The Unsustainable Frenzy for Cryptocurrency and NFTs
Digital technologies for the rich and the lure of the crypto grift.
Posted March 2, 2022 | Reviewed by Ekua Hagan
- Cryptocurrency and NFTs are not what their promoters say they are.
- Crypto consumes energy equivalent to many countries and can sap renewable energy sources that could be used for green social projects.
- Many countries have banned or are planning to ban crypto-mining in order to reach national goals of decarbonization.
If you have ever accompanied a 5-year old child to a store, you know the risks of saying no to their demands for what you deem to be an unneeded purchase. In some cases, their breathing weakens, tears well up, and their little bodies shake in anger. This can be heartbreaking—and lead to longer-term problems if you give in to the temptation of spoiling them.
Marketers celebrate this moment of “pester power” for its shattering of rationality and the cultivation of a lifelong vulnerability to the shopping frenzy. Never mind that kids can learn to identify those frenzied feelings and develop tools to deal with them, which include slow and deep breathing to calm the body and soul. That psychological skill is not much welcome in our culture of consumerism.
This brings us to the latest craze to gin up the masses—cryptocurrency and the useless stuff you can buy with it in the hope of a big payday. Advertising for crypto is on the rise, reflected in this year’s Super Bowl commercial breaks. As with most commercial advertising, crypto marketing exploits the psychology of “missing out” or being “less than,” which can elicit a perpetual feeling of inadequacy—of body image, health and fitness, income, and possessions. Celebrities feed this new frenzy by hawking crypto and nonfungible tokens (NFTs). Movie studios add options for crypto exchanges, talent agencies like CAA pay to represent tokens, and some high-profile people, including the mayor of New York City, ask to be paid in cryptocurrency.
And then there are the grifters, influencers, and scam artists; crooks using dating apps to cheat people out of money to buy crypto; and the bullying of ordinary folks threatened with identity theft if they don’t pony up some crypto coins. If you haven’t watched Dan Olson’s “The Line Goes Up” about the false promises and dangers of crypto, you might want to set aside a few hours to check it out.
All this publicity, good and bad, has the effect of creating the illusion of crypto’s ubiquity and status as a store of value (despite its well-documented volatility, such as when Bitcoin lost half its value in January). Still, as of last year, 14 percent of Americans held some amount of cryptocurrency; some for buying NFTs, some to hedge against inflation, and others who have money to burn and no casino nearby.
The crypto sales pitch
The sales pitch is basically that you can eliminate middlemen (central banks, data brokers, stock markets) and participate anonymously (actually, pseudonymously) because the blockchain on which crypto operates is supposed to enable decentralization and anonymity.
So why has so much of the recent reporting on Web3 (the catchall for crypto, NFTs, and the metaverse) identified a culture of “FOMO bullies” mocking crypto-skeptics as losers and wimps? As one software engineer says, “some proponents of crypto get enormously angry with those who so much as question the technology, much less criticize it, and I’ve been told on more than a few occasions that it’s not okay for me to express my skepticism or opinions.”
The reality of crypto ownership
Even the much-vaunted idea of decentralized power of crypto exchanges doesn’t really match the reality of crypto ownership—for example, 95 percent of Bitcoin is held by 2 percent of accounts; 80 percent of the NFT market is owned by 12 percent of accounts. This is a picture of centralized power with one telling characteristic: “Every member of Forbes’s 2021 crypto billionaires list is a man. A third of them attended Stanford or Harvard. Out of the 12 listed, only one isn’t white.”
The problem of concentrated power hasn’t lessened the enthusiasm among marketers of cryptocurrency and NFTs; in fact, the get-rich-quick ruses of crypto enthusiasts can barely hide the similarities of the crypto market to a Ponzi scheme. The Wall St Journal acknowledges as much when it tells us that while crypto wealth will benefit only a handful of companies, “individual small-time investors will, as is so often the case, not be the ones who profit from their rise.”
Software developer David Rosenthal has helpfully inventoried many of cryptocurrency’s problems: It’s built as if there were no externalities like energy consumption and carbon emissions, when in fact token mining and exchanges consume as much electricity as some European countries and the system generates massive amounts of e-waste as miners burn through hardware. Its purveyors manipulate prices through hype and deception. Ransomware enabled by crypto has disrupted supply chains, crypto gangs eat up storage capacity by exploiting free tier web services, and it has driven notorious crime waves.
Rosenthal acknowledges the potential of blockchain-based protocols for decentralizing authority and safely preserving digital information but notes the empirical reality of re-centralization via concentrated “permissionless” blockchains like that of Bitcoin as well as in long-standing, centralized “permissioned” blockchains which are more energy efficient. The former is also more expensive, more dependent on cryptocurrency and speculative investors, and a bigger emitter of greenhouse gases. He notes, “The reason for this extraordinary waste is that the profitability of mining depends on the energy consumed per hash ... Cryptocurrencies assume that society is committed to this waste of energy and hardware forever. Their response is frantic greenwashing.” Even if crypto ran on renewable energy, he adds, “the idea that it is OK for speculation to waste vast amounts of renewable power assumes that doing so doesn’t compete with more socially valuable uses for renewables, or indeed for power in general.”
Crypto’s over-consumption of electricity has led many countries to ban cryptocurrency mining in an effort to conserve energy and reduce carbon emissions. China has already done this, while Sweden and Norway have asked the EU to ban crypto-mining across the Union. One key goal for these countries is to stay on track to meet emission reductions set by the Paris Agreement of 2015, which means there’s no place for crypto’s unsustainable libertarianism. Many other countries have also banned or are considering banning crypto for this and other reasons. In the U.S., where regulation of crypto is mostly non-existent, Silicon Valley continues to dominate the narrative with libertarian nonsense about freedom from big central powers and anonymity for crypto traders. There’s even a move by some crypto miners to reopen shuttered coal-fired power plants just to power their dirty businesses.
The good news is that blockchains can be created to help fight the climate crisis, and projects are underway to be everything that crypto isn’t, starting with the decarbonization of energy production. The United Nations Development Programme (UNDP) is working on a number of global initiatives to ensure what they call an “equitable digital future for everyone.” The UN’s Environment Programme and the UNDP have also backed a Coalition for Digital Environmental Sustainability (CODES), which has among its goals a plan to use digital technologies to build a virtual world of sustainable practices which just might offer a green antidote to the hyper-consumerist vision of the tech bros’ metaverse.
We can breathe easier knowing that these projects for a sustainable digital future exist. But we must also recognize how the manufactured frenzy behind cryptocurrencies and NFTs can trigger many of our worst consumerist behaviors and further exacerbate the dangers of climate change. We’re not so distant from that 5-year-old after all.