The Ethics of Bitcoin Speculation
First published by Bird Lovegod in The Yorkshire Post
A report from the BIS, Bank for International Settlements, has informed part of this article.
Even if we separate ethics from investment, and just look at the single factor of ‘does it go up in value,’ we are still complicit in whatever it is we are funding. Invest in arms companies, and one becomes complicit in the business of war. Invest in tobacco, and one becomes complicit in the business of selling addiction and lung disease. Awareness of what we invest in is a basic responsibility. Investing in something funds it.
There’s been a lot of talk about investment in Bitcoin, and not so much, or indeed any, on the ethics of Bitcoin currency speculation, so for today I’m going to try to address that elephant in the room.
So what does investing in Bitcoin actually fund? Well that’s a problematic question, because Bitcoin doesn’t actually ‘do’ anything. Or does it?
Bitcoins are created or mined’ by a highly complicated process which I’m not qualified to describe. What I do understand it that the process of ‘mining’ them involves a huge and ever increasing amount of computer processing power. A vast amount. Here’s a shocking headline stats from Powercompare.co.uk.
Bitcoin Mining Now Consuming More Electricity Than 159 Countries Including Ireland & Most Countries In Africa.
To make that clear. The actual process of generating new Bitcoins, a totally digital coin with no inherent value, a virtual thing, uses more electricity than most countries. The resources required are mind boggling. And the protocol of Bitcoin, the programme, requires that it be increasingly more difficult to mine each new coin. The processing power, and therefor the electrical power required, must increase every time a new coin is created or ‘mined’. It’s programmed to get more and more difficult. A huge amount real World resources, fossil fuels, human endeavour, computer chips, rare earth elements, plastics, metals, poured into the process of creating a virtual, digital, coin. Wasteful doesn’t even begin to describe it. It makes killing elephants for tusk ornaments seem almost clever in comparison. Seen in these terms, it’s a mad mad folly. According to https://digiconomist.net/bitcoin-energy-consumption two thirds of the revenues of ‘mining’ go into the energy cost of powering the mining process. Two thirds. That’s before any other costs are taken into account. Wages. Huge secure fortresses of computer processors. Vast refrigeration units. Inefficient much. And it’s programmed to get worse. The cost of mining new coins could soon make mining them pointless, if it isn’t already, unless the price is manipulated upwards. Which takes us onto ethical problem number two.
Price manipulation and criminality. Tou bet.
According to a well respected report, the price surge of Bitcoin last year was possibly manipulated using another crypotocurrency called Tether. It’s all very opaque, shady, and not transparent in the slightest. Some of the people behind Tether are also involved in crypto currency exchanges, and the American Department of justice is launching an investigation into the whole thing, although it’s doubtful anyone there has the knowledge to avoid having the episode ‘techsplained’ into the long grass. Bottom line, if there is one, is this. Bitcoin price manipulation is almost certainly happening all the time, on some level, be it digitally engineered in complex arrangements, or just paid for PR spin bombarding the media until it gets repeated and becomes true. It happens all the time, people want to drive the price up, if they own ‘shares’ in it. And again, there’s nothing there except digital coins held in digital wallets created at the expense of real world resources. And it’s hardly surprising if some of the manipulation is illegal because the biggest group of early adopters of Bitcoin were criminals selling drugs and other contraband. Which is unfortunate, because another ethical consideration in investments is who else owns this stock? Who am I supporting by purchasing it? Bitcoin is the primary currency of cyber criminals, and thousands of them have made millions from it, the actual stats on this are totally unknowable because of the anonymous nature of the coin, and criminals, but the rise in cybercrime, fraud, and malware, is linked to the profitability of those crimes, which is also linked to the value of Bitcoin.
To conclude, ethically speaking, investing in Bitcoin could be construed as a gamble in an ecologically degenerate and inherently opaque system from which some of the main beneficiaries are organised crime syndicates. Fancy a punt?