This article is an original entry in the 2013 essay contest organized by Bitren and was first published on the Bitren forum, so it did not debut on my blog. At first I thought I stood no chance of winning any prize, so last night I casually posted it on the blog; unexpectedly, it still won the second-place grand prize. Because I reposted it half a day early (to Babbitt), I have voluntarily deducted 10% of the prize money as punishment, and here I would like to apologize to and thank the Bitren website.
1. Does Bitcoin waste resources?
Bitcoin’s proof-of-work mechanism, that is, the so-called “mining,” is often criticized: so many machines running at full tilt, consuming huge amounts of energy while producing nothing at all, merely to maintain the secure operation of the Bitcoin network. Doesn’t all this “wasted” energy mean that Bitcoin is very unfriendly to the environment?
Many people think this is a major problem. For example, PPC, a new currency developed by Sunny King on the basis of Bitcoin, was intended precisely to solve Bitcoin’s energy consumption problem. Admittedly, in terms of energy use, PPC is indeed more economical than Bitcoin, but there are also other costs; some of the changes PPC makes in order to reduce energy consumption may not be a good thing. But I do not want to analyze in depth the pros and cons of PPC and Bitcoin here; that belongs to another level of discussion. First, we should look at whether Bitcoin’s “energy consumption” is really a fatal problem. On this point, the proper comparison should first be with traditional currency, not with derivative cryptographic currencies in the same family.
Compared with traditional monetary systems, Bitcoin’s energy consumption is not only not its fatal weakness; one could even say it is extremely economical. Bitcoin’s energy consumption seems enormous, but it maintains the operation of the entire Bitcoin network, and currency issuance and transactions are all supported by this network. There is no need for banknote-printing machines or mints, no need for a central bank and banking systems at every level, and no need for a complex international exchange system.
Just one “China Banknote Printing and Minting Corporation” alone “has 22 medium and large enterprises and 1 national-level technology center under its jurisdiction, with nearly 30,000 employees and total net assets of 30 billion yuan.” How much electricity do these medium and large enterprises and their employees consume every day? The annual expenditure of the “People’s Bank of China” is in the tens of billions (and Bitcoin’s total market value is not even that much right now), and just the official car expenses in the “three public” expenditures reach 300 million. If you add up the banknote-printing plants and central banks of the whole world, not to mention local banks at all levels and exchange business, how much energy and resources does it take to maintain the transaction system of traditional currency? If Bitcoin mining machines consume energy in vain and produce nothing, then what exactly does the central bank produce?
Of course, the Bitcoin network is still in its infancy, so it would be unfair to compare it directly with a mature central banking system. As Bitcoin develops, its energy consumption will probably rise by several orders of magnitude, and some derivative institutions will also emerge that cause additional consumption. But in any case, compared with the huge and bloated traditional monetary system, it is always a case of the tiny compared with the giant.
New Bitcoin issuance is halved every four years; before even waiting a century for new coins to run out, in ten or twenty years the share of new coins in mining will already become very small, and mining income will mainly consist of transaction fees. And every transaction fee is voluntarily paid by each transactor to miners in order for their own transaction to be verified more quickly. Thus, the energy consumption of mining is never unlimited; it is constrained through spontaneous market equilibrium—mining’s energy use will not for long exceed mining’s income, otherwise miners will not start up their machines. Mining income mainly comes from the extra transaction fees paid by transactors, and these fees are all costs that transactors themselves think are worthwhile in order for this transaction to be verified. How much extra consumption transactors think is worth paying in order to verify a transaction, that much energy miners will invest in mining. In short, all consumption in the Bitcoin network will ultimately tend toward a reasonable market price. But in the traditional monetary system, the cost of maintaining the system is not the result of spontaneous market equilibrium. On the contrary, it is always the central bank, through its monopolized power, trying to use monetary policy to regulate the market; the central bank always hopes to become the cause of market equilibrium rather than its result. The existence of the central bank is something beyond the market, something taken as a matter of course; the market unconditionally supports it, and there is simply no limit to its consumption or waste.
2. Environmentalism is not just energy saving
We say that the Bitcoin system is more energy-efficient than the traditional monetary system, but that does not mean Bitcoin is more “environmentally friendly.” What exactly “environmentally friendly” means still needs to be examined. At the very least, environmental protection is not just a matter of energy conservation.
Even “saving energy” may not necessarily be more environmentally friendly. For example, does saving water necessarily mean being more environmentally friendly? That still depends on the specific situation. For example, if I fetch three buckets of water from the river to take a bath, and you can take a bath, wash clothes, and mop the floor with just one bucket, then you are saving more than I am; but in the end all the water still has to flow back into the river. The pollution caused by my three buckets of water may not be greater than the pollution caused by your one bucket, and perhaps my impact on the environment is even gentler.
Unless I am trying to divert the entire river, while you divert only one-third of it, then perhaps you are a bit more environmentally friendly. But the reason people want to divert the whole river is also out of a certain mentality of economy: the river flows on and on, vast amounts of energy are wasted in vain; if we develop hydropower stations to make use of this wasted energy, wouldn’t that be more economical? That seems quite reasonable, and many people hold such a view: hydropower stations are clean energy and are good for the environment, so we should build more of them. But does building one more hydropower station necessarily mean building one fewer thermal power station? The facts are by no means so. The result of building one more hydropower station often is merely to encourage a few more mines, chemical plants, and the like to be built around the hydropower station.
If Bitcoin’s energy consumption is said to be wasteful, then does using that energy to make steel necessarily not count as waste? Because that steel is useful? But where will it be used? It will be used in, say, large-scale construction, opening up many new cities, new buildings, new industrial parks, new mines, new power stations, new steel mills… and so the cycle continues, endlessly expanding. But at the end of the day, are these construction activities themselves not wasteful? You may say: these constructions satisfy people’s needs, so they are all useful. But many human needs themselves are cultivated within corresponding technological and cultural environments; massive construction and production do not fill up and relieve people’s needs, but instead continually stimulate the emergence of new needs. The updating of needs can on the one hand be seen as a sign of progress, but on the other hand, if desire falls into unrestrained expansion, that is precisely the root of the environmental crisis.
In fact, older ways of life are often more “wasteful,” while modern people measure everything by the logic of efficiency, treating all natural things as resources to be utilized, squeezing dry everything that can generate benefit without leaving any margin. Every resource must produce benefit; this cultural tendency itself is precisely one of the roots of environmental problems.
Of course, I am not saying that only modern people are especially bad and that ancient people were environmentally friendly. Ancient people also caused environmental destruction, and many civilizations were destroyed by ecological disasters. But it is only in modern times that environmental problems have become a global, systemic issue, no longer merely concrete problems that can be clearly located in terms of causes and effects, and no longer merely issues affecting one time, one place, or one group of people. Therefore any concrete measure—whether conservation or pollution control—may ease problems in some local respects, but at a larger level may instead intensify them.
3. Neither despotism nor laissez-faire can solve the problem
Since environmental problems are a systemic problem, does that mean that only a power controlling the whole system, such as a world government, can coordinate and control matters in order to respond to environmental problems? Obviously not. Of course, some despotic and authoritarian regimes, such as North Korea, may indeed slow down industrialization and perhaps delay the onset of environmental disaster, but the existence of such a regime is itself a disaster. Not to mention that some authoritarian regimes, such as the Soviet Union and the Celestial Empire, have become the vanguard in rushing toward environmental disaster.
But is it the case, as many optimists believe, that a completely laissez-faire market economy can avoid environmental disaster? Not necessarily. The free market’s ways of restraining environmental disaster mainly come in two forms: first, clear property rights; second, market competition.
If this mountain and this stretch of river belong to the public, with unclear rights and responsibilities, and everyone pollutes to their heart’s content as if it were none of their business, only to pass the buck when problems arise, then that is indeed terrible. If, however, these lands and rivers belong to specific private individuals or enterprises, then they will be more willing to take good care of them, and other people who use or damage these private resources will also have a clear party to negotiate with. This approach of clarifying property rights has been proved beneficial to environmental protection efforts, and even in China some places have begun to introduce this model to manage pollution. But private ownership is not omnipotent. We are all familiar with the so-called “prisoner’s dilemma” and “tragedy of the commons”: that is to say, in many situations, decisions made by each private actor based on the maximization of individual interest may, when viewed as a whole, amount to the worst possible outcome. On the other hand, many environmental problems are global rather than local; not to mention major issues such as the ozone hole and global warming, even when speaking of a single river, its upstream, downstream, tributaries, and so on are all intertwined. Upstream diversion or pollution will directly affect downstream ecology, not to mention many indirect effects that are difficult to measure precisely. The complexity of mutual influence among natural environments is always greater than the complexity of mutual connection among individuals and companies. Some environmental problems that can be specifically located to a destroyer and a victim will of course be better resolved under private ownership, but more problems in which the destroyer is difficult to pinpoint, or even the victim difficult to determine, are still hard to solve.
As for the market competition mechanism: for example, when energy becomes scarce, energy prices will rise; if they rise to a certain level, naturally this will incentivize people to develop and research new alternative energy sources. Alternative energy is still relatively expensive now, so it is difficult to implement, but relying on the market mechanism, once traditional energy is truly on the verge of depletion, alternatives can naturally be found. Pollution and environmental destruction will also raise the cost of living; once the cost of living rises to a certain point, naturally this will motivate people to carry out治理… In short, many optimists believe that the market can spontaneously adjust everything.
Bitcoin enthusiasts basically will not support despotism; most of them are supporters of the free market, myself included. But supporting the free market does not mean worshipping the power of the market. The invisible hand is after all not the hand of God.
The crux still lies in the fact that environmental problems are systemic, and many environmental damages are cumulative and irreversible. Environmental disasters often occur in ways that cannot be foreseen, and once they happen, they do so in a way that leaves no room for reversal. By the time the crisis is at hand and one tries to adjust spontaneously, it may already be too late. The ecological disaster of Easter Island is a very good example. The islanders cut down trees and used them as rollers to transport stone blocks and statues (equivalent to treating logs as consumed energy). Once the island’s forests had been exhausted, the construction of the statues of course had to be put on hold, but the forests would not quickly recover. On the contrary, forest destruction caused water sources to disappear and species to go extinct; in the end the entire island became incredibly barren, the islanders slaughtered one another, and civilization finally was lost and reverted to barbarism—so much so that when Westerners discovered the island, they thought those huge statues were the work of extraterrestrials. It should be noted that the chain of processes by which forest destruction leads to species extinction and environmental disaster is slow; during this process, the cost of logs does not rise significantly, and the islanders also do not have sufficient technology to predict the crisis. Once the crisis is discovered, it has already reached a point where reversal is impossible. In fact, similar cases in which local ecological disasters lead to the destruction of civilizations occur frequently in history. The difference is that, in the past, ecological crises were local: if one island’s civilization was destroyed, perhaps another island developed, and in the end some civilizations always survived. But if Easter Island, for its islanders at the time, was like the entire Earth is for us modern people, then if this living environment were to encounter a systemic and irreversible ecological disaster, we would have nowhere to flee.
Some people will say that those ancient civilizations destroyed themselves precisely because they lacked modern technology and market economy, whereas modern Western civilization has finally found the secret to survival and therefore will no longer face such disasters. I would of course like to believe this, but how can one prove it? What we can see is only that human power is growing ever stronger and development is advancing at a daily rate of renewal. But the greater the power, the more it can only mean that once one hits a wall, the blow one receives will also be greater; the faster the speed, the harder it is to brake in the face of crisis. How can we be sure that we will always be able to avoid a deadly systemic crisis in time before it occurs? The most laughable argument I have seen is this: the achievements of development so far are enough to give us confidence. But that is like saying, “I have never died before, so this proves I will not die in the future,” or “I have grown taller every year for the past eighteen years, so we can expect to grow taller every year in the future as well.”
4. The cultural background of the market economy
In short, neither despotism nor laissez-faire, neither planned economy nor free market, can make us rest easy in the face of an environmental crisis. But can Bitcoin solve the problem? Of course not. There is no method that can once and for all avert crises. But I believe Bitcoin can have a good influence, and that this influence is systemic.
Bitcoin will first affect the economic environment and the cultural environment, and changes in the economic and cultural environment will ultimately affect the relationship between human beings and the natural environment.
Neither technology nor the economy is a completely independent system; the market environment always interacts with the technological environment and the cultural environment. The assumption of the “rational economic man” is merely an abstract fantasy and has never truly existed. Real market participants do not always act according to the logic of utility maximization. People’s cultural, religious, and ideological tendencies also determine the direction of the market. Every individual has his or her own subjective likes and dislikes, and when individual inclinations gather together, they do not completely cancel each other out; instead, they manifest as certain systemic inclinations such as “zeitgeist,” “fashion,” or “social atmosphere.” These cultural tendencies cannot simply be regarded as noise or interference within the market economy system; rather, they should be seen as a larger historical backdrop above the market economy.
For example, in the automobile market, some cars clearly have better cost performance, but because of the widespread anti-Japanese sentiment in China, they may go unsold. Labels such as GMO and organic food also influence people’s choices, not to mention that the value of “useless” goods such as luxury items and decorative objects depends entirely on consumers’ cultural preferences. So if “environmentalism” becomes a popular cultural preference, if environmental ideas and trends take root deeply in people’s minds, then we can fully imagine that the logic of environmental protection may, to a certain extent, surpass utility logic and exert a kind of systemic influence on the economic system—an influence that does not require recourse to a centralized authoritarian institution, but instead relies on cultural exchange that is likewise free and open.
Then if Bitcoin can promote a more environmentally friendly culture or way of life, it can of course promote the entire economic environment to turn in a more environmentally friendly direction.
We say that what determines market relations is not only utility logic; that is to say, when people choose goods, they do not merely consider “cost-benefit ratio,” but also incorporate all kinds of cultural, fashionable, and even religious measures. And even with respect to the “cost-benefit” measure alone, it is not purely objective. Indifferent people can ignore anti-Japanese or anti-whatever sentiments, not be blinded by various forms of hype and embellishment, and participate in the market with only utility logic. But we still have to ask: by what do they measure utility?
People measure costs and benefits in money. Leaving aside whether this kind of money worship is narrow-minded, we should first ask: which kind of money?
Money has never been some external yardstick detached from the times and culture; money is also part of the market, and in essence it is also a commodity. And the cultural tendencies embodied in different forms of money are also different.
For example, using the same utility logic to measure: which is more worthwhile, 80 yuan in hand or 100 yuan five years from now? If you are talking about RMB or dollars, I would tend to choose the former; if you are talking about Zimbabwean dollars, I must definitely choose the former; and if you are talking about Bitcoin, then I am more likely to choose the latter.
This tendency, of course, directly affects my decisions on the production and consumption side as well. In “Bitcoin: Common Sense and Dogma” I already said that inflationary money encourages spending in advance, encourages a lifestyle of eating up next year’s grain this year, and that from ordinary people to national governments alike, everyone lives in a daily state of borrowing new money to repay old debts. Easy borrowing like this can indeed greatly accelerate the early-stage expansion and land-grabbing speed of entrepreneurs, but at the same time it also hardens the logic of expansion into a cultural habit. On the personal level, it means caring only about the immediate present, enjoying the moment in a heedless, born-at-dawn-and-dead-at-dusk way, while lacking long-term vision; on the national level, it stimulates the aggressive, expansionist side—for example, the collapse of the gold standard was precisely a consequence of the First World War and the Vietnam War (and not at all because of the so-called intrinsic defects of deflation and the like that so many economists try to fool us with). Even now, expectations of war are still directly tied to expectations of inflation (what was the reaction of the international market when the United States was posturing about attacking Syria?); and on the level of humanity as a whole, the consequence of inflationary logic is an attitude of expansion toward nature—pollute first, clean up later; develop first, and the energy problem and ecological problem will always be solved by then. We tend to overdraft the environment first and leave the responsibility for治理 to later generations; this style is completely consistent with the inflationary logic of borrowing new money to repay old debts.
Of course, if things could always remain as they are now—with the economy continuously accelerating, technology continuously advancing at an accelerating pace, and neither the market environment nor the natural environment undergoing any unexpected dramatic changes—then this cycle of borrowing new money to repay old debts could go on forever. But the problem is that the longer it goes on, the less we know how to stop it. Once development hits a bottleneck or a blockage, when new debts and old debts all surge up together, we may have no solution at all. If the problem is only local, like Cyprus, then perhaps it is easy enough to handle: a dictator issues an order and simply adds or erases a few zeroes from bank accounts, and the situation is eased. A local ecological disaster might also be solved through migration, colonization, or simply by letting a batch of people die off. But what about a global disaster? If the monetary ecology of the dollar system were to undergo a global collapse, perhaps we could still hope to tear everything down and start over, with Bitcoin coming to save the world. But if the Earth’s ecological system were to collapse completely, would the whole of human civilization have to be torn down and rebuilt from scratch?
By contrast, the tendency carried by Bitcoin encourages people to hold money more cautiously—this will not produce the deflationary crisis that mainstream economists turn pale at the mention of. The concept of deflation is itself a byproduct of inflationary logic, because the whole culture is accustomed to inflation, so a temporary stagnation becomes a grave problem. It is like a drug addict who will sometimes encounter a state of shortage of drugs, and only in that state does the addict feel discomfort. In what he takes to be the “normal state,” that is, the state in which drug supply is plentiful, he is completely comfortable. Thus people mistake the problem for the state of drug shortage, failing to understand that this state of discomfort is precisely the inevitable consequence of the “comfortable state” that is mistakenly regarded as normal. The addict fears only drug shortage, just as inflationary culture fears only a shortage of money. Bitcoin will not make people never spend money again; rather, it encourages people to be more prudent both in spending and in borrowing, and to take a longer view. This may of course, on the surface, slow the expansion of certain industries—for instance, the frenzied coal-financing operations in Shenmu would not be able to be so wild, and the city-building movement in Ordos would not be so rapid—but on the whole, a sober and long-term outlook is not a bad thing. Bitcoin will not truly hinder development; rather, it will allow development to proceed in a more stable, more solid, and more environmentally friendly way.
5. Arrogance and Superstition—The Roots of the Environmental Crisis
Here, Bitcoin not only promotes environmental protection by way of indirect cultural contagion; in a certain sense, it also points directly to the root of the environmental crisis: human arrogance and superstition.
In fact, the very concept of “environmental protection” already reflects human arrogance—we say that we must protect the environment, protect nature, protect the Earth… But does the Earth really need our protection? Even if all human beings were to die out completely, the Earth would still keep turning, and new ecosystems would sooner or later flourish again. It is not we who protect the environment; it is the environment that protects us.
And modern people seem to have replaced God’s position, taking upon themselves the responsibility of caring for all things as if it were self-evident. People consciously or unconsciously believe that human technology, human power, can control everything. Even the parts that cannot be controlled now, they think, will eventually be controllable in the future—that is people’s attitude toward the natural environment, and also their attitude toward the market environment. Scientists and engineers imagine that they are protecting the natural environment, while economists and financiers imagine that they are protecting the market environment. The Federal Reserve and central banks of various countries, in order to maintain market health and stability, need to keep stimulating, adjusting, planning, and directing, meticulously manipulating everything. But does the market really need people to control and protect it? Can people really succeed in maintaining market stability?
It is ecological balance that protects our lives, not we who protect ecological balance; it is the market that secures our economic life, not we who are maintaining market balance. Whether it is the “planned economy” of China and the Soviet Union, or the “forward guidance” of Europe and America, people have always believed that the power of science can not only grasp market trends, but also cope effortlessly under any change. But this is arrogance, and it is also superstition. Human capacity is always limited. When human power keeps growing stronger, the turbulence and reactions stirred up by human action grow greater as well; when the territory of the market expands, the number of unpredictable boundary events it faces also increases. Human beings are always living within the “environment,” and can never live above the environment so as to dominate the whole environment.
Can Bitcoin “protect the environment”? Can it control the future of the environment? No. But it does help dissolve people’s arrogance and superstition—it aims to abolish central banks and dispel the superstition that “those wise and mighty economists can protect the market and control all variables.” As the saying goes, “Heaven has its unexpected storms”; the essence of the “natural” lies precisely in the fact that it is always some force outside humanity that goes its own way. Human knowledge always has its limits; the undertaking of knowing is not, rather than being about eliminating the boundary of knowledge, simply about continually widening it. People are continually widening their own living environment, but they never live outside the environment. Therefore, under whatever environment, the strategies of “moderation” and “preparing for a rainy day” are always necessary. We need development, but we also always need to “leave some room.” In economic life, people “keep some savings on hand” as a form of self-restraint that “leaves some room.” This cannot enable us to foresee and avoid every “unexpected storm,” but at least it can keep us from running too fast to turn around, from sinking too deeply when crisis strikes, and from falling too miserably.
Translated from the Chinese original with AI assistance. The original text is authoritative.
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