Bitcoin and Degrowth: A New Monetary System for a Sustainable World

Bitcoin is often criticized for rewarding early adopters over later adopters, and critics often claim that this will create a new class of crypto-oligarchs to rule the world.

Austrian economics is a heterodox school of economic thought that emphasizes the role of subjective value and the importance of sound money. While Austrian economics is often associated with bitcoin, it is not the only heterodox economic theory that describes the importance of a type of money that sounds strikingly like bitcoin. Aspects of degrowth and ecological economics also promote an end to fiat and inflationary currencies.

Degrowth is a social, political, and economic movement that advocates for a reduction in the overall energy consumption of wealthy countries to make room for developing countries to increase theirs. There is a growing call from the climate movement for the world to move away from economic growth and toward degrowth. Ecological economics provides a concrete foundation for how this would work through a convergence of degrowth-growth into an overall steady-state economy.

A steady-state economy is one that is in line with what our planet is capable of sustaining. Contrary to what some may think, there are no species on this planet that can outgrow their habitat and survive for very long thereafter. Ecological economist Brian Czech calls a steady-state economy “economics for a full-world”; one where the economy has grown so big that it is pushing the environment to its limits.

Degrowth is more than steady-state economics and energy use, though. It also promotes an end to fiat, inflationary, and debt-based currencies. Degrowth encourages localism and frugal living that is in line with nature. One could argue that degrowth is exactly what Bitcoiner low-time preference looks like when applied across all aspects of the economy. Degrowth means eliminating wasteful consumerism, bullshit jobs, and rent-seeking. It also promotes indigenous methods of natural management and permaculture.

If we want degrowth, then we have to build new infrastructure to sustain this low-time preference way of living. If we are going to eliminate fiat, inflation, and debt-based currencies, then we will need to build a robust, decentralized, and secure monetary network that we can use to keep our degrowth economic system in planetary check.

In Supply Shock: Economic Growth at the Crossroads, Czech explains that inflation happens “when a monetary authority (such as the Federal Reserve in the United States) increases the money supply faster than the real economy can grow”. Czech is not an Austrian economist but a full-on degrowther. He continues, “recent periods of rapid, real economic growth… have tended to result in inflation, because the monetary authorities are too removed from the realities of economic life to understand ecological limits to growth”.

From the ecological economics perspective, the origin of money is fundamentally a result of agricultural surplus; not debt, not the state. Although these certainly play a second-order role in the development and adoption of money, without agricultural surplus, there would be no division of labor, and without division of labor, there would be no need for exchange. Taken to the extreme, if our food systems completely collapsed this year, everything else would go with it and each of us would be back to spending most of our time finding enough food to survive; we would not need money.

From the first and second laws of thermodynamics, we know that energy is neither created nor destroyed and that when energy is converted the process is imperfect, and some of it dissipates. This means that these physical laws place an ecological limit on our planet that ultimately sets an upper bound on agricultural surplus. From an ecological economics standpoint, this means that money has a limit.

Bitcoin is money and it has a limit, too. In 2140, the last of 21 million bitcoin will be minted. In the early 2030s, 98% of all bitcoin will have been created. Bitcoin’s energy consumption grows so long as the value of bitcoin sustains its growth. At some point, if bitcoin becomes the world’s money standard, all the world’s value will be on the monetary network. When that happens, the growth of the network’s hash rate and thus energy consumption will have to slow down and likely reach a steady state of its own. This will happen because of diminishing returns as the network mining difficulty increases and competition is tight.

If ecological economic theory is right, then the total value of the Bitcoin network should reflect the full planetary limit to available resources that provide an agricultural surplus. Since we cannot create more energy, it must therefore be true that we cannot create more bitcoin. Our socio-economic system will have to buy into this idea of limits and that’s where the broader societal prescriptions from degrowth will be useful. In addition, there’s a saying in the bitcoin community; “you don’t change bitcoin, bitcoin changes you.” It’s possible that adopting bitcoin will turn people away from instant gratification consumerism, something bitcoiners colloquially refer to as high-time preference.

Because mining happens globally, we expect that energy consumption will grow during the period of economic convergence. If degrowthers, ecological economists, environmentalists, and climate activists