The dark side of our shiny new currency

At the mention of cryptocurrency five years ago, most people would’ve pictured a computer science geek running mystifying code in hopes of getting rich quick. Today, according to a 2021 survey by the Pew Research Center, it is estimated that 16% of Americans have previously held, or are currently holding, some amount of cryptocurrency. 

Where did this new movement come from, and exactly when did it make the move from a fringe idea to mainstream media and economics? Most importantly, what is the impact of this huge and largely unregulated shift toward cryptocurrencies?

Cryptocurrencies are a global phenomenon. Elon Musk, owner of Tesla, recently allowed customers to pay for new Teslas in Bitcoin, and El Salvador adopted Bitcoin as its national currency. The company that owns Instagram, Facebook and WhatsApp recently changed its name to Meta (formerly Facebook) in preparation for the “metaverse,” the rapidly growing digital universe based largely on Ethereum. 

Even in our own University community, we are seeing the effects of this new age of digital currency. USC created a blockchain class, a blockchain minor and a course in the Marshall School of Business called “Internet Marketing,” which is being revamped this year to cover crypto. This recognition from “elite” research universities has likely helped crypto break into the mainstream.

The vision behind the metaverse is to create a digital universe for people to socialize, in which people can use crypto to buy plots of digital land as well as other assets, and it’s coming true. However, this exciting new world isn’t free and is coming at the expense of the one we already have.

The process of creating new cryptocurrency, known as mining, is an energy-intensive process. People gain new cryptocurrency as a reward for running transactions and using their high level computers to develop the blockchain. Just like conventional mining, this process is anything but harmless. According to BBC News, data that came out last year suggests that if Bitcoin were a country, it would consume more energy than Argentina, putting it in the top 30 most energy-inefficient countries in the world. Crypto’s carbon footprint falls just a bit short of the entire global banking industry, which uses an estimated 260 terawatt hours of energy per year according to TIME Magazine.

Even more shocking is the statistic that to mine a single dollar’s worth of Bitcoin is four to five times as costly to the environment as it would be to mine a single dollar’s worth of copper or gold, both of which are incredibly environmentally inefficient to extract. 

With the 2022 United Nations Climate Change Conference approaching, we expect to see major propositions for stricter plans to cut carbon emissions and double down on environmental protection. Meanwhile, whether driven by the desire to make easy money or by the fixation on technological innovation that has defined the last half-century, the crypto community continues to grow. 

The University’s gold rush mentality towards crypto and rapid course restructuring has more implications than just environmental ones. This perception of crypto as a novelty way to get rich quickly does not address the extreme volatility of crypto. Only last November, Bitcoin experienced one of its frequent crashes, losing an estimated 45% of its value and wiping over $1 trillion in Bitcoin. This potential to lose huge amounts of money at once is especially problematic for students whose expenses and debts can quickly become unmanageable, especially dealing with the high cost of living in Los Angeles.

This is not to say we need to stop the metaverse in its tracks. These are early days. Just as over time we were able to develop more efficient cars, there are already improvements being made to the efficiency of mining, but nowhere near the rate that these digital currencies are becoming increasingly popular. This is instead a call to action for those teaching the new crypto classes at USC. Crypto cannot be taught solely as a marketing class. In this era of climate crisis, you cannot separate the economics of Bitcoin from its environmental effects. 

While the metaverse is exciting and has huge names like Mark Zuckerberg and Elon Musk on their toes hoping to get a bite, it’s not free, and it’s coming at too steep a price.