Why we need to talk about crypto

Hi there.

As I wrote about last month in The Nation, it’s really important to think about the cloud and AI in physical terms. The etherealization of tech hides real, material presence of data centers, as well as the power structures behind them. The cloud or "virtual currency" is not some immaterial set of ideas, but millions of transactions powered on electricity.

Today, I want to talk more about crypto and power. Not metaphoric power, but literal power: the rate at which energy is transferred.

I was inspired to write this because of a disaster that happened earlier this month. A Bitcoin mining plant dumped oil into a protected wetland near Seneca Lake in upstate New York. The spill came from a retrofitted fossil fuel power plant which draws over 100 million gallons of water a day from the lake to cool its operations and dumps it back as hot as 108°F, fueling toxic algae blooms. You could see it coming. Five years ago, locals reported that Seneca lake was "so warm you feel like you're in a hot tub," and have been protesting to shut it down.

Clearly, we need to talk about crypto’s energy use. As of now, cryptocurrency mining uses about 2.3 percent of all U.S. electricity. That is more than the total electricity used for all residential lighting in America. One Bitcoin transaction has been estimated to generate greenhouse gas emissions equivalent to driving a mid-sized car 1,000 miles.

Some places are beginning to ban local mining, but crypto operations are constantly on the hunt for deregulated zones with cheap energy. New York’s spill wasn’t an aberration. It was the predictable result of that hunt. In New York, new mining is temporarily banned, but older operations were grandfathered in.

The issue here is structural. Bitcoin and similar cryptocurrencies rely on “Proof of Work” systems, which reward miners with tokens for completing complex computational problems. These systems do not accidentally consume energy. They are built to reward energy consumption. If you wanted to set up a system designed to maximally burn fuel, you might design crypto.

I found this post placing cryptocurriencies in the history of currency helpful: Cryptocurrencies I.

Bitcoin isn’t validated by its code, but by vast amounts of compute power required to create, transfer, and verify transactions. .. Humanity has deemed shells, metals, paper, and electronic ledgers as currency.. now the Tech boys advocate we use an almost innumerable opening and closing of transistors.

Costello explains how crypto replaces trust with electricity and authority with computation. The result is a monetary system backed not by law or labor, but by the brute fact of burned energy.

So with crypto, we are not burning carbon to light a child's homework or heat a kitchen. We are burning it to build "trust" and attempt to create a new form of money.

What I hear in so many of my crypto enthusiast friends is not love of burning the planet, but a desire for coin not controlled by the state, and buried within that, a post-state utopia. That desire is not trivial. It is a core part of contemporary politics, and it’s worth understanding. A few years ago, Matt Stoller wrote a great explanation of the urge to embrace visions of new currencies, arguing that crypto takes real discontent and channels it into speculative finance and faux-antimonopoly tech libertarianism. Highly recommend.

If you’re a progressive focused on food deserts or UnitedHealthcare, crypto might feel like a distraction. The left has not been immune to the etherealization of tech discussions, thinking of it as not as real as the price of eggs or gig work contracts. But we need to care about crypto because it leads to toxic spills, a hotter planet, and it is driving up utility bills.

And its definitely shaping the big political debates today. If you’ve been following the “abundance agenda” promoted by figures like Marc Andreessen and the network around the venture-backed Abundance Institute, you’ll notice a core focus is energy. Specifically, nuclear and permitting reform. That push is not because we are naturally turning on more lights. It is because of the energy demands of crypto and AI.

Support this newsletter.

So when you hear a lot about the revival of nuclear, think crypto and AI. When you hear about permitting reform pushed by the Abundance agenda, think crypto and AI.

This is not my daily bread. Mostly, when I talk about crypto, it is because I study anti-corruption laws. In the corruption world, crypto has all kinds of scammy uses. Donald Trump is currently violating the Constitution’s Emoluments Clause by accepting foreign government money through his crypto ventures, at a scale that makes the hotel grift of his first presidency look quaint. And that was not quaint. Saudi money appears to have directly shaped U.S. foreign policy.

Crypto is not immaterial. It is oil, heat, infrastructure, and emissions. And Trump corruption, as a cherry on top. If we are serious about water and oil and protecting democracy from big tech, we have to start seeing it in physical terms.

More reading:

• How crypto is eating renewable power
• The power concentration problem behind the green crypto alternatives.
• Earthjustice on the unknown amounts of energy subsidies for crypto.

Remember to save a swear for Bitcoin next time you see your energy bill.

More soon,

Zephyr

PS: I turned on the comments! Hoping you join in the conversation and tell me where you disagree.

PPS: Support this newsletter. I have to pay the data bills!