This is an essay that in its first part, covers how the financial sector strongly influences our political leaders; what financialization is, how it stagnates innovation and stops us from taking action on climate change. In the second part, it addresses why Bitcoin has value and is not a pump-and-dump scheme, and how it can disrupt the financial sector, giving us a chance to act on climate change and create a newly transformed world (one which exists with or without Bitcoin). The third part addresses environmental concerns regarding Bitcoin’s proof-of-work approach to securing the network, contextualizing the problem and providing some solutions through both external and internal pressures. Finally, the essay concludes with a call to end financialization if we want to maintain a habitable planet.
A contents section is below to make it easier for the reader to jump between sections. There’s a lot to cover, but this was the only way to make the case so please, take breaks when needed, but do read to the end.
Bitcoin as a vehicle for system change
The goal here isn’t to focus on all the details of the shifting economic landscape but to argue why Bitcoin is the kind of disruption that we need to stop the global climate from warming beyond 1.5 degrees Celsius. However, the reader must understand the dire situation we are in before such an argument can be made. We are living through an entrenched financial system that has no regard for our environment nor for people. Protests have put some pressure on the financial markets (such as the divestment movement), but as shown, the worst crimes in this sector go unpunished and allow corporations and banks to escape responsibility. The players involved have an unquenchable thirst for profit and they also make economic policy for our governments. The central banks are complicit and intertwined with the financialization problem. Our political leaders can only imagine incremental steps toward change so long as these small changes do not upset the entrenched financial system. Even some self-described socialist leaders are unable to conceptualize a world without the system as it exists today. Their vision is only a modification of the one that exists now, based on a belief that if they control it, they will do better. There is no evidence that a shift in leadership will do this because the problems are institutionalized, much like racism is institutionalized in the justice system. Therefore, we are only left with drastic choices.
Continuing with the high-speed train analogy, there is only one way to stop the train from taking every human on this planet with it over the cliff of climate change tipping points and irreversible feedback loops. The solution is radical, and it is to derail and cripple the existing financial system. This is where Bitcoin comes in.
Bitcoin’s threat to the existing system
Bitcoin is deceptively simple. The point of Bitcoin is to create a monetary system that exists outside of the current system that among other things, gave us climate change which is the greatest market failure in the history of humanity. The rest of what makes Bitcoin compelling is up to interpretation and there is a diversity of reasons to be attracted to the idea that it is. As a result, we must dispel with the myth that Bitcoin is a system without value because the value comes from its sole purpose to exist.
There is a lot of misunderstanding of Bitcoin because of the proliferation of other cryptocurrencies and the fact that among the first people to get Bitcoin are right wing libertarians and followers of Austrian school economists like Mises and Rothbard (“anarcho”-capitalists). Moreover, because Bitcoin’s price has skyrocketed, there are many people who wish to replicate it for the sole purpose of getting rich quickly. Therefore, we have seen many scams come out of the cryptocurrency space (and plenty of shills, like Spike Lee shilling for a high-fees ATM). Scams and shills, however, do not mean Bitcoin is useless or just speculation.
Beyond the scams and shills, there is no other cryptocurrency that has done what Bitcoin has done thus far. There is no other cryptocurrency, controversy aside, that can claim to be a country’s legal tender, for example. With the addition of the Lightning network as a layer 2 protocol, there is also no need for nearly all other blockchains that are currently in existence (Monero stands out as a worthwhile alternative and complement).
The Lightning network, first proposed in a white paper in 2015, solves issues related to scalability, rapid settlement, low transaction fees, and privacy through the implementation of channels which operate similar to the Tor network. Of course, Lightning is not an immaculate conception of perfected money transactability, it is not without its issues, but through community development, these can be either improved, or Lightning can be replaced with something better, as that is invariably the case with digital technology.
Let’s examine Bitcoin from a more technological perspective. We must consider Bitcoin in a different light from what many of us who are concerned about the climate have traditionally viewed it, namely fake money that increases CO2 emissions and which serves only to produce pump-and-dump speculative behavior. First, we must think of Bitcoin in the historical context of the Internet and the Transmission Control Protocol/Internet Protocol (TCP/IP). TCP/IP are a set of rules that make communication possible between computers. Without TCP/IP, we would not be able to watch movies on Netflix, receive e-mail, or chat on Discord. Most people are not aware of the power of these communication rules, but the World Wide Web would not have been possible without them. TCP/IP existed before the World Wide Web was created, and the World Wide Web is a layer that improved on TCP/IP, making it possible for interconnected web pages to exist.
The Web introduced a new computer protocol to the world called the Hypertext Transfer Protocol (HTTP) and revolutionized the way society interacts on nearly every level. In the same way, Bitcoin is like the TCP/IP layer for a type of electronic monetary system and a layer 2 protocol like Lightning is like the World Wide Web, but in this case, it interconnects quotidian financial transactions. Like the Internet and Web, Bitcoin has the potential to disrupt and improve lives, but it can potentially allow for new kinds of monsters to be born. The difference between the Web and Bitcoin, however, is that because Bitcoin is based on a decentralized blockchain, it is therefore part of a greater movement toward the re-decentralization of the Internet. As a quick aside, what this means is that there is a lot of room left for human rights minded people to get involved and have an impact on technology and society in a way that was not previously possible (see getdweb.net for more information).
Second we must acknowledge its real-world use cases. As mentioned, Lightning network makes it possible for Bitcoin to be used in regular, everyday purchases because fees are much lower than on the main network. Today, using the Lightning network and Bitrefill, Bitcoin can be used to buy groceries, airplane tickets, or dinner. Bitcoin can be used to pay podcasters by the minute. While you stream a podcast, you can stream revenue back to them over the Lightning network. This happens instantaneously, without a payment processor like Stripe or PayPal taking a minimum 3% cut. More importantly, without fear of being deplatformed because a payment processor doesn’t like the kind of content you produce. Sex workers in particular are at risk of deplatforming from the payment processing system. Recently, a supporter of the Tor network, which provides Internet anonymity for those living under oppressive regimes, was banned from PayPal for using his account to pay for cloud hosting of Tor nodes. Finally, when the US government pressured payment processors including credit card companies and PayPal to deplatform Julian Assange, he turned to Bitcoin to keep Wikileaks alive. To reiterate, the mere fact that an alternative, decentralized and censorship-resistant Internet money exists outside of the financial system gives it value.
Given the the historical, technological and use case examination, it starts to become clear that Bitcoin is disruptive and transformative in the same way that the Internet was at the turn of the last century. Carol Alexander, a cryptocurrency expert at the University of Sussex in the United Kingdom was quoted in Foreign Policy this year as saying, “They’re reinventing what finance is, and it’s sort of going under the radar of the establishment…They’re not using standard products. They’re not using standard trading protocols… It’s a revolution led by young people, computer science geeks…” This means that the central banking system is already a decade behind the Bitcoin community when it comes to digital currency.
This is why Bitcoin can potentially help us stop climate change from getting worse. We know that the financial sector is strangling innovation, that the banks are funneling money to oil companies, and that the central banks are complicit through projects like quantitative easing. We cannot expect the existing structure to give us the opportunity we need to transform the system when we ask them to. So far, they have made it clear through our politicians, that very little will change. As stated, Bitcoin’s goal is to exist outside of the current monetary structure, and this alone is disruptive enough. In fact, we know that it is having a disruptive effect because central banks are starting to get nervous. The Bank for International Settlements (BIS) wants central banks to develop and issue their own central bank digital currencies to compete with Bitcoin. While BIS correctly understood that financialization undermines innovation, they incorrectly claim that Bitcoin is harmful to the public good when it is in fact an innovation the undermines financialization (and thus the central banks). Bitcoin undermines financialization because it threatens the main players (central and private banks, institutional investors, hedge funds) who dominate our global financial system.
Greek economist Yanis Varoufaukis is well known among progressive and socialist circles. He is opposed to the adoption of Bitcoin because he believes it will cause a kind of feudalism where early adopters will run this new world. Varofaukis makes a valid point worth more examination, but arguing this is not within the scope of this paper. From a climate change perspective, Bitcoin serves primarily as a vehicle to disrupt the existing system enough to create an opening for transformative change, hopefully enraging populations enough to take real action against those who have sent us down this path of self-destruction.
There is one issue with Varoufaukis’s anti-Bitcoin stance that is worth addressing here. He is a proponent of a central bank digital currency. He agrees that we need to cut out the middleman, but he overlooks some important aspects of what this would mean. Mainly that a central bank digital currency (CBDC) in no way prevents the further entrenchment of the surveillance state. Varoufaukis makes the outrageous claim that a CBDC would be anonymous. This is a huge claim without any basis in reality because governments abhor encryption and privacy. He also ignores the reality that a CBDC would not prevent a new form of feudalism because the central banks are complicit in the creation of what Varofaukis calls, techno-feudalism, which he argues has replaced capitalism. The same Wall St players that currently move through the public and private banking sectors would still be running the central banks, thus propping up the very system that is making this new economics possible. The same problems with financialization would exist in a CBDC world, making it impossible for us to act quickly to stop the planet from warming even more.
Furthermore, a central banking digital coin, with nearly all the qualities of Bitcoin, but only under the power of a central authority, would mean states have much more power and control over our lives than ever before. We can no longer accept incremental changes or these sleights-of-hand.
One might claim that the central point of this argument is somewhat incorrect because institutional investors and bankers are paying attention to Bitcoin and other cryptocurrencies. Goldman Sachs recently published a pamphlet on investing in Bitcoin and Ethereum as stores of value. Yet, it seems that these investors are only looking at cryptocurrency as a high-risk asset class in which to generate short-term profit during periods of high market volatility. The Wall Street institutional investors appear to not be interested in Bitcoin as a viable currency or medium of exchange. Their role in the community tends to exist outside of Bitcoin’s. In particular, JP Morgan Chase, Microsoft and Intel formed the Enterprise Ethereum Alliance, which should make anyone serious about challenging the existing system suspicious of Ethereum.
Bitcoin is as revolutionary as the World Wide Web was at the turn of the century. The Web was misunderstood early on as well. Over 30 years later, it has completely transformed our way of life. Bitcoin has the potential to do the same. Bitcoin’s base layer combined with the Lightning network opens up a world of possibilities, including empowering the most vulnerable who are considered too unsavory for the banking system, which easily bends to government pressure. As argued, because Bitcoin exists as a functioning money transfer system outside of our de facto financial system, this is enough of a threat to the existing banking structure. If it succeeds, it can upend the way banks work, including the central banks, which will likely be terrifying but also provide a unique opening for action on climate change once the banks are vulnerable. At the same time, Bitcoin can also create new problems, especially if it remains popular only among right-wing libertarians. The main point to remember is that Bitcoin itself is just money, it does not come with a right-wing ideology right out of the box. What happens with Bitcoin will depend entirely on the community. This is why it is imperative that we understand what it is and how to use it.
