by UnHerd
Thursday, 8
April 2021
Idea
11:51

Will Bitcoin destroy the West — and then the world?

Peter Thiel is warning that the cryptocurrency could disrupt the global order
by UnHerd

Peter Thiel, tech billionaire, has turned gamekeeper again. Though he’s an enthusiast for Bitcoin and cryptocurrencies in general, he’s just uttered the following warning at an event for the Richard Nixon Foundation:

It’s not there yet, but if Bitcoin becomes established as fully-fledged rival to government-issued currency, then that would be disruptive.

In particular, and as Thiel explains, it would threaten the US dollar’s position as the world’s reserve currency. If the dollar loses its pre-eminent status, then America would find it much harder to fund its enormous public debts. Among other things, the defence budget would come under pressure — forcing the US to scale-back its role as the global policeman.

Guess who would benefit most from that?

It is unlikely that Bitcoin will displace conventional currencies. Bitcoin may be backed by its self-imposed scarcity, but dollars, euros, pounds and yen are backed by politics. It’s pretty clear who’s on the winning side.

There’s another problem with Bitcoin: it’s absolutely filthy.

I’m not referring to crypto’s less savoury uses here, but to its technological infrastructure. Basically Bitcoin is an energy hog. The computational processes by which transactions are processed and the Bitcoins themselves created (‘mined’, in the jargon) use a lot of electricity.

Most Bitcoin mining takes place in China (even though the use of cryptocurrency is more-or-less banned there). It is therefore generated by China’s infamously dirty coal-fired power stations.

New research published in Nature this week, puts some numbers on Bitcoin’s carbon footprint:

We find that the annualized energy consumption of the Bitcoin industry in China will peak in 2024 at 296.59  [terawatt hours]… This exceeds the total energy consumption level of Italy and Saudi Arabia and ranks 12th among all countries in 2016.
- Nature

This equates to “carbon emission flows” of “130.50 million metric tons” — which, for purposes of comparison, is more than all the greenhouse emissions from the Czech Republic.

It’s crazy. If western governments want to take Bitcoin down a peg or two then they could slap a hefty carbon tax on purchases by western companies and financial institutions. However, a more constructive approach would be to support the development of a low carbon infrastructure for crypto currencies and other blockchain-based operations.

Any system that is supported by widely distributed network of computers could, in theory, allocate work to locations around the world with a surplus of power from renewable sources. Variable generation is, of course, the big drawback of wind turbines and solar panels. Sometimes they produce too little for local needs and sometimes too much.

But if we could do more to shift demand for computation around the planet, then that could help soak up surplus production of renewable power wherever and whenever it occurs. Thus we could decarbonise crypto and boost the economics of clean energy.

Unless western governments become as authoritarian as Beijing, they won’t be able to stop crypto even if they wanted to. However, they can influence its evolution. Bitcoin, after all, is the beginning not the end.

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Stanley Beardshall
Stanley Beardshall
1 year ago

Why do I smell a rat every time I hear about a currency invented by people who are “good with computers”? Why does the Emperor’s clothes story pop into my head?
Nothing I read convinces me that Bitcoin et al are to be trusted, but then I am old and probably biased by previous bubbles….

Vijay Kant
Vijay Kant
1 year ago

Unfortunately, the crowd cheering the Emperor is getting bigger and bigger.

Bitcoin, being a social currency, will live and die like any real social group. I compare Bitcoin to a religion: it is driven by the faith of its followers organised into a close knit social group with certain rules. All religions have dreamed of global dominance, and many have died out in the process. Unfortunately, some religions have survived for centuries without contributing anything to the progress of humankind!

Galeti Tavas
Galeti Tavas
1 year ago
Reply to  Vijay Kant

I hate it when militant atheists use their twisted ideas of Religion to make bad analogies. “All religions have dreamed of global dominance”, sure, and all athiests have killked more humans than any other cause, China and Russia 100,000,000 just in the 1900s. Argue the case, not your agenda.

Rhonda Culwell
Rhonda Culwell
1 year ago
Reply to  Vijay Kant

And some religions have been responsible for founding some of the best colleges in the world. At least. they were until they abandoned their religion.

Stephen Crossley
Stephen Crossley
1 year ago

Hmm…would I like to invest in Bitcoin?
Built around blockchain as an unhackable technology. I recommend doing a Google search on “The top 6 biggest Bitcoin hacks ever”, one of the more interesting ones being the SECOND time the Mt Gox exchange was hacked when it managed to “lose” Bitcoins worth $45 billion at current values.
When the inscrutable Satoshi decreed that no more than 21 million Bitcoins could ever be created he popped out to the shops before explaining what would happen after that. Considering just over 18.5 million have been created in the last 10 years I hope he returns soon with some suggestions. It is highly likely that this ceiling will be lifted but…wait for it…no-one knows how the system will operate after the magic number is reached.
Never mind all that though. Don’t miss the opportunity of a lifetime to purchase one of these magically invisible tokens for just under $60,000 each.
Oh and can you please send a cashier’s cheque or alternatively greenbacks in a duffel bag? Cheers.

Galeti Tavas
Galeti Tavas
1 year ago

Here, here is 60,000 USDT, Tether, one Bitcoin Please. I hope you do not mind, I seem to have lost the bank statement showing the 60,000 $ in the bank Of The Bahamas really is holding the cash backing the tether, but you can trust me, and tether, it is as good as gold, we promise.

kathleen carr
kathleen carr
1 year ago
Reply to  Galeti Tavas

I don’t really understand how it works as you have to know what you want to buy and then buy enough bitcoin to pay for it. How would this work with random buying which usually happens on the internet?Would people’s wage be paid in bitcoin and would banks then accept it?

Galeti Tavas
Galeti Tavas
1 year ago
Reply to  kathleen carr

Bitcoin uses the same amount of Electricity as Argentinia to fuel its computing needs. Look at the huge computing facilities in China and elsewhere ‘Mining Bitcoin’, which is how the miners are paid for doing the work of tracking the block-chain which tracks who owns what bitcoin, and how it is exchanged. By the way each Bitcoin is subdevided into 100,000,000 satoshis, this is a lot to keep up with, it is the least green of any thing ever created.

Stan Konwiser
Stan Konwiser
1 year ago

Once China’s economy becomes the largest in the world, the CCP can simply say “if you want to do commerce with us you must dump the dollar and trade with our CCP crypto currency as the reserve currency.”

Crypto currencies are ‘asset’ based currencies based on the rareness of the asset serial numbers. Once the Chinese take control of the world reserve currency, they can do what Nixon did and declare it a fiat currency. Then they could ‘mine’ currency the same way the US does now: just print it. No carbon foot print at all.

The US dollar and US economy will collapse under the weight of its debt load because there would be no incentive to extend more credit to the US.

Implied in Nixon’s converting the dollar to a fiat currency was that the US had the military strength to defend the currency and the Western economies around the world. Theil understands that and points out that problem once China, who is building their military, may be able to defend their economic position and their currency as the US has done for 100 years.

This is a far more existential threat to the Western World than climate change.

Fraser Bailey
Fraser Bailey
1 year ago
Reply to  Stan Konwiser

Little Mix are a far more existential threat to the Western World than climate change.

Vijay Kant
Vijay Kant
1 year ago
Reply to  Stan Konwiser

And obviously the US and the rest of the world will just silently accept the new Chinese hegemony! Yup, sounds like your garden variety bitcoiner living in an echo chamber…

Bernard Hill
Bernard Hill
1 year ago
Reply to  Vijay Kant

…think you missed Stan’s point Vijay. He’s not talking about /defending Bitcoin per se. He’s just saying what’s going to happen courtesy of the CCP if there is no alternative, independent “hard” currency to replace the USD’s monumental “fiat” over extension. As things stand its Bitcoin or gold, and the CCP already has a strong hold on the latter.

Galeti Tavas
Galeti Tavas
1 year ago
Reply to  Stan Konwiser

You Utterly fail to understand what a ‘Reserve Currency’ is.

Your post makes as much sense as saying if China captures control of the NFT market they can become the world’s reserve currency. It is pure gibberish. Maybe the IMF will try to become the Reserve, it printed 500,000,000 SDR this year, taking the money it ‘Prints’ to one Trillion! Never heard of SDR? Well the world is crazier than most realize. Anyway the IMF with the World Bank will try making a reserve crypto soon enough, it will fail.

The Chinese currency cannot become the world’s reserve, and neither can bit coin, any more than the Zimbabwe dollar (ZWD).

Added days later 500,000,000,000 Half a Trillion! not half a billion, powers off, sorry.

Last edited 1 year ago by Galeti Tavas
Stan Konwiser
Stan Konwiser
1 year ago
Reply to  Galeti Tavas

SDR’s are a market basket of currencies that do not now include the Chinese Yuan. Once China has the world’s largest economy, don’t you think they will demand a seat at the IMF table. Don’t you think they will demand inclusion of their currency in the SDR? Don’t you think they will insist their currency has an outsized influence in the basket of currencies particularly at the expense of the USD? Saying ‘The Chinese currency cannot become the world’s reserve.’ is like those who said the ‘British Empire will never fall’ or ‘the USSR would never collapse’. More recently, ‘Peace cannot be made in the Middle East without solving the Palestinian problem’.
There are no absolutes.

Vijay Kant
Vijay Kant
1 year ago

We just need a major war, and all these cryptos will come crushing down. In the end what matters is the currency of the strongest nation. That nation has the power to declare all other forms of money illegal. That is why gold has always been desirable during conflicts. It does not matter what some close-knit crypto related social groups think. Cryptos are a product of a generation that has not seen real global conflicts. A generation that has not witnessed a major power outage. Cryptos are a product of dreams dreamed while sleeping during peacetimes. They are definitely not a replacement for gold, for transections in gold do not require a working Internet or stable power supply! These are fantasies of unoccupied idle minds of peacetimes.

Last edited 1 year ago by Vijay Kant
Andrew Thompson
Andrew Thompson
1 year ago

Hands up anyone with the slightest remote notion of what Bitcoin and crypto currency is. Or am I just thick?

Last edited 1 year ago by Andrew Thompson
Colin Haller
Colin Haller
1 year ago

The crypto-honks are delusional.
The $USD is “backed” by its collection of taxes, fees and fines that can only be paid in the unit of account over which it exercises a jealous monopoly of issue — if you don’t believe me, try counterfeiting on for size. And failure to pay your tax obligations puts you on the pointy end of their police and prison systems, not to mention their Army, Navy and Air Force.
With apologies to Iosif Dzhugashvili, how many divisions does Bitcoin have?

Galeti Tavas
Galeti Tavas
1 year ago

What a non article, do some research, I would say watch Jim Rickards explain how it cannot become a reserve currency as it cannot do bonds. Reserve currency is Bonds, the units of it are $. The supply must be flexible, and must grow, or how can you use supply and interest to manage the money supply? And how can Bitcoin be Bonds? It has no fixed value and is a set quantity, how can it pay interest if it is fixed? Bit coin can only be deflationary as reserve. Watch Munger and Buffett and Dalio on youtube about bit coin, even Peter Schiff (I know, a gold shill, like Rikards, but still, good analyst)

But anyway – how about TETHER? (USDT) If you do not know tether you do not know Bitcoin. Tether is pretty much a conspiracy nuts dream, it is likely completely corrupt, it has no auditable reserves, it is used to buy bitcoin from China and weird places to distort the price. Bitcoin is doomed, it is just when and how big.

China can use Bitcoin to harm the West, but that is pushing, it would be used in another way to attack USD, not making it a Reserve. China is even worse off than us about printing and debt so it is unlikely as they have about Zero Internal Money Velocity in China, and without the world consumers it would implode.

Su Mac
Su Mac
1 year ago
Reply to  Galeti Tavas

Haha Sanford – was wondering how long before someone advised UnHerd to go off and get some money education via Rickards, Alasdair McLeod, Ronan Manley etc al. I keep telling ’em!

Diarmid Weir
Diarmid Weir
1 year ago

‘Bitcoin may be backed by its self-imposed scarcity…’
If I print a few ‘Weirnotes’ off my computer they will be very, very scarce indeed – but will anyone pay me dollars, pounds or euros for them? Of course not! Bitcoin is a very risky asset (so risky that any conceivable gain is wiped out by the likelihood of loss) with no chance of becoming a currency.

Galeti Tavas
Galeti Tavas
1 year ago
Reply to  Diarmid Weir

The writer of the above article is out buying NFTs and dreaming of how valuable the one of the NFT mansion they just purchased for $1000 will be in one year.

“Mar 24, 2021A digital house created as an “NFT” or “non-fungible token” was sold for more than $500,000. For comparison, the median price of a physical U.S. home is $346,800, according to the Federal Reserve…”

Haha, pure digital gold, haha,

Gerald gwarcuri
Gerald gwarcuri
1 year ago

I’m thinking about using Bitcoin to purchase tulip bulbs, or perhaps U.S. student loan debt. What could possibly go wrong?

William MacDougall
William MacDougall
1 year ago

No, bitcoin won’t. Certainly the US Dollar will cease to be the sole reserve currency; that’s already happening. America’s aggressive use of sanctions makes it a dangerous asset for many. The unique extraterritorial claims of the US makes it a dangerous means of payment; the US tries to claim jurisdiction over transactions conducted in foreign countries, perfectly legal there, simply because they’re done in dollars. And increasing inflation risk makes it a dangerous place for saving. But it will be replaced by other hard currencies, not Bitcoin. Cryptocurrency is too volatile to be a safe place for saving, transactions are too expensive and too slow, and contrary to what many believe, it is not anonymous. But the dollar ceasing to be the world’s reserve currency would be good for the West; diversification is not bad.

Stan Konwiser
Stan Konwiser
1 year ago

William- 2 comments:
a. Yes it won’t be Bitcoin. It will be a China controlled digital currency. They are already developing it for trial use in China.
b. Diversification of reserve currency won’t work well. The value of the various currencies will be settled against the strongest economy/currency. That will become the de facto reserve currency. That economy must be able to both militarily as well as economically defend its currency. Look at history: The Romans had their own coins that all its empire had to use. The Pound was the predominant world currency when the British Empire ruled. The US has/had the military strength to defend the dollar and its commerce around the world. Diversification will simply lead to conflict over the same.

Last edited 1 year ago by Stan Konwiser
Galeti Tavas
Galeti Tavas
1 year ago

China will be the reserve currency when the Kardashians are coining their own money, not for a wile yet; as the entire Global Fiat Currency, Central Bank, system is in one liferaft called The USD, and anyone making holes in it will cause all to droun.

Alex Delszsen
Alex Delszsen
1 year ago

Who has got the skinny on the pizza company that sold pizzas for a Bitcoin back in the year dot? How wealthy are those owners now? Enquiring minds want to know.

Galeti Tavas
Galeti Tavas
1 year ago
Reply to  Alex Delszsen

Are they the ones Q was talking about? It all links up in the end. WWG1WGA