Technology in its nascent stage is usually restricted to the confines of enthusiasts, hobbyists, and those actively involved in its development. For Bitcoin and blockchain technology, however, the case is different — as both form a topical issue in many a discourse. Let’s examine both of them from an environmental, social, and governance (ESG) perspective.
From Market Volatility to Financial Crimes
Almost every critic of Bitcoin and the other cryptocurrencies espouses the price volatility and financial crimes rhetoric. The market is indeed volatile and price swings are a common feature. Cryptocurrencies are an emerging asset class, and until the market reaches a certain level of maturity, price swings will continue.
Bitcoin also came into the spotlight in the aftermath of the Silk Road investigation — causing some to believe that cryptocurrencies are a conduit for money laundering, tax evasion, and terrorist financing. External observers tend to cast a jaundiced glance at cryptocurrencies due to the revelations from the high-profile investigation. However, though criminal elements can mask their activities with the anonymity provided by blockchain technology, this ultimately constitutes an insignificant portion of the crypto-economy landscape.
A recent study by ESG rating agency ISS-Oekom raised issues concerning the environmental impacts of cryptocurrency mining.
The energy consumption of virtual currency mining is another false rhetoric that is popular on the internet. Headlines like ‘Bitcoin consumes as much energy as X country’ are a common sight to anyone who monitors such news.
However, the fact of the matter is that many of these ‘experts’ use flawed methodologies in their estimations — and Bitcoin mining isn’t as energy consumptive as researchers claim.
Bitcoin and Blockchain: Democracy and Financial Inclusion
There are also those who belong to the blockchain only brigade — folks who say Bitcoin is a bubble and that blockchain is the real innovation. According to ISS, blockchain presents promising potentials for democracy and transparency in many facets of human life, from the global business process to the fidelity of electoral processes.
The technology behind cryptocurrencies is already finding some use in logistics and supply chain management with firms like IBM leading the way. ISS also identified e-voting as another area of application for blockchain technology. According to the rating agency, blockchain can provide transparency as well as a means to fight voter fraud and sundry electoral manipulation.
Financial inclusion is perhaps the most pivotal accomplishment of blockchain technology and to a large extent, Bitcoin. In 2017, the World Bank revealed that there were two million unbanked people in the world. Bitcoin, so far, has led the way in bringing digital money to people disenfranchised by mainstream financial apparatus.
Do you think the positives outweigh the negatives when it comes to Bitcoin and blockchain technology? Keep the conversation going in the comment section below.
Images courtesy of AdobeStock, Bitcoinist archives.