Bitcoin — the world’s first digital and entirely decentralized currency — wasn’t only revolutionary when it first appeared, it also got its timing just right.
The domain bitcoin.com was initially registered in August 2008, smack-dab in the middle of the worst recession the world had seen in a while, and the white paper released under the pseudonym Satoshi Nakamoto that followed shortly after presented a vision of a currency that didn’t need to rely on failing banks.
Bitcoin’s genesis block itself contained an embedded message that sharply criticized the traditional banking system.
It is no surprise that early adopters of Bitcoin weren’t just the most tech-savvy among us but also some of the most idealistic people out there.
Bitcoin — and decentralized, blockchain-based, cryptocurrencies in general, for that matter — simultaneously conjured images of freedom and community. It was to money what torrents were to content.
Bitcoin, early adopters believed, would create a world in which traditional banks and government-backed currencies could become entirely optional.
Bitcoin had the power to create an economy that wouldn’t be vulnerable to the same instabilities the 2008 recession did so much to highlight, potentially helping to solve the problem of poverty.
Bitcoin could make global collaboration possible and straightforward and effectively erase national borders from the equation altogether.
Exchange rates could become a thing of the past when Bitcoin was used.
Perhaps most importantly, the use of Bitcoin could, on a massive scale, allow people to offer financial support to controversial causes — with Wikileaks being the prime early example — without getting into trouble.
Bitcoin could make secure payment possible without compromising privacy and anonymity.
More than a decade after its inception, Bitcoin is no longer the sole domain of visionary programmers and other early adopters.
It is no longer obscure, mocked, or feared.
Bitcoin’s longevity and stability are no longer in question, as the cryptocurrency has exponentially risen in value.
More and more entirely mainstream businesses are taking steps to accept payment in Bitcoin, and increasing numbers of people who were skeptical at first are, frankly, hitting themselves over the head.
They’re filled with regret that they didn’t invest in Bitcoin much earlier — because if they had, they could be positively wealthy just about now.
The global economic landscape has, however, also undergone significant shifts since Bitcoin first emerged.
The new focus on the need to be socially responsible is causing potential investors to ask a different set of questions than they might have before.
Just as many people are aware that investing in Bitcoin still can be immensely profitable even in this day and age, wondering whether they should jump on the cryptocurrency bandwagon now, others want to look before they leap.
They want to know if investing in Bitcoin is ethical before they even consider this step — and that is a question with many dimensions.
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Table of Contents
What Factors Determine Whether an Investment is Ethical?
The same factors that you might consider when it comes to personal ethics play a role in deciding whether an investment is ethical and what concerns you should have.
- Looking at the potential consequences of the decision, in this case investing in Bitcoin.
- Examining who would benefit from the decision to invest in Bitcoin, how, and how much.
- Analyzing who or what (including the environment) might suffer — meaning, in this case, potentially both due to Bitcoin’s very existence and your personal decision to invest in it.
- Asking if the decision, in this case, to invest in Bitcoin aligns with your values and beliefs. Does anything about it feel wrong?
- Asking if the decision is legal? In investing in Bitcoin, you could also ask if the currency is easily used to carry out illegal activities and how you feel about that.
Some of these questions have easy answers, while others very much don’t.
To be able to answer the question “is investing in Bitcoin ethical?” you would, after all, need more information.
That is why, when it comes to business ethics, it can help to look at guiding parameters.
Those would include:
- The environmental impact of the decision. Bitcoin is a solely digital currency, and therefore, anyone who invests in it by definition requires easy access to the internet.
- In today’s world, no regular internet user can remain unaware of the fact that climate change is the single biggest threat to our planet’s health and the well-being of future generations. Nobody can remain unaware that, while sweeping social and political changes are sorely needed to combat climate change, the personal choices we make and the carbon footprint we leave behind also matter. This is to make ethical investments of any kind, including in Bitcoin, the environmental impact must be considered.
- The social impact of your investment decision. When asking if investing in Bitcoin is ethical, you need to consider if Bitcoin is in general. Your step of investing in cryptocurrency has a positive, negative, or neutral social impact, particularly on more marginalized groups. You could consider who benefits from the existence of Bitcoin and your personal access to it. To some extent, this depends on what you plan to do if your returns prove to be profitable — those who believe they would donate to charities would leave a different social legacy than those who might. For instance, travel the world or buy a fast and fossil-fuel burning vehicle.
- Transparency is the third criterion to be considered in business ethics, and it is also referred to as governance. Questions to ask when analyzing this final factor would include “who is held accountable?” and “who is in control?”.
With those ethical criteria in mind, it then becomes possible to ask productive questions that allow you to gain a personal answer to your questions as to why investing in Bitcoin is ethical or why investing in Bitcoin is not ethical.
What Kind of Environmental Impact Does Investing in Bitcoin Have?
The first question to ask when considering if investing in Bitcoin is ethical would be what kind of environmental impact your investment, and the very existence of the digital currency, might have.
To answer it, you need to ask this — is crypto mining ethical?
Nearly anyone who has even taken a cursory look at the possibility of investing in Bitcoin or any other cryptocurrency will have stumbled upon the term “crypto mining” or “Bitcoin mining” — but the fact that this operation is rather technical also means that few people have the capacity to understand what the process entails truly.
Bitcoin mining serves two distinct purposes.
The first is to create a new bitcoin, and the second would be to verify payment transactions, a crucial part of rendering Bitcoin safe and trustworthy as a cryptocurrency.
Here, so-called Bitcoin miners use extremely powerful computer setups to add any transaction you may make, whether buying or selling Bitcoin, to the blockchain and to ensure that the public record is accurate.
This process of Bitcoin mining is essential to consider when asking yourself about Bitcoin’s environmental impact.
Although the precise process at work here is highly technical, blockchain environmental issues are far more clear-cut.
Bitcoin energy consumption is enormous — the potent hardware that Bitcoin miners rely on devours over 31 terawatt-hours every year.
One terawatt-hour is equivalent to 1,000,000,000,000 watts, by the way. For comparison, the average US household consumes about 11,000 kilowatt-hours a year, with one KWH being equal to 1,000 watts.
Not only have the media reported that each single Bitcoin transaction uses the same amount of energy that could also power a total of nine (!!!) houses in the United States for a day.
Most entire countries consume less energy every year than the global Bitcoin mining industry does.
This itself highlights important blockchain environmental issues that do not answer the question “is investing in Bitcoin ethical?” favorably.
Yes, you can count on that the global banking sector collectively uses more energy annually than Bitcoin miners do.
Does every physical cash payment you make take up the same amount of energy that would be used to power nine homes for a day, though?
Does every online banking transaction use a traditional bank?
The answer here is no, and that is why investing in Bitcoin is not ethical enough for some people.
The fact that Bitcoin miners are forever chasing faster, more powerful, and more efficient computer rigs that allow them to make higher profits from mining also needs to be considered.
The “real-life” mining of the resources required to manufacture computer parts and facilitate their global transportation also has a huge carbon footprint.
See Related: How to Invest In Wind Energy
What Kind of Social Impact Does Investing in Bitcoin Have?
As you ask why investing in Bitcoin is ethical, you could also look at the potential social impact of your decision.
This is less clear-cut than the undeniable environmental impact crypto mining has by consuming enormous amounts of energy, simply because it is much more challenging to assess.
Bitcoin mining has indeed supported countless people in developing economies, including to a large extent Latin America and more impoverished regions in the Russian Federation, leading not only to a nice chunk of change but also considerable wealth in some cases.
It is equally valid that smart investments, cleverly timed, have allowed people in similarly poor regions to attain wealth.
This, too, needs to be taken into account as you consider blockchain ethical issues. Every time you carry out a Bitcoin transaction, you are potentially helping a crypto-miner in a developing nation become financially independent.
Bitcoin has further allowed numerous people who would not previously have achieved this to receive and send payments in a way that circumvents government censorship.
Anyone who wanted to support Wikileaks in the early days of Bitcoin will understand the potential positive social impact that Bitcoin, when set up appropriately, represents a truly anonymous and private payment method.
Is investing in Bitcoin ethical for you as an individual or company?
That, of course, does not merely depend on the wider social nature and impact of Bitcoin as a digital currency but also your intentions.
If Bitcoin were to rise significantly in value like it has been doing since its inception, and you were to make a sizable profit by investing in Bitcoin, what would you do with it?
If you plan to put these funds to use in positive and socially responsible ways, that will make the investment significantly more ethical. It could even hold the key to why investing in Bitcoin is ethical for you.
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How Well Does Bitcoin Rank on the Transparency Front?
Transparency also called governance and perhaps better described simply as accountability, is the final foundational question to consider in business ethics.
Bitcoin is, frankly, far from transparent.
There is no doubt that this fact is largely due to lacking technical knowledge among many users (or rather, people in general).
Even those who have become masters at managing Bitcoin wallets may not understand the intricacies of blockchain and Bitcoin mining.
Like traditional banking, we can become proficient users and consumers without truly knowing anything about the system’s inner workings.
The decentralized nature of Bitcoin also inherently reduces transparency, however. No single person or body can be held accountable for Bitcoin itself or actions taken using this digital currency.
The fact that Bitcoin is by definition designed to be private and anonymous does not help in this area.
While Bitcoin’s nature can be put to ethical use in circumventing the draconian regulations of dictatorial governments, it can also just as quickly be employed in advancing criminal enterprises.
Nobody who invests in Bitcoin can do anything about this fact nor change the nature of Bitcoin.
If you want to be a part of this movement but want other options to use Crypto.com to invest in some of the most revolutionary digital currencies on the market.
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Is Investing in Bitcoin Ethical? The Bottom Line
Questions relating to business ethics offer those individuals and businesses who are currently considering why investing in Bitcoin is ethical or why investing in Bitcoin is not ethical a helpful framework.
“Is crypto mining ethical?” is a question that cannot be skipped here, given the fact that Bitcoin does have an enormous — and growing — environmental impact.
Ultimately, every potential investor has to answer this question for themselves, and to consider all possible issues in-depth offers an excellent starting point.
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Kyle Kroeger, esteemed Purdue University alum and accomplished finance professional, brings a decade of invaluable experience from diverse finance roles in both small and large firms. An astute investor himself, Kyle adeptly navigates the spheres of corporate and client-side finance, always guiding with a principal investor’s sharp acumen.
Hailing from a lineage of industrious Midwestern entrepreneurs and creatives, his business instincts are deeply ingrained. This background fuels his entrepreneurial spirit and underpins his commitment to responsible investment. As the Founder and Owner of The Impact Investor, Kyle fervently advocates for increased awareness of ethically invested funds, empowering individuals to make judicious investment decisions.
Striving to marry financial prudence with positive societal impact, Kyle imparts practical strategies for saving and investing, underlined by a robust ethos of conscientious capitalism. His ambition transcends personal gain, aiming instead to spark transformative global change through the power of responsible investment.
When not immersed in the world of finance, he’s continually captivated by the cultural richness of new cities, relishing the opportunity to learn from diverse societies. This passion for travel is eloquently documented on his site, ViaTravelers.com, where you can delve into his unique experiences via his author profile.