There has been a lot of interest in cryptocurrency, and I was recently interviewed in the Wall Street Journal and New York Times, so there's my 15 minutes of fame haha. It's interesting to see the contrast in viewpoints on this area. Two things that consistently come up: Is bitcoin wasting electricity? How many jobs does it create? Well, it's complicated.
One of the unfortunate side effects of bitcoin, which was definitely unintended, is the proliferation of large scale, centralized mining. Bitcoin was intended to be highly decentralized, but the rise of ASICS (the specialized computers we use that do only one thing: SHA-256 encryption) created a situation ripe for widespread centralization and industrialization of it. And that's exactly what we're seeing here as more and more people see the virtues in it. But this is just the beginning, cryptocurrency is still in its infancy and there are many more applications that are yet to be discovered for blockchain technology. Personally I believe it has many uses in the healthcare industry and I plan to push for that when I finally become a doctor.
The New York Times article, while somewhat misinformed (he refers to the machines as "specialized hard drives" for example) brings up a good point. While I don't agree with his assessment that cryptocurrency has anything to do with low productivity, he essentially asks "why mine cryptocurrency when you have manufacturing next door that uses the same amount of electricity and employs hundreds of people?"
Cryptocurrency mining is just not super labor intensive, an entire plant can be ran with a handful of people. But everything is also becoming automated and jobs are largely being lost to this. Look at how cars are made now (especially in Japan) versus how they were made in the '70's. Look at companies like Smartly, which has an MBA program that replaces typical classroom instruction with an app (giving this a try now!). Drones, self driving trucking? I think you get the idea.
As technology advances, more jobs will be lost to automation. And to be clear, what bitcoin automates is banking, more or less, even though I would not exactly consider it a "currency" at the moment, but I hope to be able to at some point. On the issue of electricity usage, comparing bitcoin to a typical manufacturing plant is apples and oranges. It would be more fair to compare it to data centers, which currently consume about 5% of electricity in the US, and probably employs roughly the same number of people per amount of electricity. Or even the plethora of tech companies whose primary product is, in fact, not physical at all. On that note, how much electricity does the internet use? Bitcoin is a network in the early stages, and is, like the internet was, still somewhat unwieldy and looking for a useful purpose. I'm not sure what the future holds, but I do see an opportunity with cryptocurrencies and smart contracts.
Still, I believe the issue of electric usage is a serious concern, especially if it's not coming from renewable sources. Like I talked about in my last post, upstate NY, and most concentrations of bitcoin mining operations in the US, use some sort of renewable energy. Typically hydroelectric. In our case, I believe there is an abundance of latent hydroelectric power that can still be tapped. Could the electricity be used more effectively to create jobs? I'd say yes. But where are those jobs going to come from? Will wages keep up with inflation? Will distribution of wealth become more equitable? Bitcoin is valuable as an asset because it deflates while fiat inflates. And yes, it seeks to take some power from banks and give it to the people. I believe in that aspect of cryptocurrency full heartedly. But now, because it's so profitable, this is not an aspect especially appreciated.
One thing that is often overlooked is that mining supports other areas of development in physical products too and is opening up new industries utilizing the technology. Especially considering the businesses that actually build these ASICS, who can literally sell out of them in minutes! I would love to see one of these operations come in to upstate NY, which would create more jobs than mining. It's also created a many mining "shops" and suppliers that sell replacement parts, machines, and specialized equipment, a lot of which has been adapted or made for mining, which requires labor.
On that note, in Plattsburgh this has led to the development of the Triangle Mining Box, which is an all in one solution for running and cooling the machines in a space efficient manner. This was developed by Greg and Ryan Brienza of Zafra LLC, a local mining hosting company, since current server cases just don't fit the bill for the demands of cryptocurrency mining. They put their experience in building out mining operations and managed to find a better way than just throwing the machines on shelving units. We recently moved our machines into one of these, seen in the image above. They're made right in Plattsburgh, you can learn more about it here!