Does Bitcoin belong to your ESG basket?

As blockchain technology booms, so do controversies associated with it. The blockchain superstar, Bitcoin, has been at the forefront of this criticism yet the question of crypto and sustainability is all but black and white. In a recent call for the alumni of our programs, Pierre-Edouard Wahl walked us through his arguments for the S, the G and the E of Bitcoin.

“Internet and digital banking opened the finance world to the masses,” Pierre-Edouard begins. He has been active in the blockchain space since 2012 and recently completed the IRI/CSP Impact Investing for the Next Generation program. Despite the strong controversies related to the E or environmental factors of cryptocurrencies, Pierre-Edouard is a strong advocate for placing blockchain investments, including Bitcoin, in the sustainability basket of an investment portfolio.

“Bitcoin gives more opportunities and power to the people than other crypto currencies: it is globally accessible 24/7 and you have full control over your money. There are no intermediaries and no transaction or management fees,” Pierre-Edouard begins underscoring the S or societal pros of Bitcoin within ESG investing like financial inclusion, instant global transactional network open 24/7/365 to transact on. Furthermore, Bitcoin empowers people. For example, in some countries, it is valuable for women to have direct access to the transactional world without the need for approval from their husbands. Refugees without a bank account or ID can still do transactions.”

In addition to accessibility, Pierre-Edouard mentions data integrity guarantees, as examples making the case for the S for Bitcoin. “One can claim authorship and ownership to tokens with a hash, a sort of a digital fingerprint to prove integrity, and a private key to prove ownership. In case you lose the key to your assets, you can recover it through your trusted group when the majority agrees. In this way, bitcoin builds social trust.”

The G — Stateless and empowering

According to Pierre-Edouard, the governance system of bitcoin is “fairer” than the usual democratic or plutocratic systems. “Other blockchains tend to have the governance of the wealthy. They claim to have a democratic vote, but it is weighted based on the number of tokens allocated for that vote. With bitcoin one has the same voting power, no matter how many bitcoins the person owns,” he explains.

Apart from several other rights you have as a bitcoin owner, there are more benefits Pierre-Edouard likes to highlight: “Bitcoin is in fact neutral money for governments, as it is stateless helping build a stronger cyberspace jurisdiction. This enables us to test new governance systems like liquid democracy, futarchy, or even dystopian franchulates amongst other new governance models.

The E — Using and boosting energy

When explaining the environmental elements of bitcoin, Pierre-Edouard starts with an assumption: “Bitcoin delivers some value, otherwise all the energy that goes into securing it, is all going waste.” He refers to the critical acclaims of environmentalists pointing at the large amounts of energy used for the proof-of-work of cryptocurrency mining, a way of working by which one can gain currencies like bitcoin without buying them, through solving complex cryptographic equations with the use of specialized computing equipment.

“This proof-of-work demands a lot of energy, but I like to make the case that it urges miners to cut their costs by looking for sustainable long term solutions, such as mining closer to power plants to reduce energy loss during transportation, mining from a power plant baseload or even investing into green energy which already is cheaper than fossil fuel-based energy production. The high energy demands of cryptocurrencies pushes for a more rapid energy transition toward renewables that are becoming cheaper by the year, by pushing for governments to look for means of providing more energy more sustainably.”

“Path forward for humanity”

Passionate about Bitcoin, Pierre-Edouard concludes by highlighting the risks of a centralized monetary system: “Developments around Central Bank Digital Currency are worrisome to me. Central banks have an overview of all transactions and the power to wipe out, control, and lock accounts or even worse identities. This is not necessarily a concern in a stable democracy like Switzerland, but the goodwill of such cannot be taken for granted.”

“I truly see a path forward for humanity with bitcoin,” he finishes hopeful. “As centralized control is consolidating, and technology seems to accelerate this central power, I see bitcoin as an important tool for potential ‘salvation’, empowering people to be more accountable, distributing power equally and applying the same rules to all participants,” Pierre-Edouard closes, and urges more discussions on how Bitcoins could be made more sustainable, faster.