Thursday, 29 March 2018

Write that printing money creates wealth, get published in Nature

In the debate about the carbon footprint of cryptocurrencies, Nature has recently published a one-page correspondence titled “Cryptocurrency mining is neither wasteful nor uneconomic”. This counter-intuitive claim provoked me to read the text in search of a non-trivial idea. To my shock and horror, the only basis for the claim is the trivial wordplay of using the same term “wealth” for both money and goods and services.
The idea is that creating a given amount in cryptocurrency consumes less resources than producing the goods and services that can be bought with that amount, so cryptocurrency mining is more economic than other activities. Using the same argument, one could contend that printing paper money generates wealth if the paper is worth less than the amount written on it.

I won’t blame the author of this nonsense: everyone can have stupid ideas from time to time. Who knows? This might even be a hoax. But Nature’s editorial staff is supposed to act as a filter, and not to publish nonsense. In selecting research articles for publication, Nature is already being criticized for priviledging striking claims over solid results. It would be worrying that Nature’s news and comments sections would start sliding down a similar slope.

The correspondence in question unwittingly reinforces the argument against cryptocurrency mining: while obviously wasteful, that activity is encouraged in the existing economic system, and in this particular sense it is indeed not uneconomic. When money was based on precious metals, producing money did take effort and resources. But in paper and electronic forms, money has become almost free to produce. Consuming much resources to produce cryptocurrencies is therefore a regression, and a needless one: there already exist cryptocurrencies that do not require mining.