Austrian economics dominates the discourse on bitcoin, but it is not the only heterodox economic theory that describes the importance of a type of money that sounds strikingly similar to bitcoin. Some aspects of degrowth and green economics promote the end of fiat and inflationary currencies. While we often focus on the benefits of bitcoin mining for the current energy transition away from fossil fuels, bitcoin has an even more important role to play in transitioning our societies toward a sustainable and more equitable world.
bitcoin’s energy consumption is both trivial and non-trivial. The network consumes less than 0.5% of the world’s electricity consumption. Some have said that this is nothing more than a “rounding error.” At the same time, it is hard to deny that this small portion of energy consumption is on the order of magnitude of 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 just a few of them.
There are valid reasons to be concerned about energy consumption and, more so, about the potential for growth in energy consumption. There is sufficient peer-reviewed literature available on the Internet that shows a definitive link between energy consumption and environmental degradation. From a green economics and degrowth perspective, this is generally a result of the neoclassical drive towards endless economic growth.
The results of environmental degradation due to endless economic growth are obvious. 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 carbon emissions sinks, are now becoming sources of carbon emissions due to rising global temperatures and agribusiness-driven 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 is evidence that the poor incentive design of our current economic system is moving the planet further away from comfortable habitability, not just for humans but for all species.
The harsh reality is that bitcoin's energy consumption will continue to grow for some time, assuming more and more people adopt bitcoin. If you care about climate change and know the basic relationship between energy consumption, economic growth, and environmental degradation, then bitcoin's energy usage sounds scary. The most important detail to understand about bitcoin is that the network's energy usage is capped, and it is also essential to providing the kind of monetary system that will sustain a declining global economy.
Degrowth is a social, political and economic movement. It is a broad movement of people advocating that richer countries reduce their overall energy consumption and leave room for developing countries to increase theirs. The climate movement is increasingly calling for the world to move away from economic growth and towards degrowth. Green economics provides a concrete basis for this to work through a degrowth-growth convergence in an overall steady-state economy.
The steady-state economy is one in which our economy aligns with what our planet is capable of sustaining. Contrary to what some may think, there are no species on this planet that can outgrow their habitat and survive long after it. Ecological economist Brian Czech calls the steady-state economy “economics for a whole world”; an economy that has grown so large that it is pushing the environment to its limits.
However, degrowth is more than just a steady-state economy and energy use. It also promotes the end of fiat, inflationary, debt-based currencies. Degrowth encourages localism and frugal living that is in line with nature. One could argue that degrowth is exactly what Bitcoiners’ low time preference sounds like when applied to all aspects of the economy. Degrowth means eliminating wasteful consumerism, junk jobs, and rent-seeking. It also promotes indigenous methods of natural management and permaculture.
In fact, if we want degrowth, then we need to build new infrastructure to sustain this low time preference way of life. If we are to eliminate inflationary, debt-based fiat currencies, then we will need to build a robust, decentralized, and secure monetary network that we can use to keep our degrowth economic system under planetary control.
In Supply shock: economic growth at a crossroadsCzech explains that inflation occurs “when a monetary authority (such as the US Federal Reserve) increases the money supply faster than the real economy can grow.” Czech is not an Austrian economist, but a convinced degrowther. He goes on to say that “recent periods of rapid real economic growth… have tended to generate inflation, because monetary authorities are too detached from the realities of economic life to understand the ecological limits of growth.”
From the perspective of ecological economics, the origin of money is fundamentally the result of agricultural surplus, not debt or the state. Although these factors play a secondary 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. Taken to the extreme, if our food systems were to collapse completely this year, everything else would disappear with it and each of us would have to go back to devoting most of our time to finding enough food to survive; we would not need money.
It follows from the first and second laws of thermodynamics that energy is neither created nor destroyed, and that when it is transformed, the process is imperfect and part of it is dissipated. This means that these physical laws impose an ecological limit on our planet, which ultimately sets an upper limit for agricultural surplus. From the point of view of ecological economics, this means that money has a limit.
bitcoin is money, and it also has a limit. 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 bitcoin's value sustains its growth. At some point, if bitcoin becomes the global monetary standard, all the value in the world will be in the monetary network. When that happens, the growth of the network's hash rate and therefore energy consumption will have to slow down and probably reach a steady state of their own. This will happen because of diminishing returns as the network's mining difficulty increases and competition gets tight.
If ecological economic theory is correct, then the total value of the bitcoin network should reflect the entire planetary limit of available resources that provide an agricultural surplus. Since we cannot create more energy, it must be true that we cannot create more bitcoins. Our socioeconomic system will have to accept this idea of limits and that is where the broader social prescriptions of degrowth will come in handy. Also, there is a saying in the bitcoin community: “You don’t change bitcoins, bitcoin changes you.” It is possible that bitcoin adoption will move people away from instant gratification consumerism, something bitcoiners colloquially refer to as high time preference.
Since mining is practiced worldwide, we expect energy consumption to increase during the period of economic convergence. If degrowth advocates, ecological economists, environmentalists, and climate activists get on board now, they can help shape the future of where and how that energy consumption will develop to ensure that it is well distributed across regions of the world that currently suffer from energy poverty. This will ensure that developing countries gain the most benefit from grid growth and thus facilitate some of the steady-state convergence between degrowth and growth.
We are just beginning to see this situation play out. bitcoin adoption is generally highest in less developed countries, where people are subject to hyperinflation and unstable and repressive monetary regimes. In addition, governments in some developing countries, such as the Central African Republic, are looking into how to use bitcoin mining to develop their natural renewable energy resources. Colombia's newly elected president, Gustavo Petro, a progressive-leaning politician, has also shown interest in using bitcoin mining for the same purpose.
bitcoin is often criticized for rewarding early adopters rather than late adopters, with critics often claiming that this will create a new class of crypto-oligarchs who will rule the world. In a recent article by the bitcoin Policy Institute titled “Is bitcoin Fairly Distributed?” the authors pointed 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 currency distribution compared to alternative cryptocurrencies.
Money alone cannot solve the unequal distribution of resources, but if we combine money like bitcoin with a set of economic rules that reduce economic inequality (the book Radical markets If some reasonable market mechanisms are designed, wealth will eventually be distributed fairly among all people. Maintaining a sustainable society in a steady-state economy requires that we reduce all forms of inequality.
You don’t have to believe that climate change is real to take the above view. Limits to natural resources mean that there is a natural limit to oil. The United States reached peak oil production in the 1970s and the recent shale boom there will not last forever. As we have seen, energy independence is necessary to strengthen supply chains and promote localism in our socio-economy. If we want a similar quality of life for future generations, then embracing bitcoin and the perspectives of green economics and degrowth are essential to extend the best aspects of our current society into the distant future. Despite what critics say, bitcoin has a very important role to play in this regard. While this is an incredible burden, it is up to us to get this message across to the rest of the world. Time is ticking.
