| While supposedly the leading next-generation currency, the great irony about Bitcoin is that it's shockingly retrograde in almost every way that matters. To start with, "manufacturing" the cryptocurrency has required burning lots of coal, leaving a massive carbon footprint for a means of exchange that will ostensibly dominate a future, greener world. Annual emissions tied to the electricity needed for cryptomining "rigs" (high-powered computers that produce digital tokens by solving math problems) are equal to that spewed by all of Argentina, according to researchers at Cambridge University. As Bill Gates—apparently a master of understatement—said of Bitcoin at a recent New York Times DealBook conference: "It's not a great climate thing."  Bill Gates Photographer: Jeff Pachoud/AFP This week in the New Economy
Just as perversely, the blockchain technology that supports Bitcoin transactions is "extremely inefficient," U.S. Treasury Secretary Janet Yellen said at the same event. She also warned about Bitcoin's now well-known use in illicit finance. The network's peer-to-peer architecture bypasses banks and monetary authorities, making it popular with extortionists, porn merchants, hackers and other denizens of the dark web.
Nor is Bitcoin a useful store of value, the minimum requirement of any currency going all the way back to cowrie shells. That's because of its wild price swings. In fact, Bitcoin isn't really a "thing" at all. Gold has industrial uses. Other assets, like stocks and bonds, produce revenue streams. Bitcoin is nothing more than a string of code whose value is almost entirely a function of its artificial scarcity (only 21 million Bitcoins will ever be "mined," according to the mysterious person, or persons, called Satoshi Nakamoto who developed the currency.) Economist Nouriel Roubini, a fierce critic of cryptocurrencies, throws in a few letters in place of the 'B' to make Bitcoin a vulgarity. He reckons that "the fundamental value of Bitcoin is zero" and would, in fact, be negative if miners had to pay a carbon tax.  Nouriel Roubini Photographer: Joe Buglewicz/Bloomberg Bitcoin in other words has some big detractors—which explains the delight in the cryptocurrency community this week when Norwegian billionaire Kjell Inge Rokke came out as a Bitcoin fan, full of enthusiasm for its potential to remake global finance. In a letter to shareholders, Rokke announced a new company to invest in Bitcoin and help improve the performance and image of the blockchain technology. One idea: mining Bitcoin using "stranded" renewable energy that can't be deployed on the grid. Rokke said the digital currency could "become the core of a new monetary architecture." Other billionaires have joined the speculative frenzy, including Elon Musk, the founder of Tesla and SpaceX. But Rokke is different. He's an industrialist of the old school who built his fortune on oil and gas. His bold move into Bitcoin adds to evidence that cryptocurrencies have gone mainstream, despite all the naysayers. MassMutual, the staid life insurer, has jumped onto the bandwagon, while the market value of Bitcoin has surged past the $1 trillion mark. Take your pick. Bitcoin is either (as Roubini posits) the financial equivalent of human waste, or (as Rokke contends) a "Stairway to Heaven." How does the financial layperson make sense of it all?  Kjell Inge Rokke Photographer: Jens Köhler/ullstein bild via Getty Images The economist Adam Tooze—no fan of Bitcoin—looks at money as a political phenomenon. "In particular, it is an amalgam of the power and confidence leveraged by the state and capital," he writes. Bitcoin was designed to bypass these structures of power, embodied by the banks and monetary authorities. And its most passionate champions— "cypherpunks" as they're called—are finding more and more allies among mainstream investors who share their skepticism about the dollar and other "fiat" currencies at a time when some are worried about the return of inflation. How will central banks respond to the challenge? If you can't beat 'em, join 'em, of course. The People's Bank of China is already rolling out its own digital currency, and even Yellen is intrigued: A digital dollar could result in "faster, safer and cheaper payments," she told the DealBook conference. Indeed, it would be a double irony if Bitcoin, a radical experiment in peer-to-peer money, not only failed due to its clunky, planet-warming design, but ended up speeding the creation of the ultimate top-down currency. Tooze, for one, is excited at the prospect. "Everyone could be equipped with central bank accounts, blurring the boundary line between fiscal and monetary policy. Enabling helicopter drops of money and people's QE, the very opposite of what the founders of Bitcoin intended," Tooze wrote. "Very much my cup of tea."
Bloomberg New Economy Conversations with Andrew Browne: Big Pharma joined with governments to deliver coronavirus shots in record time. The successful moonshot could spur future research into other affordable drugs to treat global diseases. Join us March 23 at 10 a.m. ET when Katalin Karikó, senior vice president of Covid vaccine pioneer BioNTech, and others discuss Vaccine Miracles and the New Promise of Science. Register here.
__________________________________________________________ Like Turning Points? Subscribe to Bloomberg.com for unlimited access to trusted, data-driven journalism and gain expert analysis from exclusive subscriber-only newsletters. Sign up for Bloomberg CityLab's Most Popular newsletter, a weekly digest of what's trending in the future of cities. Download the Bloomberg app: It's available for iOS and Android. Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. Learn more. | 
Post a Comment