I like the idea of cryptocurrencies for several reasons. With the exceptions of ones started by governments or their cronies, they exist outside the direct control of governments. If designed properly, they can also enable anonymous transactions, which hinders the efforts of governments to use transaction information to oppress individuals. However, there is a lot of criticism aimed at cryptocurrencies. Some of the criticism is valid, but much of the criticism is idiotic when considered in the context of currencies in general.
One of the most common criticisms I see regarding cryptocurrencies is their energy consumption. Consider Bitcoin. There is a website dedicated to tracking the estimated power usage of the Bitcoin blockchain. As of this writing the site estimates the blockchain’s energy consumption at 73.12 TWh, which it says is roughly equivalent to the power usage of all of Austria. Consuming the power usage of an entire country to maintain a blockchain appears horribly inefficient… until you compare it to the resources used by other currencies.
Consider the United States dollar. It’s easy to make the mistake of assuming the dollar is a comparatively efficient currency since pieces of paper with pictures of dead tyrants don’t consume electricity. But there’s so much more involved in manufacturing an maintaining dollars. To start with you have the obvious raw materials needed to manufacture dollars. Ink, paper, printing machinery, etc. are needed to make every dollar. Not only is printing machinery used to print dollars, it also requires routine maintenance. Once the dollars are printed they must be stored so you need warehouse facilities. But not any warehouse facility will do. Being a highly sought after good, dollars must be stored in a warehouse that is secure against thieves. These secure storage facilities require hardened materials, security devices, electricity, manpower, etc. Then you have the issue of transporting dollars between storage facilities, which must also be done in a secure manner (armored trucks aren’t exactly fuel efficient vehicles).
The resources needed for manufacturing, storing, and circulating dollars is only a small percentage of the overall resources needed to maintain dollars. A fiat currency quickly becomes worthless if nongovernmental counterfeiters are able to practice their trade unhindered. There are two majors steps to thwarting counterfeiters: hardening the currency itself to make counterfeiting more difficult and punishing counterfeiters once they’re captured.
A dollar can have a lot of built-in security measures. Each of these measures requires resources for both development and implementation. Research and development is needed first to come up with measures that make dollars harder to counterfeit, then manufacturing machinery capable of implementing those measures must be developed, purchased, powered, and maintained.
Then you have the task of punishing captured counterfeiters. The first step in this process is writing and passing legislation, which can be an incredibly inefficient process. The legislation itself is meaningless though, it merely authorizes the allocation of resources for law enforcers. Dollars are probably the most common target of currency counterfeiters, which means the amount of law enforcement effort needed to find and capture counterfeiters is significant, especially when you consider the fact that such efforts must be global in scale. Once captured the counterfeiters must then be tried and, if found guilty, imprisoned. The court system isn’t designed for efficiency and prisons, like the previously mentioned secure warehouses, require a lot of resources to build, operate, and maintain.
What I’ve presented is an incomplete summary of the resources needed to maintain a fiat currency. It’s easy to see that they’re not a resource efficient as many people suspect. Criticizing cryptocurrencies for being inefficient without comparing such inefficiency to their biggest competitors, fiat currencies, is disingenuous and meaingless.