Is investing in bitcoin fundamentally bad for the progress of the economy? That is the question posed in a recent New York Times piece, noting that the activity of mining bitcoin alone has huge costs in terms of power and comes as an expensively extracted good, despite the fact that the value of that good is, at this point, solely determined by the enthusiasm of an international community of collectors and traders.
“It appears that much of our evolving digital infrastructure is devoted to activities, like the proliferation of cybercoins, that are worse than frivolous,” said James McAndrews, the former head of research at the Federal Reserve Bank of New York.
MeAndrews points to slow economic growth and nearly 20 percent of the adult workforce having, for all intents and purposes, given up on work. Entrepreneurship has slowed down, and Americans are even having fewer children.
And some economists are wondering if the richly developed digital lives of Americans aren’t getting in the way of them developing richly lived real lives.
Bitcoin is theorized to be one of the biggest parts of the biggest emerging brick in that wall of distraction. And also among the most expensive, as “mining” bitcoin has big costs in terms of power. According to the Times, “Bitcoin miners compete for the coins by submitting answers to difficult math problems. Instead of solving the problems, miners use computers to submit a flood of guesses.”
And as bitcoin is currently worth over $10,000 a pop — down from the all time high of nearly $20,000 — there is reason to spend the electricity to find them.
Tyler Cowen, an economist at George Mason University, said mining gold was a better use of resources —because even if it lost value, it could be used to fill teeth.
“Once the bitcoin power is burned, it is never coming back,” he said.