Note: This is another Medium repost, originally written Mar. 10, 2021. I’ve slightly edited the formatting.
I’m a solution-oriented person, so I figured out a way to take care of the collective damage to our planet that we’re causing by chasing crypto tokens for greed. I think the solution will need to be along these lines, before we destroy our societies through depletion of the world’s energy resources.
I just came up with one plan to wind the markets down, but it’s going to cost $500 billion and will reward the current miners, which I would prefer to avoid. But I think it could wind down the entire cryptocurrency market in an orderly fashion, so as to avoid crashing the economy. Feedback welcome. *
The current “market cap” of Bitcoin is $600 billion, which is an astonishing amount of money that should not be invested in this venture. If we can get the G8 countries (G7 + Russia is key to this) to agree to make a fund to wind down Bitcoin, they could buy it out over time.
There’s an easy carrot-and-stick approach that I think would be a fine alternative to suddenly making all cryptocurrencies illegal, like I would prefer. Set the redemption rate (for any national currency, which you can trade for gold or anything else) to $500 billion worldwide.
Divide that up by the number of bitcoins and then the governments of the world will buy back all of the coins that now exist. Let’s call the US version of this law the Energy-Efficient Financial Transaction Act (EEFTA). Let’s ban all of the proof of work coins for wasting power.
If we can’t get the G7+1 countries to agree to ban them immediately, perhaps we can collectively agree to phase them out over a four or five-year period. The key is to make the redemption pool decrease to $0 over that interval of time. That’s the “carrot” and the “stick”.
I figured this out while pondering how diabolical the incentives are for cryptocurrency because people want to get a relative advantage over everyone else and that ratchets up the greed and collective energy use. We need a time-based incentive for cashing out fast.
With a pool of $500 billion that’s guaranteed (replace that number with whatever the capitalization is of each of the coins that are slated to be banned at the end of the period), if people don’t cash out, they’ll be progressively punished. The value of the coins will “decay”, like the radioactive waste they are, from an environmental, social, moral, and engineering perspective.
Has anyone thought about the implications of phasing out energy-wasting blockchains over a short time interval? I feel like the more we discuss and share these proposals widely, the more volatile these markets will become, and the valuations will drop with the increase in risk.
The more we can reduce the value of cryptocoins by advocating for passing laws simultaneously across the major economies of the world (this could be a UN proposal too, but the rich countries should pay for it), the more cheaply those countries can wind down the toxic algorithms.
By setting a redemption value in fiat currency, and allowing people to cash out in a currency of their choosing, perhaps under favorable capital gains taxes, and then ramping that redemption value down to $0 on a known timeline, it recreates the artificial scarcity, in reverse.
I’m not sure many people are aware of the diabolical details of the specific algorithm that Bitcoin and its imitators are based off of, where mining coins becomes progressively more difficult by halving the reward every four years, and also based on the total global hash rate. That’s why everyone is racing to mine the most coins the fastest. It’s guaranteed to get more difficult to mine the same coin as long as hardware gets faster and speculators join the network, and also with every halving event. That’s why speculators believe the value will go up. Not if we pass laws to ban this horrendous waste of human potential.
I’m convinced that the only way to wind down the entire speculative market (with the externalities not currently accounted for by “the economy”) is for the governments that are most responsible for having allowed this entire scheme to get off the ground pay the costs of cleanup.
We should treat cryptocurrencies like the toxic waste from an abandoned mine, or other “Superfund” sites filled with toxic byproducts of industry. Think of the worldwide agreement to phase out CFCs to save the ozone layer. We need a new Montreal Protocol.
* constructive feedback, not irritating slogans like “enjoy being poor”. Those are the thought-stopping cliches of an indoctrinated cult follower, not your own original thoughts. If you do this, then “enjoy being a mediocre thinker.”