Money For Nothing in the Bitcoin Bubble

A virtual currencies mining farm operates in a former Soviet-era car factory warehouse in Moscow. (Maxim Zmeyev/AFP/Getty Images)

Perhaps you are a person who thinks that money comes to those who work hard, to those who are smart, or even just to those who are lucky. Perhaps you think that money should be centralized with those who have been successful in business, or perhaps it should be divided equally among a country’s citizens. Perhaps you think people should receive a universal basic income, or free health care or education. Perhaps you have some kind of theory about who deserves money and who doesn’t. Well, buckle up, because everything you thought about money — how it’s made, how it’s spent, and who deserves it — is getting thrown out the window.

“The wealth is intoxicating news, feverish because it seems so random,” writes New York Times tech reporter Nellie Bowles about the most recent tech bubble: the boom in cryptocurrency. It’s a gold rush of new technology that hasn’t created jobs, it hasn’t created a new form of communication — it’s only created money.

The newly-minted millionaires and billionaires of the cryptocurrency boom share one thing in common: an obsession with cryptocurrency. Unlike the dot-com boom of the 1990s or the rise of the social media super companies in the 2000s, the cryptocurrency bubble offers little in the way of goods and services. Its devotees share a distrust of the banks and of the government.

The cryptocurrency community is centered around a tightknit group of friends — developers, libertarians, Redditors and cypherpunks — who have known each other for years through meet-ups, an endless circuit of crypto conferences and internet message boards. Over long hours in anonymous group chats, San Francisco bars and Settlers of Catan game nights, they talk about how cryptocurrency will decentralize power and wealth, changing the world order.

The goal may be decentralization, but the money is extremely concentrated. Coinbase has more than 13 million accounts that own cryptocurrencies. Data suggests that about 94 percent of the Bitcoin wealth is held by men, and some estimate that 95 percent of the wealth is held by 4 percent of the owners.

There are only a few winners here, and, unless they lose it all, their impact going forward will be outsize.

Cryptocurrency is created through the mining of data, a substance as seemingly immaterial as “Ethereum,” the name of one currently booming currency. But data mining has real-world consequences: While everyone is getting rich, the environment is melting down.

At its current rate, bitcoin will use as much energy as the entire United States by the middle of 2019, and by the end of the year, it would use as much energy as the entire world. It’s a surreal prospect, but it’s one the crypto millionaire is willing to take. “The worse regular civilization does and the less you trust, the better crypto does,” one person explains. “It’s almost like the ultimate short trade.”

Read the story