Representations of bitcoin and US dollar banknotes. bitcoin is digital money, similar to any other currency, though more transferable and outside of the control of banking systems and governments. Reuters
Representations of bitcoin and US dollar banknotes. bitcoin is digital money, similar to any other currency, though more transferable and outside of the control of banking systems and governments. Reuters
Representations of bitcoin and US dollar banknotes. bitcoin is digital money, similar to any other currency, though more transferable and outside of the control of banking systems and governments. Reu
Miles of ink have already flown in commentary and analysis about the cryptocurrency bitcoin. But recently, something has changed – and it may be ominous. As trading volumes have shot up, the digital currency is being weaponised to support all different kinds of interests. Where will this lead?
Consider bitcoin's beginnings. It is digital money, similar to any other currency, though more transferable and outside of the control of banking systems and governments. For this reason, in the early days, it was used extensively for illicit trade and transactions. Then some uber-cool coffee shops and retailers also accepted BTC, when this elusive currency could be had for less than $2,000.
From there, the fascination spread, and cryptocurrencies were flogged in places from low-cost airline in-flight magazines to personal finance blogs. More money piled in causing a massive rally and valuing the currency at close to $20,000 in December 2017 before registering big losses. And onto the rollercoaster we climbed. But what will the future history read?
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Economists such as Nouriel Roubini caution individuals strongly against investing because there is no underlying commodity, business or asset that provides BTC its value. Warren Buffet, veteran investor, shares this view and concern that the price increase is pure speculation.
But it may be risky in another much larger way, too.
Since this currency is entirely digital and is transacted in complex ways, it is extremely energy intensive – thousands of times more so than credit card transactions.
Iran has blamed the energy demand of hundreds of cryptocurrency transaction centres in the country for recent power outages in Tehran. The clever folks at the Bitcoin Electricity Consumption Index, an effort of Cambridge University, have put a number to it: bitcoin's annual energy consumption is 129 Terawatt hours, which is more energy than the Ukraine consumes in one year – a population of 44 million with a GDP of $153 billion. The current total value of BTC is now well over $1.5 trillion – without having produced anything at all – not one toaster, not one graduate, not one beach towel on a Black Sea resort, nothing that even remotely resembles an output of a country.
Yet, the energy consumption and carbon emissions of this phenomenon are symptomatic of our aversion to include the true cost of carbon while apparently creating wealth out of thin air.
Still, plenty of people and companies point to BTC continuing to grow in value and the need to invest further. Somewhat ironically, electric car company Tesla is one of them. Another is Dambisa Moyo, a development economist, who recently advocated for bitcoin to be a store of value. She argues that companies must invest in this currency as a measure of self-protection, a kind of insurance. Companies that invest successfully will be able to take over poorer companies that have not invested.
Tesla chief executive Elon Musk. Tesla is one of many companies intent on investing in bitcoin. AFP
With this argument Ms Moyo has “weaponised” bitcoin and created a cryptocurrency arms race. This is akin to a cold war: nobody wants it but, equally, nobody can afford not to participate. It is a stratospheric war at that, fought at high altitude at such high stakes that the effects will splash down over the population. Savings, pensions and debt are rolled into the exposure to bitcoin as institutional investors join in.
This means massive volatility – on March 14 it was worth $61,600 and down to $54,000 two days later. In November 2017 its value was $327. But what if institutional investors held on for several years? What if the value collapsed? What if everyone was invested in the currency – even schoolchildren could invest their lunch money in this global de-centralised digital honeypot. Could bitcoin become too big to fail? Will governments need to bail out those who sustain losses?
Illuminated mining rigs at the CryptoUniverse cryptocurrency mining farm in Nadvoitsy, Russia. The rise of bitcoin and other cryptocurrencies has prompted a push among central banks to develop their own digital currencies. Bloomberg
The digital experiment is of epic and real-life proportions: over $1.5tn are locked into this code. Much of that money could have gone to re-kindling Covid-19-ravaged economies (just watch those stimulus cheques going to bitcoin). Everyone is hoping to strike it rich, everyone else fears missing out. Few worry about the planetary climate implications and more trading means more carbon emissions. Others egg on investors by weaponising BTC. Energy allocation is prioritised to carry out transactions over essential services.
How might it unfurl as wealth is created and destroyed so easily and ethereally? This sounds like a dystopian future and addictive game rolled into one. But, of course, this is just one possible scenario. I’m sure there is another one somewhere, in which everyone gets rich, someone somewhere resolves the climate and energy issues, and we all live happily ever after.
Dr Patrick Noack is the executive director of future, foresight and imagination at the Dubai Future Foundation
"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
Cryptocurrency Investing for Dummies – by Kiana Danial
There are several primers for investing in cryptocurrencies available online, including e-books written by people whose credentials fall apart on the second page of your preferred search engine.
Ms Danial is a finance coach and former currency analyst who writes for Nasdaq. Her broad-strokes primer (2019) breaks down investing in cryptocurrency into baby steps, while explaining the terms and technologies involved.
Although cryptocurrencies are a fast evolving world, this book offers a good insight into the game as well as providing some basic tips, strategies and warning signs.
Begin your cryptocurrency journey here.
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UAE currency: the story behind the money in your pockets
180ml extra virgin olive oil; 4 to 5 large cloves of garlic, minced or pureed (or 3 to 4 garlic scapes, roughly chopped); 1 or 2 small hot red chillies, dried (or ¼ teaspoon dried red chilli flakes); 400g raw prawns, deveined, heads removed and tails left intact; a generous splash of sweet chilli vinegar; sea salt flakes for seasoning; a small handful of fresh flat-leaf parsley, roughly chopped
Method
▶ Heat the oil in a terracotta dish or frying pan. Once the oil is sizzling hot, add the garlic and chilli, stirring continuously for about 10 seconds until golden and aromatic.
▶ Add a splash of sweet chilli vinegar and as it vigorously simmers, releasing perfumed aromas, add the prawns and cook, stirring a few times.
▶ Once the prawns turn pink, after 1 or 2 minutes of cooking, remove from the heat and season with sea salt flakes.
▶ Once the prawns are cool enough to eat, scatter with parsley and serve with small forks or toothpicks as the perfect sharing starter. Finish off with crusty bread to soak up all that flavour-infused olive oil.
