The previous chapter examined critiques internal to Web3's own promises — that it recentralizes, that it is prone to scams, that much of its activity is speculative churn. This chapter turns outward, to the costs and harms that Web3 imposes on people and systems beyond its own users. Economists call such spillovers externalities — costs (or benefits) of an activity borne by parties who did not choose to participate in it, and which the activity's own price does not capture. The classic example is a factory whose smoke dirties a neighbor's laundry: the factory enjoys the profit, the neighbor pays in soot. The central task of this chapter is to ask, with figures and dates, what Web3's smoke actually is, who breathes it, and how large the cloud truly is. Doing so requires a discipline the public debate often lacks: separating proof-of-work cryptocurrencies (chiefly Bitcoin) from the proof-of-stake systems that now underpin most of Web3, and separating harms that are demonstrated from harms that are merely asserted.
In plain terms: an externality is a side effect your bill does not show. If using a technology damages the climate, drains a region's grid, or funds crime, those are costs to the wider world — and a fair assessment of Web3 has to weigh them honestly, neither exaggerating nor waving them away.
A note on framing runs through the whole chapter. "Crypto is boiling the oceans" is a memorable slogan, and for one technology — Bitcoin's proof-of-work — it points at something real. But it is false as a description of Web3 as a whole, because the largest smart-contract platform abandoned proof-of-work in 2022 and cut its energy use by an estimated 99.95 percent. Keeping that distinction visible is not special pleading for the industry; it is simply accuracy, and accuracy is the only basis on which either praise or condemnation can stand.
In plain terms
an externality is a side effect your bill does not show. If using a technology damages the climate, drains a region's grid, or funds crime, those are costs to the wider world — and a fair assessment of Web3 has to weigh them honestly, neither exaggerating nor waving them away.
nobody can directly measure how much electricity Bitcoin uses, so analysts estimate it two ways — one by modeling the whole network, one by surveying real miners. The estimates land between about 138 and 175 terawatt-hours a year, somewhere around half a percent of all the electricity humanity uses. The uncertainty is real and should be stated, not hidden.
Bitcoin's electricity is getting cleaner by some measures — over half now counts as "sustainable" if you include nuclear — but "cleaner" is not "clean," and the total is still big. Both the "it's mostly green now" and the "it's an environmental catastrophe" camps are overstating a genuinely murky picture.
mining machines are disposable by design — built for one task, then junked within a year or two when better ones appear. That produces tens of thousands of tonnes of hard-to-recycle electronic scrap a year, a real environmental cost on top of the electricity.
in a single day in September 2022, the main engine of Web3 cut its electricity use by about 99.95 percent — roughly two-thousand-fold — by switching from a system that burns power to one that locks up money. The lesson is that proof-of-work's huge energy cost is a design choice, not a law of nature for blockchains.
crypto prices lurch up and down far more than stocks or currencies. That is the speculator's own problem until the lurches, combined with leverage and outright fraud, wipe out the savings of hundreds of thousands of ordinary account-holders who did not grasp what they were exposed to — as happened in 2022, when roughly $2 trillion in paper wealth vanished.
a key open question is whether crypto-tokens actually make the world richer or just shuffle money around (while skimming fees and, for Bitcoin, burning electricity). The honest answer is that some corners do create real value and others are closer to a casino — and which dominates overall is not yet settled by the evidence.
the bodies that guard the global financial system have looked hard at crypto. Their verdict so far is reassuring but conditional: the 2022 crash stayed mostly walled off from ordinary banking, so the wider economy was spared — but that was partly luck, and a bigger, better-connected crypto sector could do real damage next time.
yes, billions of dollars of crime flow through crypto — roughly $40.9 billion in 2024, and the real figure is higher because the count keeps getting revised up. But that is about 0.14 percent of all crypto activity, far below the share of crime in cash and bank money. Both facts are true: the absolute number is large, and the proportion is small and disputed. Quoting only one of them is propaganda.
behind the statistics are real people — Filipino gamers who borrowed money to play, retirees who put savings into a coin that collapsed. What makes scams a public harm and not just bad luck is who they target: the schemes lean hardest on the poor and inexperienced, often using the language of "financial inclusion" as bait.
What the chapter covers
- The environmental dimension I: Bitcoin's electricity appetite
- The environmental dimension II: electronic waste
- The environmental dimension III: why this is a Bitcoin problem, not a Web3 problem
- The economic dimension I: volatility and consumer harm
- The economic dimension II: wealth concentration and the value question
- The economic dimension III: financial-stability concerns
- The social dimension I: illicit finance in context
- The social dimension II: the human toll of scams
- The social dimension III: equity, access, and the digital divide
- Synthesis
Terms explained in this chapter
The full chapter is in the book.
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