The trend of cryptocurrencies in recent years have been a roller coaster: from the birth of Bitcoin in 2009 to the present day, digital currencies have captured the attention of many countries. In some cases they have been used to improve accessibility and direct free trade, in others to finance the weapons of a conflict.
Particularly in the last two years, with the explosion of Bitcoin there have been important changes in the global economic landscape but not only. A revolution like this implies that there are direct effects on society and on the environment.
The geopolitics of cryptocurrencies: globalization
Globalization has changed the world very quickly by creating connections and new opportunities. In this scenario the economic sector was perhaps the protagonist: free markets and trade have been taken in by nations and tensions have never been completely resolved.
In this context of turbulent geo-economic growth, cryptocurrencies have emerged as a new alternative to the classic market and have grown exponentially. Development linear and well regulated and for this reason it is generating a lot of confusion both among investors and among the States themselves.
The geopolitics of cryptocurrencies: what digital currencies are made of
To better understand how the geopolitics of cryptocurrencies works, it is necessary to have a clear idea of the practical concept of digital currency. Cryptocurrencies are not made of air but of heavy metals, plastics, rubbers and other materials that we see around us every day.
To exist they need electricity and technological equipment, or in other words, mining processes, assembly companies, disposal companies, companies that extract fossil fuels or renewable energy sources.
The impacts generated
When we talk about impacts we must be careful not to close ourselves in a local vision of the problem but to address the issue on a large scale. Since globalization has generated connections and an openness of trade, sustainability and the economic growth of a single country will be the result of the sum of the intermediate (sustainable) processes.
The environmental, social and economic impacts generated by many cryptocurrencies such as bitcoin are worrying. The consequences of an uncontrolled and disordered innovation often imply bad consequences that affect the civilian population.
It suffices to see the case of El Salvador, probably used as an experiment: a huge crash that worsened the living conditions of most people and contributed to increasing public disorder.
The extraction of resources
On other occasions the impacts have been even more direct: cryptocurrencies that use the Proof of Work (PoW) protocol, for example, need large quantities of electricity, super-computers and high-consumption cooling processes.
The sources of energy used obviously depend on the cost and legislation of the country. In this case, speaking of cryptocurrency mines, we refer to gigantic structures full of electronic equipment that use the most affordable sources.
Since last year when the price of bitcoins skyrocketed, China changed its policy - a sign that the use of hydroelectricity was not 100% "clean". The result was not an adjustment and a change of internal policy but a Great Migration to more fertile lands.
The Great Migration
The phenomenon of Great Migration tells us a lot about to the geopolitics of digital currencies. Being a technology still not well regulated in the international market, it moves astutely to try to grow and obtain more power.
When China adopted another stance towards digital currencies, bitcoin mines moved mainly to the United States. The sources of energy are changed from hydroelectric to fossil fuels by exploding criticism from environmentalists on the web and humanitarian organizations.
The geopolitics of cryptocurrencies: the Russia-Ukraine conflict
Even before the conflict between Russia and Ukraine began, Ukraine had adopted an open stance towards cryptocurrencies based on its expanding tech industry.
Cryptocurrencies are therefore a means to escape various problems: for Russia it could be an opportunity to avoid sanctions and for Ukraine was the means by which to stock up on weapons and be able to respond to the Russian attack.
The geopolitics of cryptocurrencies: raw resources
The manufacture of electronic equipment is thus how the extraction of the necessary raw resources weigh heavily on the scales. Trade with some countries including Australia and the Democratic Republic of Congo will be essential to be able to obtain large quantities of heavy metals such as lithium and lead.
China already has occupied a large part of the Congolese territory to appropriate their raw materials by exploiting poverty and the social disorder of the country. The United States possesses many useful mines in its territory and for this reason it will be difficult for them to move towards a sustainable policy.
The race for resources and the new geopolitical assets will move towards technological innovations with great knock-on effects on populations and territories.
It is difficult to predict the scenario of the next few years but decentralized finance has shown of being an attractive alternative not to depend too much on the fluctuation of local currencies and avoid sanctions by climbing from the SWIFT system without compromising international trade too much.
In some cases there is the risk that the chosen consensus mechanism facilitates the centralization of capital as in the case of Proof of Stake (PoS) but in general if the processes were well regulated and the scams more limited, there would be more and more investors ready to jump into this world.
While skeptics argue that regulation could limit the potential of digital currencies, the reality is very simple: as long as there will be no stricter control, people will not take this alternative seriously.
Cryptocurrencies have exploded but still remain a niche scenario today for several reasons, above all for the fear of jumping into a still unknown world without great protections. The economic assets of the next few months will certainly determine imminent changes.