Before they even think about investing in cryptocurrencies, people want to know if it’s ethical. This is a question with numerous aspects; this is not simply a black and white situation.
As someone who has witnessed several investment fads, most retail investors will lose money investing in cryptocurrencies.
Investing and gambling are not the same things. And, like gambling, only a few people will win. Is crypto, therefore, unethical? It’s a toss-up.
We have three areas of concern to consider.
How bad is it for the environment?
The first thing to consider is how bad it is for the environment.
No one knows with certainty how much energy is consumed in cryptocurrency production (or mining). Estimates range from that of Finland’s energy consumption each year to that of Brazil.
The University of Cambridge Bitcoin Electricity Consumption Index, an authoritative source, estimates global consumption at over 80 GWH, or roughly 23 coal-fired power stations in terms of electricity. That’s a lot of energy for so few people and miners.
The more individuals that mine cryptocurrency, the more power is required. It takes roughly $7-11,000 of electricity to mine one bitcoin at present. However, because they are worth so much more than their mining fees, there is a strong incentive to continue mining and paying for power expenses.
Not only that, but the increasing computing power required to mine crypto is also causing e-waste. The continuous development of computer hardware necessitates periodic replacement. It’s not often re-used or recycled.
Exploiting the poor
The second area of concern is that cryptocurrencies exploit the poor. Despite accusations that crypto banks are unbanked, there is little evidence to support this. Quite the opposite holds true. It can similarly entice them into yet another rich quick scheme, much like gambling does.
Instead, crypto provides the poor with the allure of becoming rich fast by investing their hard-earned cash. And if crypto is simply another kind of gambling, and ethical investors will not invest in gambling, is investing in cryptocurrency seem ethical?
Another signal from crypto investors is that it is developing a sound financial system. This is a highly dubious claim and perhaps virtue signaling. Neither the internet nor blockchain are limited to or caused by crypto, which offers better infrastructure.
Harbors illegal activity
The next concern is that it may be used for illicit activity. The crypto sector was created to go outside the law. It’s a logical hiding place and money laundering location, therefore. Some people argue that because there isn’t much illegal cash in crypto, this is true. However, because of its untraceable nature, this is something of a question mark.
Cryptocurrency is a magnet for criminals because it is both untraceable and tax-free; thus, logic dictates. Defenders argue that since criminals also use cash for laundering, crypto isn’t any worse. But two wrongs don’t make a right, and at least money used for criminal activity is traceable. Crypto was intentionally untraceable and untaxable.
If taxes are the cost of civil society, anything intended to conceal assets and avoid tax is ethically questionable.
Individuals and organizations are contemplating whether or not to invest in cryptocurrencies may answer business ethics questions.
Given that crypto has a significant environmental impact, it’s hard to ignore this point: “Is crypto mining ethical?” The ultimate decision rests with each potential investor, who must answer this question for themselves and examine all possible concerns in depth.