Everything that is wrong with crypto (2/2)

Crypto: Excessive environmental impact, perfect coverage for organized crime and basically a pyramid scheme. Time for a reality check. NFTs then? Not fundamentally better either.

Yesterday I wrote here about what is wrong with crypto as an investment object. But that is not the only thing that can be said about crypto.

Energy waste or mining

For example, there is another part that instead of trading the currency is vertically integrated to process the coins correctly. This happens through the so-called crypto mining† As the name suggests, the network is ‘dug’ to indicate a transaction. The reward: a percentage of the value of the part that has been deciphered. It is not long term investment or investment like day trading, but makes passive money. At least if there is money to be made.

A student from Maastricht has a complete cryptopharm in Latvia. She said that energy prices there have risen sharply in recent years, but are still only low compared to the prices we pay in the Netherlands. The biggest expense for one miner is therefore electricity. Running a simple miner which gives about € 5 per. day, can easily cost € 2 in energy per. day. It is € 3 profit per. day. It does not sound like a fat container. In any case, put five of these in the basement and run them day and night, 365 days a year. That’s more than € 5,000 a year that it provides: a great addition!

This miners is mostly built in China. Mining has been banned there for a few years now, so a new destination was sought for these used machines: the West. However, there are a few differences. The same was the energy in China for some of this miners from hydropower plants, a sustainable energy source. In the West, they just run mostly on coal and gas plants, according to CNN. In addition, the equipment was still new and clean at the time. Meanwhile, it is obsolete and inefficient machines with the necessary traces of use and downtime

This miners are also flown in lots by plane. They also often do not have the necessary ventilation because they are often stored in basements and ceilings due to the noise. Finally: this one miners was used at a time when there were still plenty of chips, GPUs and other hardware. Today, a manufacturer of these GPUs (also called graphics cards or video cards) has to choose whether to install the chips in a cryptocurrenciesin a gaming computer or in equipment for the X-ray department of the hospital.

Oh yes, and also drugs, money laundering and human and arms trafficking

The advantage of an encrypted (encrypted) code is also that no one can just access it. The transactions take place over a complex network of servers and proxies. These are all terms that are too complex for the government to figure out. And where the government is disposed of, it attracts sinister figures. Forbes wrote earlier about how easy a transaction between a drug cartel and a human trafficker can go without anyone seeing.

So it’s no longer about the little revolving door criminals or taking money from underage ‘investors’. It is about a structured network of terrorism and organized crime that stimulates trade in weapons, drugs and people (!) Through encrypted transactions. But that an innovation can be used for the good of people as well as for the bad is nothing new. For example, the discovery of nuclear fission in the twentieth century was not only a good invention as an alternative energy source, but also became known as the origin of the two largest nuclear explosions ever observed on Earth.

CO2-neutral Holland? Quit crypto!

The difference, however, is that nuclear fission has a positive side, namely a more sustainable energy source for a cleaner climate. Crypto, on the other hand, only pollutes the environment with its power-consuming miners and transactions. In addition, they produce heat that the thermostat cannot compete with.

cryptocurrencies used to execute parts of a crypto transaction. Encrypting part of the blockchain is a process that uses a lot of energy. In fact, only the servers used to mine Bitcoin would cost 0.5% of global energy consumption. That’s about 7 times as much energy as the total business Google uses, according to business insider. A Euthereum transaction gives a CO2 emission of more than 102 kg. That equates to 227,000 credit card transactions or 17,000 hours of YouTube playback. In fact, a Bitcoin transaction would cost four times that: 402 kg of CO2.

In short: a currency that was intended for an independent payment system, is used by organized crime and wealth-seeking investors and has an environmental impact that provides no added value to society either. But is that all? No, there is more.

Crypto, a new pyramid scheme?

The value of one coin depends entirely on the demand for the currency. Where a normal investment is based on the aforementioned business results and market expectations, there is no underlying value for a crypto. It is an uncovered position that only increases in value because there is a new buyer who would rather hold the position than the previous one.

But what if there is no next buyer? As you continue to play by convincing friends and followers of the success of coin you only create more demand for coin which you own. So more people will play with what you and the value of you coin advantage. The only problem is that the number of new players at some point stops growing.

As was also pointed out in this article, the cryptosystem almost resembles an old acquaintance: the pyramid scheme. The value is apparently driven by greed and persuasion. As one alleged banker wrote to Bitcoin Magazine: “Cryptocurrencies are speculative assets that can cause great harm to society. They derive their value mainly from greed, and they trust the greed of others and the hope that the plan will continue unhindered.”

According to Warren Buffet, it’s exactly the difference between productive assets that create value and something that someone is willing to pay more than the previous person for inexplicable reasons. Still, lots of new wealth seekers continue to invest in crypto platforms like Bitvavo and Crypto.com, though the trend seems as good as over, given the price declines of the past six months.

The European Union also spoke last month about the implications of crypto for the use of money laundering and terrorist financing. As the European Central Bank pointed out, coin therefore no underlying value and no physical resources that can define the value. As a result, coins thus an intangible good, and its value is determined solely by supply and demand. And there is enough demand among criminals and some wealth seekers, although various cryptocurrencies have fallen sharply in recent weeks. Would this be the end of the crypto era, or is the hype so deeply ingrained in society that we all continue to believe in the bubble a little longer?

NFTs: The Solution to Bitcoin Backlogs?

But if this article and the references, reports, and surveys are not enough to change the minds of these wallet keepers, it is not too late to step into this rogue world. For those who missed the crypto submarine, there is now a new hype, based on the same blockchain and the same scandals and abuses: NFTs.

If you are still not convinced how insanely pointless this cryptorace is, then hurry to buy virtual monkey paintings or a digital boat galore so this time you can be the guru or coach offering the courses to a new generation of weak opportunists…

Despite the fact that different brands work on their own NFT, and that there are benefits for the music industry and the like, an NFT is still worse for the environment than making fair deals on paper. An advantage for artists and other small makers is nice, but should not be at the expense of the climate. Then the digital goal justifies the means, and of course that is not possible in the midst of a climate crisis.

Or be sensible and choose a stable income with a real job and become a teacher or catering worker, because that’s what Holland is really waiting for!

About the Author: Bart van Eekelen is the founder and director of e-pickr.

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