What is Bitcoin?
At its core, Bitcoin is a value-added digital store that enables everyone in the world to integrate into a single financial system. For the first time, anyone in the world can send money to anyone else in the world, instantly, regardless of nationality, credit score or even access to a bank. No government owns it or sets its policy. It equates the playing field in a global geopolitical environment prone to corruption, censorship and currency manipulation. Does not own any corporation. Close off, Zuckerberg (you too, Sandberg).
Bitcoin is governed by immutable code that identifies human class and is agnostic to biased. Its network is protected by mines around the world and has been verified by thousands to thousands of nodes around the world. Nodes are servers that store the history of all bitcoin transactions and strengthen the bitcoin protocol. Nodes promote new pending transactions within the network until they are obtained and processed by a mine.
Bitcoin mining is basically a computer process that is a sequence of time-based transactions called blockchain to solve complex math problems in competition with other computers. Known as proof-of-work, miners earn bitcoin in exchange for their work to secure the network. This process enables Bitcoin to operate without central ownership, giving everyone around the world (including smartphones) an equal chance of financial inclusion.
Think of Bitcoin as a digital scarcity. There will be only 21 million bitcoins, confirmed by the protocol issue algorithm. The supply of bitcoin is coded to be halved every four years, until the final half of the new supply is reduced to 0.. Meanwhile, people, companies, institutional investors and the government are increasing the demand for bitcoin every day.
Lack drives value. This is true where demand exceeds supply: oil, gold, toilet paper, and single-family homes on the West Coast. The Internet of the 1990s enabled us to exchange information digitally. Bitcoin enables us to exchange value digitally. As society is increasingly shifting online, how we measure value will increasingly go online. A digitally connected world will require a sovereign, decentralized, censorship resistant, peer-to-peer, 24/7 run, secure and attack resistant digital store. Bitcoin means money for the digital world.
Central banks from China to the United States are adapting to the digital world through the promotion of central bank digital currencies (CBDCs). Unfortunately, simply moving the current Fiat system into the digital space reflects the same limitations we now face and exacerbates privacy concerns. For example, one of the limitations of the current system is that a basket of nations or peoples holds the world’s reserve currency. It places one or more of its allies in the rest of the world to pursue monetary policy, which often leads to volatile debt and economic dependence. El Savado recently announced a bitcoin legal tender in an effort to stem the tide.
A new problem for CBDC is the complete lack of confidentiality of all financial transactions. Especially in places like Russia or Hong Kong, but growing in places like Texas, the government must take seriously the risk of monitoring the purchasing activities of its citizens. The Chinese government has already tested the expiration date for the money it has provided. The CBDC also has the power to restrict people from making purchases. It is a form of financial coercion that can have catastrophic consequences around the world.
Bitcoin enables privacy. Individuals take full ownership of their bitcoin, known as self-custody. The name of a person transacting on the Bitcoin network is identified only by a universal key (think of it as a digital ID). However, every transaction on the Bitcoin network is auditable.
You’ve probably heard the word blockchain. A blockchain is a digital register that is distributed to each node in the network. It is extremely difficult to hack or change. It provides a verifiable record of every transaction made in the blockchain without the need for a trusted third party. Personally, Bitcoin is transparent.
You’ve probably heard a lot about using Bitcoin for illegal activity. Ironically, the rate of illegal activity on the Bitcoin network is much lower than in US dollars. The study accounts for less than 1% of all transactions.
Does excavation harm the environment?
A major area of concern for many progressives is the impact of bitcoin mining on the environment. Bad acceptance from the New York Times, The New Yorker, The Guardian, and elsewhere has done their listeners a disservice and that is what persuaded this article. Contrary to popular opinion, the bitcoin mining industry is already entering the era of renewable energy.
Here’s the thing: Bitcoin uses energy. Securing the Bitcoin network Mining rigs – enabling its decentralized, sovereign nature – require electricity to run. Indeed, the initial running costs for power mining. This encourages miners to find the cheapest source of electricity, which is often energy that would otherwise be wasted and then spread into the atmosphere. Gas companies are increasingly converting their excess energy into bitcoin mining operations or selling it to mining companies who are happy to pay down dollars to reuse it.
Innovation in mining has deepened. Hydro power leverage has never been done before by large and small entities. Alex Gladstein records that bitcoin mining using hydropower in the Congo is financing the preservation of a national park. It’s worth reading thoroughly about how Bitcoin transforms into an international development and humanitarian aid.
Near home, the state of Texas (among other rage-inducing activities), uses its wind power to mine bitcoin. Wyoming actively targets bitcoin mining courts, the state’s abundant natural resources and low energy costs. Given its huge potential for economic development, especially for the underprivileged communities located outside the densely populated city center, there is considerable incentive for bitcoin mining in all states. Restricting bitcoin mining in the name of environmental quality signals for states rich in natural resources is short-sighted.
It is true that the historian of Bitcoin has historically had a heavy climate footprint. In the geopolitical gift of the century, China (after numerous empty threats) has cracked down on its bitcoin mining this year. The crackdown has shut down almost half of Bitcoin’s mining operations, many of which are already in the process of relocating to North America. Coal-heavy Chinese mining operations are being replaced with increasingly renewable alternatives as more mining infrastructure develops.
The Bitcoin Mining Council estimates that about half of all bitcoin mining is powered by renewable energy. For comparison, the banking industry uses about 25% of renewable energy. Over time, mining is expected to be driven increasingly by renewability. If anything, the most worrying thing for progressive Bitcoin is the corporatization of the mining industry. However, that corporatization also scales the use of renewable energy outside of any other industry.
In addition, it is important to keep in mind the power use of Bitcoin. Scholars constantly note
Bitcoin’s annual energy consumption exceeds the energy consumption of a small country. That’s true. But the United States uses Christmas lights and they are only used a fraction of a year.
Importantly, Bitcoin’s Lightning network, a Level 2 technology, enables faster transactions without using network power. This did not take into account the widely cited calculations of the use of bitcoin power by Dutch central banker Alex de Vries and MIT researcher Christian Stall. The title of ClickByte using the piano as a unit of Bitcoin waste measurement must be ignored accordingly (Google it, if you need to).
So, for some like a holiday tradition tihya, bitcoin uses energy. However, energy is increasingly being cut in sustainable ways and on larger and larger scales. The innovation that is coming out of the bitcoin mining industry is amazing. Current metrics of Bitcoin’s energy usage are a lagging indicator.
Bitcoin solves any social problem?
In the United States, we are relatively lucky (officially) to “lose” only a few percent of our purchasing power to inflation each year. The lowest wage earner among us suffers the most from a financial system dependent on an increase in spending each year. However, better closures are only slightly affected or even benefit from rising asset values.
In other parts of the world where currencies are less stable or broken, people may lose most or almost all of their purchasing power overnight. Venezuela has the worst inflation rate in the world, at around 10,000%. Bitcoin provides an alternative assortment of prices, a lifeline for anyone facing hyperinflation.
This is especially useful for those living under unstable regimes or for changing unstable regimes. Alex Gladstein writes explicitly about the effectiveness of Bitcoin in Cuba, Palestine and Afghanistan. The usefulness of Bitcoin as a borderless, globally recognized currency cannot be underestimated.
Importantly, Bitcoin can also serve as a tool for economic empowerment of victims of domestic violence and survivors. It has been widely reported that %% of victims of domestic violence face economic abuse. Most cite financial dependence as the primary barrier to escape. Bitcoin gives survivors the ability to buy, sell, and store value without the knowledge or permission of their abuser. It is no exaggeration to say that money that cannot be monitored or confiscated can save the lives of some survivors.
Bitcoin enables financial inclusion. It solves a significant access problem for a few million people without a bank, including 7 million in the United States. This is a very fair arrangement because it is completely detached from credit. Bradley Ritler explains how exclusionary policies such as redlining have contributed to poor credit in the African American community. Bitcoin is uniquely beneficial for people who face increased barriers to wealth and housing due to lower credit scores. Since the credit system harms people of color imperfectly, the pivot of a credit-based system of Bitcoin can promote more racially just results.
This is not a complete list of what progressives should know about Bitcoin. A broad understanding of Bitcoin certainly requires a significant amount of time commitment. For example, this article has just touched on Bitcoin’s Level 2 technology, or why it could revolt online gaming. There was virtually no technical content, leaving readers to dig into other sources to find out about block sizes or hashtags.
Hopefully what has been made clear is that Bitcoin is not a particular “shady super coder” cyber world, as Senator Elizabeth Warren expects and will not believe. Nor is it a significant threat to our planet. Bitcoin is the first opportunity for humanity to come together under a single, global, peer-to-peer meaning. It cannot be despised. It is never closed for the holidays. And it is going to change the world.
This is a guest post by Nicole Debro. The views expressed do not fully reflect their own and BTC Inc.’s Bitcoin Magazine.