Austrian economics dominates the Bitcoin discourse, but it’s not the only heterodox economic theory to describe the importance of a form of money strikingly similar to Bitcoin. The negative growth and environmental economics aspects promote the end of fiat currencies and inflation. And while we often focus on the benefits of Bitcoin mining in the current energy transition away from fossil fuels, Bitcoin has a much more important role to play in transforming our societies into a more just and sustainable world.
Bitcoin’s energy consumption is both negligible and not negligible. The network consumes less than half a percent of the world’s electricity consumption. Some have described this as a “rounding error.” At the same time, it’s hard to deny that this tiny fraction of energy use is roughly equivalent to the energy consumption of a small country. Of course, many global technologies consume more energy than Bitcoin; data centers, air conditioners, and the banking industry are among them.
There are good reasons to be concerned about energy consumption, and even more so, the prospects for energy consumption to grow. There is ample peer-reviewed literature available online that shows a definitive link between energy consumption and environmental degradation. From an environmental economics and negative growth perspective, this is largely due to the neoclassical drive for endless economic growth.
The consequences of environmental degradation caused by continued economic growth are clear. Many scientists believe we are in the midst of a sixth mass extinction for which humans are primarily responsible. A recent German study found a nearly 80% decline in insect biomass over the past 20 years. Brazilian rainforests, once one of our best sources of carbon emissions, are now becoming carbon emitters due to rising global temperatures and agribusiness-led deforestation. Chemical pollution is everywhere. Microplastics were recently found in human blood samples and Monsanto’s Roundup can now be found in urine samples. All of this evidence suggests that the poorly designed incentives of our current economic system are pushing the planet further away from comfortable habitability, not just for humans but for all species.
The sad reality is that Bitcoin’s energy consumption will continue to grow for some time, assuming more and more people adopt it. If you’re concerned about climate change and know the fundamental relationship between energy consumption, economic growth, and environmental degradation, Bitcoin’s energy use sounds scary. The most important detail to understand about Bitcoin is that the network’s energy use is both constrained and necessary to provide the kind of monetary system that will support a declining global economy.
Negative growth is a social, political and economic movement. It is a broad movement of people who call for richer countries to reduce their overall energy consumption while allowing developing countries to increase their consumption. There is a growing call from the climate movement for the world to move away from economic growth towards negative growth. Ecological economics provides a concrete basis for how this can be done by converging negative growth with growth in a generally stable economy.
A steady-state economy is one in which our economy matches what our planet can sustain. Contrary to what some might think, there are no species on this planet that can grow outside their environment and survive for long afterward. Environmental economist Brian Cheek calls a steady-state economy a “perfect world economy,” one in which the economy has grown to the point that it has pushed the environment to its limits.
But negative growth is not limited to stable economies and energy use. It also promotes the end of fiat, inflationary, and debt-based currencies. Negative growth encourages localism and economic living in harmony with nature. One could argue that negative growth is exactly what Bitcoin’s low-time preference looks like when applied to all aspects of the economy. Negative growth means eliminating wasteful consumption, bullshit jobs, and rent-seeking. It also promotes local approaches to natural management and permaculture.
Indeed, if we want negative growth, we need to build a new infrastructure to support this low-time-preference lifestyle. And if we are going to eliminate fiat currencies, inflation, and debt-based currencies, we will need to build a robust, decentralized, and secure monetary network that we can use to keep our negative-growth economic system under planetary control.
in Supply Shock: Economic Growth at a CrossroadsInflation, explains Czech, occurs “when a monetary authority (such as the US Federal Reserve) increases the money supply faster than the real economy can grow.” Czech is no Austrian economist, and is a full-fledged proponent of deflation. “Recent periods of rapid real economic growth… have tended to cause inflation, because monetary authorities are so out of touch with the realities of economic life that they cannot understand the ecological limits of growth,” he continues.
From an ecological economics perspective, the origin of money is primarily the result of agricultural surplus; not religion, not the state. Although these factors undoubtedly play a minor role in the development and adoption of money, without agricultural surplus there would be no division of labor, and without division of labor there would be no need for exchange. Seriously, if our food systems were to collapse completely this year, everything else would collapse with it, and we would all go back to spending most of our time searching for enough food to survive; we would no longer need money.
From the first and second laws of thermodynamics, we know that energy is neither created nor destroyed, that energy conversion is not complete, and that some energy is lost. This means that these physical laws impose an ecological limit on our planet, which ultimately places an upper limit on agricultural surplus. From an ecological economics perspective, this means that money has a limit.
Bitcoin is money and it has limits. In 2140, the last 21 million bitcoins will be minted. By the early 2030s, 98% of all bitcoins will have been created. Bitcoin’s energy consumption grows as long as the value of bitcoin supports its growth. At some point, if bitcoin becomes a global financial standard, all of the world’s value will be on the cash network. When that happens, the growth of the network’s hash rate and thus energy consumption will have to slow down and will likely reach a steady state on its own. This will happen because of diminishing returns as mining difficulty on the network increases and competition heats up.
If ecological economic theory is correct, the total value of the Bitcoin network should reflect the full planetary limit of available resources that provide agricultural surplus. Since we cannot create more energy, it must be true that we cannot create more Bitcoin. Our socioeconomic system would have to buy into this idea of limits, and this is where broader societal prescriptions for negative growth would come in handy. Additionally, there is a saying in the Bitcoin community: “You don’t change Bitcoin, Bitcoin changes you.” Bitcoin adoption could shift people away from instant gratification consumption, which Bitcoin advocates commonly refer to as just-in-time preference.
Because mining occurs globally, we expect energy consumption to grow during the period of economic convergence. If deregulationists, green economists, environmentalists, and climate activists join forces now, they will help shape the future of where and how energy consumption evolves to ensure that it is well distributed in the regions of the world that currently suffer from energy poverty. This will ensure that developing countries reap the greatest benefits from grid growth and thus facilitate part of the steady convergence between deregulation and growth.
We’re starting to see this unfold. Bitcoin adoption is generally highest in less developed countries where people are subject to hyperinflation and unstable and repressive monetary systems. In addition, governments in some developing countries such as the Central African Republic are looking into using Bitcoin mining to develop natural renewable energy resources. The newly elected president of Colombia, Gustavo Petro, a progressive politician, has also expressed interest in using Bitcoin mining for the same purpose.
Bitcoin is often criticized for rewarding early adopters over later adopters, with critics often claiming that this would create a new class of crypto oligarchs to rule the world. In a recent Bitcoin Policy Institute article titled “Is Bitcoin Distributed Fairly?”, the authors point to a recent study by CoinMetrics that showed that despite “large institutions entering the space, Bitcoin remains largely a grassroots movement,” and has the best distribution of the currency when compared to alternative cryptocurrencies.
Money alone cannot solve the problem of unequal distribution of resources, but if we link money like Bitcoin to a set of economic rules that reduce economic inequality (the book Root Markets Given some reasonable design of market mechanisms, wealth will be distributed fairly over time among all people. Maintaining a sustainable society with a stable economy requires us to reduce all forms of inequality.
Believing that climate change is real is not necessary to embrace the above perspective. The existence of a natural resource limit means that there is a natural limit to oil. The United States reached peak oil production in the 1970s, and the recent American shale boom will not last forever. As we have seen, energy independence is essential to strengthening supply chains and promoting localism in our social economy. If we want a similar quality of life for future generations, embracing Bitcoin and the perspectives of environmental economics and negative growth is essential to extending the best aspects of our current society into the distant future. Despite what critics say, Bitcoin has a very important role to play here. While this is an incredible burden, it is up to us to get this message across to the rest of the world. Time is running out.
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