satoshi’s), they are identical to each other and most importantly there is a fixed limited supply. Only number is six is still up for debate, and mostly a human construct whether we will accept or deny Bitcoin. The Romans would be jealous.
2. Create immutable trust
Blockchain is also described as ‘the trust protocol’, as it will allow to hardcode trust into unchangeable rules. Trust is a complex issue, that we deal with every single day. When you handle money, you trust that your currently will still be worth something tomorrow; when you elect a politician, you trust that he or she will do what they told you.
With Blockchain we can actually create rules and agreements that cannot be changed, unless the majority agrees. This means that once something has been agreed upon, there is no backtracking unless the majority wants to. Imagine politicians that cannot change their promises after they were elected.
Some examples of what a trust protocol could do:
- Make sure politicans stick to their promises.
- Encode international rules, for example about climate change or economical reforms.
- More accountability within companies, governments and organizations.
- Trust international payments without middle party, opening up markets to billions of people
- Buy a house directly from a friend, with a obligated payment system. Automatical rules if this is broken.
- Or what about, buy a house together with 10 people, and automatically distribute revenue. The same goes for art, cars, etc.
3. Redistribute wealth
Note: This blog post is still in draft and being updated
- Provide a tool to redistribute wealth
- Create more efficient systems
- Give power to the people.