The benefits of cryptocurrency far outweigh the environmental impacts of cryptocurrency mining
I. Introduction
With increasing popularity in bitcoin, the number of bitcoin miners has been increasing which means that bitcoin mining requires more energy than ever before. In 2019, bitcoin consumed more electricity than single countries such as Switzerland or Greece or Israel. Other cryptocurrencies use less energy in mining but usually its because they have much smaller number of miners are participating. Some economists are stressing negative view on cryptocurrency’s future based on negative environmental impact from inefficient mining algorithms. However, cryptocurrency is gaining more popularity over time. This paper analyze advantages and potential of cryptocurrency which make bitcoin valuable disregard of negative environmental impact.
II. Advantages of cryptocurrency
1. Secured transactions
Cryptocurrency has decentralized network which is the biggest difference between cryptocurrency and fiat currency. Many advantages from cryptocurrency derive from this attribute of cryptocurrency. All transactions are kept in all nodes in blockchain network. Every transaction is going through audit and verification process in blockchain. Transactions are completely secured and there cant be double payment. Cryptocurrency is secure, validated and audited by the network itself.
2. No possibility to make counterfeit
Counterfeit money is endless issue in every currency, and it is getting more difficult to solve with technological development. On the other hand, in cryptocurrency, to make counterfeit of cryptocurrency, hackers should hack into every mining simultaneously. And this impossible to do it especially in case of bitcoin which has numerous miners. Thus there can’t be counterfeit or double payment.[i]
3. Remedy for monetary failure
Keeping independence of monetary policy is hard for most of the countries and some countries go monetary failure. In many cases this failure leads to hyperinflation and people cant afford their basic needs with their own currency. For example, in 2016 Venezuela, people were not able to buy basic goods because of hyperinflation. People started to mine bitcoin themselves since Venezuela barely charged on electricity. With the bitcoin they mined, people bought groceries secretly via online shops such as amazon and walmart. Like cases in Venezuela, bitcoin can be practical remedy in terms of monetary or government failure.
4. Cheaper transaction
Cryptocurrency is based on decentralized network which means there is no central entity who is collecting the fee or middle man who is charging commission. In cryptocurrency, transaction fee is really low and there is no bureaucracy like in traditional transaction via banks. Transaction in cryptocurrency is easier, cheaper and more transparent.
III. Potential of cryptocurrency
1. Decentralized system
Centralized traditional banks have many inefficiency and unnecessary costs. The banks are rely on multiple intermediaries to process payments and required to go through unnecessary process.[ii] The system is less democratic since they need to follow all restrictions from the banks. Decentralized system in cryptocurrency allow people to have transaction with less cost and less restrictions.
2. Strong belief on cryptocurrency
The amount and value of the cryptocurrency is not decided by central entity such as government or monetary authority. Its value and existence are determined solely by network and participants in the network. If participants have negative expectation on cryptocurrency, its value will decrease and vice versa. The history of cryptocurrency is showing that participants have belief on cryptocurrency and with the advantages above, this belief will more or less, continue. In addition participants know volatility makes cryptocurrency more profitable. Thus volatility of cryptocurrency would not work as drawback, rather would work to keep the value of the cryptocurrency.
3. Tax evasion
In most countries, it is obligatory to report their gains on cryptocurrency and pay tax for it. Since most people get cryptocurrency by exchange and they need to provide identity in real world to cryptocurrency platforms, it is possible to be tracked by government. But there is possibility to evade tax via privacy coin such as monero, zcash or dash. Even not using privacy coin, still there are numerous ways to avoid tax with cryptocurrency.[iii] Especially in this era, many countries are adopting more socialism policy and it leads to higher tax, potential of cryptocurrency is getting higher.
4. Technology application
Technology in cryptocurrency such as decentralized network and smart contracts have wide potential of application. Especially in case of Ethereum, it has the most advanced technology and features. The Ethereum Enterprise Alliance is an organization of businesses and institutions spanning the blockchain ecosphere, education, IT, commodities and industry sectors.[iv] It allows companies in other field to learn, apply and utilize on the Ethereum blockchain network in their business.
IV. Conclusion
Even though cryptocurrency has inefficiency in mining in terms of environment, cryptocurrency has several advantages which outweigh the drawback and has various potential in many ways as introduced as above. In addition, since there is sustainable energy development going on, environmental criticism in cryptocurrency would be reduced.
Resources
[i] Zehr, Dan, “With Bitcoin, Benefits Outweigh Drawbacks,” F 2014, https://search-proquest-com.zdroje.vse.cz/docview/1505369816/fulltext/3C66C2B1424B40ABPQ/5?accountid=17203.
[ii] “Central Banks Will Jump-Start the Decentralization of Money,” CoinDesk, June 19, 2018, https://www.coindesk.com/central-banks-will-jump-start-decentralization-money.
[iii] “4 Ways to Pay Zero Tax on Cryptocurrency Gains,” Escape Artist (blog), August 31, 2017, https://www.escapeartist.com/blog/4-ways-pay-zero-tax-cryptocurrency-gains/.
[iv] VTNV Solutions Limited https://www le-vpn com Sitemap XML © 2021 Le VPN All rights reserved, “Are Cryptocurrencies Secure?,” Le VPN (blog), December 7, 2018, https://www.le-vpn.com/are-cryptocurrencies-secure/.
