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Published on April 19th, 2013 | by Joshua S Hill


Bitcoin’s Environmental Problem

April 19th, 2013 by  

The world of environmental problems is bad enough without adding digital problems to the mix, but that’s just what Bitcoin has done by virtue of being the most popular digital currency currently available. Bitcoin logo

Bitcoin, for the uninitiated, is “a digital currency which was first described in a 2008 paper by pseudonymous developer Satoshi Nakamoto, who called it an anonymous, peer-to-peer, electronic payments system.” Nakamoto believed (PDF) that an “electronic payment system based on cryptographic proof instead of trust” was necessary to prevent fraud:

Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.

All very well and good, you might say, but what does this have to do with the environment?

The problem comes in the accumulation of Bitcoins (or is the plural Bitcoin?).


There are two primary methods of acquiring Bitcoins: purchasing on the open market and ‘mining’ for Bitcoins (just like we would mine for gold, say). Business Insider provided a fantastic rundown of just how a digital currency is mined:

A common analogy for Bitcoins is gold: like gold, they have value only because people want them, the supply is limited, more Bitcoins are created only by ‘mining’ for them and the difficulty in mining grows as they are mined. But rather than being stored in underground vaults Bitcoins are simply entries in a notional ledger held across many computers around the world.

Unlike gold, however, mining for Bitcoins is a mathematical process conducted on necessarily increasingly more powerful computers. A successful search will yield a ‘block’ of data, a Bitcoin ‘hash’. As Business Insider describes, “when a match occurs the miner obtains a bounty of Bitcoins.” This is the tricky bit, however. As with any currency there has to be rarity. And as the amount of currency owned grows, so too must the rarity, and therefore the difficulty in acquiring more of said currency.

Returning to the analogy of gold, when gold was first discovered, all you needed was a pan and patience. As time went on, and gold started becoming rarer, the technology needed to extract more and more gold increased. The same goes with Bitcoins, as the computational power required to complete a successful search for a Bitcoin hash continues to increase. More and more powerful computers are required to earn Bitcoin, and those computers are being pushed harder and faster with each Bitcoin that is earned.

Subsequently, so too are the power requirements of those computers. And there we have the environmental problem of the Bitcoin.

Think of it in terms of a distributed computing project, like Folding@home, which uses the idle processes of your computer to simulate protein folding (hence the name). Joining this project connects your computer to thousands of other computers across the globe which have similarly installed the software that simulates the folding. As a result, the researchers have access to one of the world’s largest supercomputers, without the expense of needing to actually buy a supercomputer, by virtue of having thousands of computers around the world doing the job of one expensive supercomputer. The relevant similarities to Bitcoin — and there are several in this particular instance — exist in using your computer’s idle processes.

Normally, when someone is finished with their computer for the day, they might turn it off. However, when folding — or in this case, searching for Bitcoin hashes — the computer is left on in an effort to let the program work longer and have access to more of the computers processes. Additionally, your computer is not ‘at rest’ — using only the barest power necessary to run. Rather, the search pushes the computer to work harder, which in turn increases the amount of power required to sustain the work.

According to, Bitcoin miners are using 1,046.97 megawatt hours today to search for new Bitcoin hashes, which amounts to approximately $157,000. Blockchain also details the current operating profit of mining, putting the figure in at $204,219.47: that’s an operating margin of only 56.53%.

Without a doubt, that sum probably pales in comparison to the needs of our current financial systems, but given that this is a new and — arguably — unnecessary form of currency with minimal use cases (so far), one wonders at the wisdom currently driving the search for more Bitcoins. Furthermore, when the cost of finding a Bitcoin starts to outweigh the relative cost of a Bitcoin, what then? Will the search continue unhindered, heedless of the environmental damage being caused (not to mention the rising personal costs)? Supporters of Bitcoin are quick to remind critics that the currency was designed in a way that will see the mining of Bitcoins taper off as they become more difficult to find and therefore less economical, but with no evidence of such an occurrence, it will be in the proof that these issues are proven or disproven.

Bloomberg, which originally made this story into headline news, unsurprisingly decided to go for the sensational headline approach: “Virtual Bitcoin Mining Is a Real-World Environmental Disaster” reads its headline, reminding us that it only chooses those headlines because the average reader falls for it every time. And while there may be no real looming international environmental disaster, there is definitely cause for concern.

For example, since Bloomberg published its story — a week ago — the megawatt hours necessary have risen from 982 to 1,046.97, which has subsequently pushed the cost from $147,000 up to $157,000.

That’s in just seven days.

Calculating that into a real-world application, today’s Bitcoin search could have powered 33,901 US homes for one day (based on the US Energy Information Administration’s data for 2011 average annual electricity consumption).

All in all, the Bitcoin is definitely serving a critical function in a society which is undoubtedly moving forward — technologically, at least. However, this critical function is being carried out in the same manner that has so thoroughly hurt our planet’s atmosphere; an almost cataclysmic disregard for anything but personal gain. For centuries, we have striven for technological advancement with little to no regard for the impact that advancement — and the means by which we achieve it — will have on the environment. That disregard is slowly dissipating, but one wonders — if the meteoric popularity of the Bitcoin is any example — whether that disregard is dissipating fast enough.

Check out our new 93-page EV report, based on over 2,000 surveys collected from EV drivers in 49 of 50 US states, 26 European countries, and 9 Canadian provinces.

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About the Author

I'm a Christian, a nerd, a geek, and I believe that we're pretty quickly directing planet-Earth into hell in a handbasket! I also write for Fantasy Book Review (, and can be found writing articles for a variety of other sites. Check me out at for more.

  • sculligan

    Wrong. The bitcoins become rarer as the difficulty increases. The difficulty increases with the addition of new miners. Bitcoin rewards are set to release at a constant rate. The problem is that as it becomes more popular the more computing power is required to extract a “decent” amount of coin.

  • Bob_Wallace

    Just saw…

    “Study authors Moore and Christin identified 40 Bitcoin exchanges worldwide that convert the cyber money into 33 hard currencies. Of those 40, 18 have gone out of business. Nine of the 40 experienced security breaches from hackers or other criminal activity, forcing five of them to subsequently close. Another 13 closed without any publicly announced breach, according to Moore and Christin.

    From their study, the researchers found the failure rate of Bitcoin exchanges is 45 percent. The median lifetime of an exchange is just over one year, 381 days.

    Of the 18 Bitcoin exchanges that closed, in 11 of those cases the authors were able to find evidence of whether or not the customers were reimbursed their money. Five exchanges didn’t reimburse their customers. Six claim to have done so.”

  • Bob_Wallace

    Gold has industrial uses. If people decide that it no longer has an increased monetary worth its value will sink only to the industrial value. Gold has a base price significantly higher than zero.

    Currency, such as the US dollar, are backed by the issuing country. The US has tremendous assets including thousands of tons of gold and a remarkable amount of the nation’s land area.

    Bitcoins are backed up, what, redundant storage on multiple hard drives?

    • Otis11

      No major industrialized country in the world, to my knowledge, still backs up their currency with gold or silver. The money has value because people say it has value (such as the US declaring that it is tender). Bitcoins are the exact same way – It has as much value as people are willing to give it. It simply has more price fluctuations at the moment because people do not understand it and it is small enough in scope (currently) for a mash rush of people to change the price. (But this is the same as if every American decided they wanted to trade all their money for Swiss Franks.)

      • Bob_Wallace

        In the case of US dollars, Swiss francs, or euros there are countries backing them up. As countries are deemed to be failing their money typically fails as happened with the Confederate dollar.

        There’s no “there” behind the bitcoin. Will it survive? Only time will tell.

        Does it have adequate utility to make it survive? I doubt it. There aren’t any advantages over the expectation on the part of some that they will be able to hide their earnings from the tax man. And the tax man is really good at finding what he wants to know.

        • Otis11

          Agreed on the current currency, and agreed on the bitcoin surviving (although I suspect we have a difference of opinion on which way that will turn out)

          But it does have numerous advantages working in it’s favor:

          No Third-Party Seizure:
          Cannot be confiscated by a third party as no other party has enough control of the system.

          No Taxes:
          Sure, the Tax man could find out about it and tax you for it, but if you receive payment in bitcoins and pay for something with bitcoins, many transactions (especially for services) can become completely un-proveable. If you can’t prove the transaction took place, you can’t tax it. (Similar to operating completely in cash. Not saying I condone this, but simply that it is an inherent “advantage” should someone chose to do this)

          No Tracking:
          No third party can track what you buy or how much you spend. Again, this is becoming increasingly desirable in this age where everything is tracked and analysed.

          No Transaction Costs:
          The bitcoin users are the mainframe that runs this.

          No Risk of “Charge-backs”:
          From a seller’s perspective, this is quite useful.

          Can be used anywhere – you may not even know what country the other party is in.

          There are a number of other advantages (and some disadvantages as well), but that’s the basics from my limited knowledge.

          Also, there is the very real possibility that bitcoin won’t survive – it’s a pioneer in a brand new field that hasn’t been tested. There will be a lot of lessons learned and the system may or may not weather the storm, but I do believe that a cryptographic currency will exist. If Bitcoin fails, another will rise in it’s place.

          • Bob_Wallace

            The attraction I continue to see is that bitcoins could be used to avoid taxes and make it easier/safer to engage in illegal activities.

            The inability to track can be a problem. In the event that someone cracks your account and steals your bits you have no record of ever owning them.

            The no risk of charge-backs would be a deal-killer for any smart buyer. I use credit cards for online purchases because I know if there’s a problem with receiving what I purchased I have some recourse.

            I don’t see the borderless part having any value. Transactions are easy to do across borders with legitimate money.

          • Otis11

            The biggest advantages I see are that it’s a decentralized currency that no one has power over – returning power to the people. The inability to track the money is also a significant plus in my mind as I dislike being tracked. (yes I know every website does track me – that’s why I normally surf anonymously through things like TOR, but once I started posting it no longer mattered for this site.)

            And the other thing – if you’re worried about getting hacked you can a) not store substantial amounts of money in your bitcoin wallet, rather buy coins and use them directly. or b) have multiple wallets so that if any one gets hacked you don’t lose all that much.

            In the end, bitcoin may not be for everyone. That’s fine, it’s not meant to be – but there are people doing legitimate business with bitcoins simply because to them, the subtle advantages out weight the disadvantages.

      • Ronald Brakels

        Actually bitcoins are not the same thing as fiat currency issued by governments. In the case of the US dollar it can be used to pay US taxes. As US citizens can be thrown in jail if they don’t pay their taxes, so this ability is quite useful. Even if everyone prefered not to use US dollars for transactions there would still be a large market for US dollars among the large bulk of the population who prefer to stay out of jail. Of course, the United States could adopt the bitcoin as its currency in which case it would lose control over its monetary supply and be unable to moderate economic boom and bust, so that wouldn’t be a very bright thing to do.

        Additionally, national fiat currencies are protected from competition by the fact that it can be used to pay taxes, but bitcoins have no such protection. Apart from perhaps nostalgia there is no reason for people to prefer bitcoins over more or less identical competitors such as Radcoins, Ronald Dollars, or the iQuatloo.

        • Otis11

          I never claimed it was the same thing as fiat currency, as there are notable differences. What I said was that they both derive their value from the same place – people saying they have value. (This includes the US government giving it “value” by requiring it’s use). Bitcoin also has inherent uses that make it highly valuable to people – it cannot be manipulated by any government body, it is completely deregulated and absolutely predictable, and it can be used to make completely anonymous transactions (very useful in this day and age where everything you do is recorded). And I don’t think anyone expects any industrialized country to adopt bitcoins IN PLACE OF their current currency, but it does have many useful roles operating in parallel with that currency. While unlikely, I could see a government accepting bitcoins as a form of payment only to change it on the exchange rate for the national currency – heck there’s no reason an intermediate company couldn’t handle this and the government would never know the difference.

          And no, the federal government cannot ensure the value of their currency – remember what happened to, iirc, the German Mark? There are no guarentees. But yes, federal currencies would be more inherently stable because they are already established.

          And yes – there is reason to use bitcoins over the others. Bitcoin has show to be nearly impossible to hack (as a system, you can obviously hack the computers that mine), as well as a number of advantages I state above.

          All of this, and I am not even an expert on bitcoins. I implore you, do some research on Bitcoin with an open mind.

          • Ronald Brakels

            You ask me to so some research on bitcoins with an open mind. I don’t know why you ask me to do this as nothing I wrote on it was wrong as far as I can tell. Three days ago I didn’t know what a bitcoin was, I did my research, and as a result I see that I have no reason to hold bitcoins. The lack of a reason to hold onto bitcoins will result in a tendency for them to reach their natural value, which is zero. Can you give me one reason why I would want to hold onto bitcoins as opposed to converting them into something that doesn’t have a natural value of zero? Please assume I am not a criminal in your answer. I place no value on not having my transactions monitored. (Not that they are anyway. I did a cost/benefit analysis and determined that the frequent flyer points weren’t worth the time it takes to swipe the local supermarket’s store card.)

          • Otis11

            Well, the main reason I said that is because you seem to think it’s the same as any “made up” currency (as implied by your comment “there is no reason for people to prefer bitcoins over more or less identical competitors such as Radcoins, Ronald Dollars, or the iQuatloo.” unless I misunderstood something)

            While you personally may not care enough about the various benefits to use bitcoins, (and that’s fine, bitcoins aren’t for everyone) there are people who do legitimate business with them because they dislike being tracked or they believe that a decentralized currency based on cryptography is a good thing for various reasons.

            I’m not some crazy conspiracy theorist, but I can tell you, if you do a significant amount of business online or at major retailers, and you use a credit card, your transactions are being tracked. (I’ve done work in the data mining industry – it’s actually a little concerning how easy it is to identify people in “anonymous” data.)

            So, to summarize, the benefits may not be of any value to you as an individual, but there are many people who do value some of the features Bitcoin provides who are doing real, legitimate business. Just because this technology is not valuable to you, if you understand it, there is no reason to discourage other people from using. They may not completely understand it, but that is not necessary to use it and derive value from it.

          • Ronald Brakels

            My point about Radcoins and iQuatloos is that the bitcoin doesn’t have exclusivity. There is nothing to stop people making competing cryptographic currency that is just as good. In fact there is no reason why someone couldn’t make something that is more or less exactly the same. (After all, who is bitcoin going to sue?) Bitcoin is not a store of value, having a natural value of zero since nothing practical can be done with a bitcoin and only has value because it can be used for transactions. If a competitor reduces the number of transactions done with bitcoins its value will fall.

            I can’t see any reason why I should hold bitcoins, but I also don’t see why anyone else should hold bitcoins. That is, hang onto them after a transaction is completed. If Ivan receives 10,000 bitcoins in return for selling pharmaceuticals, if he knows that bit coins have no natural value to stop them falling to towards or to a value of zero, he should either immediately buy something he wants with them or exchange them for a currency that has a natural value greater than zero due to its usefulness in paying taxes and which has its exclusivity protected by people with guns rather than by nothing. Of course, once everyone starts thinking like Ivan then the value of bitcoins will plummet towards zero. The world has seen this sort of popping event many times.

            You say I have no reason to discourage people from using bitcoins. Actually I do. I’m kind and so would like to warn people who may not be aware of it that they are exposing themselves to risk. Also, as a kind person, when ever I gloat it hurts me deep inside and so I’d like to burst the bubble now and so minimize the amount of gloat potential I expose myself to.

            But while I recommend against people holding bitcoins I don’t think anything should be “done” about them. I’m confident the situation will eventually sort itself out and value of bitcoins will reach their natural equilibrium.

          • Otis11

            True, there is nothing stopping anyone else from creating a better cryptographic currency, which I believe will happen and eventually kill bitcoin (The beta test never gets everything right). But the time it takes for this to happen is significant and there will be many rise and falls in bitcoin exchange rates before then. Holding bitcoins is not significantly more risky than investing in the stock market (especially one with heavy FF assets).

            And again – US currency’s (or any other) inherent value is insignificant unless the vast majority of your wealth is in coins. Yes there are countries that back these currencies and they are well established, but they too are at risk of becoming worthless. It has happened many times before, especially in areas of war or economic turmoil.

            So I think we’re actually saying similar things, we just have a difference of opinions on what that means for the here-and-now and how it will play out in the end. (I think they have value and actually use them, but do not hold them in significant amounts for long, you feel their benefits aren’t worth the trouble. I think another cryptocurrency may potentially come to replace bitcoins but one will always exist, you feel like they will fail and see the “error of their ways.”)

            Is that a fair assessment of things? (There’s a very good chance I’m overlooking something we’ve discussed, I’m pretty beat ATM.)

          • Bob_Wallace

            “Holding bitcoins is not significantly more risky than investing in the stock market (especially one with heavy FF assets).”

            You don’t really believe that, do you?

            When one buys stock they are purchasing partial ownership in something tangible, a company with assets.

          • Otis11

            Ok, with large companies that’s true, but if you ever purchase stocks with a small company that also has angle investors or bank loans, many times the core loaner gets their money first and the stock holders just get what’s left. (Which can be 0).

            Sure there are safer stocks, but the high risk, high reward stocks that many younger people are encouraged to invest in are not significantly different in overall risk, no.

            Y’all have done a lot of reasoning and hand-waving to say these coins are worthless, but that’s not what the past 5 years have shown us. They have crashed and spiked many times due to people not understanding them, but they always recover and stabilize.

            It’s becoming obvious that there’s no way I’m going to convince you otherwise though, and it’s really not that important as there are enough people who understand it and use it that it’s not going to collapse any time soon. In a few years when something better replaces it? Sure, but anyway…

          • Ronald Brakels

            As Bob mentioned, holding bitcoins is not the same as owning shares. Companies make stuff or provide services that people want (or at least are willing to pay for even if they don’t really want them). Bitcoins don’t do anything except be bitcoins. They’re a bit like gold except gold has a natural value that is above zero because it can be used to fill teeth and is good for rustproofing and other purposes. While some shares go up and some go down, on average they do produce a real positive return over time. Bitcoins don’t produce a positive return since they don’t do anything.

            While it is possible for the value of the dollar to fall to zero, that would actually take a lot of effort as there is a lot of ruin in a nation. But It doesn’t take any effort at all for bitcoins to drop to zero or close to zero in value. All it takes is for people to decide they don’t want to hold them. I’m quite sure this will happen at some point, I just don’t know when, otherwise I should short the bitcoin and get rich. I would of course share my new wealth with everyone who reads Cleantechnica. (Just possibly in a way that not everyone would appreciate.) So bit coins are really not at all like national currencies with regards to risk.

            If you’re not holding any significant amount of your wealth in bitcoins and are just using it for transactions, then you should be fine. But if, like some people, you were buying them as an investment, I would be concerned for you.

          • Otis11

            Oh yeah, none of this is going to change how I use bitcoins.

            I’ll let you read my reply to bob, but basically, our discussion is inconsequential for the future of bitcoins, and its becoming obvious that I’m not going to change your mind.

          • jeffhre

            “Holding bitcoins is not significantly more risky than investing in the stock market (especially one with heavy FF assets).” Can you put that analysis in numerical terms please 🙂

            A company’s stock ultimately represents the discounted value of the expected future returns of the company. What value does a bitcoin ultimately represent?

          • Bob_Wallace

            Assume you had your bitcoins spread over the 40 exchanges Moore and Christin studied. At least 5 went away and took those bitcoins with them. A 12.5% loss.

            I can’t see why there should be any actual value growth with bitcoins. There may be speculative bubbles in which you could sell out your holding for more than you paid, but over time there is no reason for bitcoins to gain value.

            So expected return on bitcoins is a negative 12.5%

            Money invested in an index stock fund may show short term losses but overall returns are positive. Even with a few of the companies owned going bankrupt the other companies earn enough to cover that loss and return somewhere around 10% per year.

          • jeffhre

            Currency derives it’s value as a medium of exchange. Currency must be scarce ie difficult enough to “hack” so that it is not devalued. It must be held in amounts that match the exchange requirements of the economy or the underlying goods inflation will destroy the value of the currency.

            Currency does not draw it’s value from people “saying” it has worth. Clearly there is more demand for bitcoins than there are bitcoins available. It seems to be valued more like gold, a commodity, rather than currency, like dollars.

  • hehehe

    fuck you all tree huggers over here!

  • Look at just 1 facility for comparison.., the VISA fraud prevention facility in Virginia.

    Hopefully this will help you understand just how silly your article looks to the rest of us who understand this weird new decentralized cryptocurrency and its theoretical potential.

    So really the exact opposite is true. Use bitcoins and save the planet… 😛

  • Otis11

    Problems with this paper – First distributive computing project such as F@H actually help the environment, even if the participating computers are left on 24/7. This is because it minimizes the need for the research team to have a dedicated supercomputer run 24/7 that would take dedicated hardware. While it only saves a little bit in direct electricity use, it is much more efficient in the sense that you do not need to manufacture more dedicated hardware. (along with all the chemicals used in making electronics) This is a very, very good thing. Please do not try to discourage its use.

    Second, you do not give enough information to calculate an operating margine of 56.53% or you made a math mistake as $157,000/204,219 = 76.87%

    Third, the point: “Furthermore, when the cost of finding a Bitcoin starts to outweigh the relative cost of a Bitcoin, what then?” Is unfounded. Just like in the actual gold market, there is much more gold available it is just not economical to recover at the present time. When the cost of mining bitcoins is greater than the cost of buying them, less people will mine them, driving down the total cost of mining until they are again equal. Basic economics. (While not everyone understands this, enough of the bitcoin miners do. Plus, they tend to be the ones highly educated on monetary policy and economics)

    Forth: “was designed in a way that will see the mining of Bitcoins taper off as they become more difficult to find and therefore less economical” is also unfounded and actually wrong. We have seen multiple instances of significant fluctuations in the collective hash power based on the market value of the coins – when spikes occur, more people mine. Many of those miners then disappear when the spike goes away.

    “That’s in just seven days” – again, the reason for the sudden fluctuation in power consumed for mining is directly related to a sudden fluctuation in price of a bitcoin. Also, because people start using less efficient hardware for the spikes just like we do with electricity (peaker plants), the spikes are greater than would normally be expected based on efficiency values, but that has been totally overlooked.

    “disregard for anything but personal gain” Again – untrue. This simply shows a lack of understanding of what bitcoin is and the impacts it has already had on the world of technology.

    Also, you have no way of comparing it to the current currency, which uses raw materials AND computational power. How many greenhouse gasses are released by the manufacture and transportation of US currency? How much electricity is consumed by all the ATMs, bank computer mainframes and even the bank lights?

    This assessment does not compare all the necessary factors, and hence, draws the wrong conclusion. Surprising considering the same argument was made to discredit solar and wind not to long ago…

  • Ronald Brakels

    I am very impressed with the writing skills of toddlers these days on account of how anyone who was alive in 2008 would realize that cunning financial plans don’t always turn out as well as one might hope.

  • Jonas Lihnell

    Two quite important and utterly missed points:

    1) Bitcoin energy efficiency as it is today might not be good compared to centralized designs if you measure per transaction, but as the technology advances the efficiency gets better.

    2) The heat generated in the process lowers the energy required for heating otherwise giving this a potential 0 sum loss.

    • jeffhre

      Good points. And as the grid gets cleaner and more efficient, so do bitcoins. One question about the 0 sum heat loss equation though…Summer?

  • Jonas

    Please compare with the amount of energy needed to sustain all the worlds excisting currencies before blaming Bitcoin for beeing inefficient.

    • jeffhre

      That was my question also, thanks. Though I was just curious about subtracting the energy costs of the tiny fraction of existing currencies that bitcoins replace.

      Adding value to the economy requires inputs of energy. Does bitcoin mining require more energy on average per unit of value? Thus bitcoins would also tend to displace the hours bitcoin miners would have spent using energy making widgets, engineering financial products, flipping burgers…snatching purses.

  • I wanted to buy Bitcoins here, in the UK, directly without intermediators on ebay or other middle men (because fees are huge), and I found it very difficult, so I made this guide with the cheapest way,

  • Let’s see now. Around 1 GWh a day would leave us with less than 0.5 TWh a year. World electricity generation in 2010 was 21,431 TWh, so that 0.5 TWh is a very small percentage.

    And generating Bitcoins is not “wasting” electricity. The result of that process is something of value (a revolutionary new World currency).

    There is no way a cryptocurrency like Bitcoin could avoid using much electricity. But it would make sense for the miners to use renewable energy when it is very cheap, or in negative price territory. Lately one of the Bitcoin developers proposed using renewable energy in generated in the desert for mining Bitcoins and sending the Bitcoins instead of the electricity to population centers. That would be an interesting idea as long as the necessary power lines are still not in place

    • jeffhre

      Exactly, something of value. Revolutionary…currencies come and currencies go.

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