Cryptocurrency lying on white-yellow background

Balancing the Ledger: A Critical Examination of Cryptocurrency Ethics


Despite a significant drop in interest surrounding cryptocurrency technology recently, techno futurists continue to center their claims and justifications around a promised future of decentralized control, security, and transparency. This paper examines the ethical implications of the technology in the context of such promises. It challenges the optimistic narrative by discussing the often-ignored consequences that cryptocurrencies impose on various parts of society, particularly those who are already marginalized. The exploration delves into issues such as the digital divide, the inherent volatility and unpredictability of cryptocurrencies, and their ecological footprint, disputing claims that the benefits outweigh the harms.

A Brief History of Cryptocurrency, 2009-2023

Like all influential movements, the world of cryptocurrency is anchored by a founding myth that resonates deeply with its followers. This saga began in the tumultuous backdrop of 2008, a year marked by the near-collapse of the global financial system. In this climate of uncertainty and distrust towards traditional banking institutions, a mysterious entity known as Satoshi Nakamoto released a seminal whitepaper, “Bitcoin: A Peer-to-Peer Electronic Cash System,” to an online group of cryptography enthusiasts [1]. Building on previous examples of digital currency and knowledge of innovations in cryptographic technologies, the paper promised a system impervious to the influence of bankers and politicians, beholden only to the computer code by which it is defined.

At the heart of Bitcoin’s innovation lies the blockchain, a pioneering form of distributed ledger technology. This blockchain represents a paradigm shift in how transactional data is recorded and shared. Its structure ensures that every transaction is transparently logged, providing an unprecedented level of public accountability and traceability, while participants maintain their anonymity behind complex cryptographic keys. This fusion of openness and privacy challenges conventional financial models, proposing a new standard for what a financial system could look like.

In the decade and a half that followed the launch of Bitcoin, its popularity and price steadily grew.  Many other cryptocurrencies followed its model, slightly tweaking the formula in order to satisfy some supposed technological shortfall or another in the original design [2], [3]. Its popularity reached a fever-pitch during the 2020-21 Covid lockdowns when retail investors, flush with stimulus cash and bored at home, invested heavily in cryptocurrencies and Non-Fungible Tokens (NFTs) [3]. In 2022, a subsequent crash in the price of these assets resulted in a majority of retail cryptocurrency investors losing money [4].

Alongside the price collapse of cryptocurrencies, a number of large firms in the industry, including some that were seen as stalwarts, also faced significant financial trouble. Most notable among these was the spectacular implosion of a major cryptocurrency exchange, FTX, which had billed itself as “the most trusted” in the industry [5]. This event not only highlighted the volatile nature of the cryptocurrency market but also raised serious questions about the regulatory oversights and the inherent risks associated with such decentralized, digital financial systems [6].

“We’re All Gonna Make It”

This popular mantra within the cryptocurrency community, often shortened as WAGMI, reflects a pervasive belief in eventual collective financial success [7]. It conveys the expectation that those investing in and advocating for cryptocurrencies will ultimately reap substantial rewards.

Key among the asserted benefits of cryptocurrency is the promise of financial autonomy. Unlike conventional banks, which are mired in regulations and often criticized for lack of transparency and customer-centric practices, cryptocurrencies offer users more control over their own finances and transactions. 

This control is endorsed as a direct route to financial empowerment, particularly appealing to those disillusioned with the traditional banking sector’s bureaucracy and fees. Appeals of this nature resonate particularly well with an American audience. A 2023 study revealed a significant decline in trust: only 10% of U.S. adults have ‘high confidence’ in the banking system, down from 22% in 2020 [8]. This erosion of trust followed the collapse of two major U.S. banks: Silicon Valley Bank and Signature Bank. Despite their collapse, the fallout was swiftly contained within weeks and did not lead to broader market disruptions, a testament to the strength of a well-regulated centralized banking system.

Cryptocurrency advocates often highlight a bright prospective future, brimming with innovation, increased adoption, and soaring values [9]. Much of the enthusiasm surrounding cryptocurrencies hinges on this “what could be” scenario, emphasizing potential rather than present-day utility. In this vision, the current limitations and volatility of cryptocurrencies are often glossed over, overshadowed by a conviction in a more prosperous financial era. Such bold claims resonate across diverse perspectives, from presenting cryptocurrencies as a new source of liberation for indigenous communities to envisioning a future where politically appointed bureaucrats are replaced by tech-savvy blockocrats [10], [11]. These idealistic notions perfectly encapsulate the foundational belief of WAGMI – that cryptocurrency can be everything, to everyone, soon.

“Not Gonna Make It”

Of course, every coin has two sides. In crypto parlance, “Not Gonna Make It” (NGMI) often serves as a critique of those who get cold feet about the potential risk of their investments or those perceived as making poor investment decisions within the crypto community. However, in a broader and more critical context, NGMI can symbolize the inherent risks, challenges, and downsides of the cryptocurrency world that cast doubt on the unbridled optimism of the crypto faithful.

The unregulated and often opaque nature of the cryptocurrency market makes it a hotbed for scams and fraudulent activities [12], [13]. In the words of the U.S. Federal Trade Commission, “only scammers demand payment in cryptocurrency” [14]. The same decentralization and technological complexity that attract users to cryptocurrencies also create vulnerabilities. Exchanges and wallets have been subjected to sophisticated hacking attempts, resulting in substantial financial losses for investors. For example, in November 2023, two exchanges were hacked simultaneously with a total of $115 million stolen [15]. In 2022 alone, approximately $3.8 billion was stolen due to crypto hacking [16]. The irreversible nature of blockchain transactions means that once assets are stolen, they are often impossible to recover [17]. Cryptocurrency investors, a majority of whom are amateurs, are under a constant barrage of threats including “social engineering, targeted crime, scams, and … thefts and hacks” [18]

The most apparent harm caused by cryptocurrencies is the financial losses experienced by investors, with over three-quarters of them reportedly losing money [19]. This fact is not surprising when you consider what leads the vast majority of first-time cryptocurrency investors to invest: price spikes, which have consistently been followed by steep drops [20]. Indeed, anonymized studies of bank accounts by JP Morgan Chase & Co. have revealed a significant disconnect between the amount of money pouring out of bank accounts and into crypto exchanges during peaks, and the amount of money that makes its way back [20]. This aspect of cryptocurrency investment, often concealed by its speculative nature, is exacerbated by enthusiasts who flaunt their wealth to attract naive new investors to their schemes [21].

Environmental Impact of Cryptocurrency 

The theft of large sums of money is hardly crypto’s most imminent threat. The environmental impact of cryptocurrencies, especially those using energy-intensive proof-of-work mechanisms, is profound. Proof-of-work is essential for validating transactions and creating new currency units in systems like Bitcoin, by far the largest and most valuable cryptocurrency network at present. This validation process requires a significant amount of computational power and, consequently, electricity. Such massive energy consumption by cryptocurrencies even surpasses that of some industrialized nations like Singapore and Portugal [22], [23], [24].

As demand for cryptocurrencies escalates, the need for efficient and affordable energy sources becomes more pressing for crypto miners, who are key in maintaining the network’s infrastructure. This quest for cost-effective energy often leads them to coal, especially in developing countries where environmental regulations may be less stringent [23]. When the value of cryptocurrencies rises, mining becomes more profitable, attracting more participants and consequently increasing energy consumption and associated emissions.

Current data suggest that the operations of cryptocurrencies contribute approximately 0.15% of global greenhouse gas emissions [24]. While this percentage might appear small in the global context, the localized environmental impact in areas where mining is concentrated can be substantial. Moreover, this figure could escalate as the popularity and acceptance of cryptocurrencies grow. The environmental impact of cryptocurrency mining is further complicated by its decentralized nature. Unlike traditional industries, where regulatory bodies can enforce environmental standards, the opaque nature of cryptocurrency mining poses challenges in tackling its environmental impact. Even within the United States, miners looking to avoid the scrutiny of environmentally conscious lawmakers will simply pack up their operations and move to states with more lenient regulatory environments [25]. This trend symbolizes the broader challenge of implementing environmental regulations in the cryptocurrency industry.

Digital Divide

Limited accessibility is yet another drawback of cryptocurrency. The underlying infrastructure of cryptocurrencies was initially developed by and for cryptography enthusiasts [1]. The complexity is not a hurdle that will be overcome as the technology grows in popularity; it is a necessary feature to safeguard the network against vulnerabilities. The cryptographic mechanisms that protect blockchain transactions require constant refinement to stay ahead of potential security breaches.

This ongoing process of innovation among cryptography experts not only drives the development of more robust systems but also contributes to the exclusivity of the field. It requires knowledge of digital wallets, encryption, and safe transaction practices in a landscape rife with security threats, which can be complex and daunting [26]. This reliance on digital skills and infrastructure creates a stark divide: those with access and understanding thrive, while others who lack resources or technological literacy fall behind. This gap is not just about financial means but also about accessibility to technology and knowledge.

The technical demands of cryptocurrencies exclude many. Setting up wallets, understanding keys, and navigating the trading and investing landscape can be overwhelming. Even informed participants can suffer severe losses due to simple errors [27]. This situation underscores the widening of the digital divide, where access to and understanding of technology increasingly determines financial opportunities and risks.

This digital divide is especially pronounced among certain demographics, notably senior citizens. In the United States, seniors are disproportionately affected by financial scams, losing an estimated $3 billion annually to various forms of fraud [12]. A significant portion of these scams exploit their lack of familiarity with digital platforms and technologies. Cryptocurrency, with its inherent complexities, exacerbates this vulnerability. In the UK, for instance, there’s been an uptick in reports of scammers using cold calls to target the elderly with cryptocurrency schemes [28]. Similarly, in Ohio, law enforcement and the Ohio Department of Aging have teamed up to combat cryptocurrency scams aimed at seniors [29]. While these examples are region-specific, they highlight the intersection of cryptocurrency and financial fraud targeting the elderly. This trend is gaining traction as cryptocurrencies become more mainstream, making such frauds easier to perpetrate.

Historically marginalized communities, those “who are systematically excluded from meaningful participation in mainstream economic, political, cultural, and social life,” are the ones most impacted by the digital divide [30]. Specifically, the divide is most prevalent for individuals in low-income communities where access to technology and quality internet is limited and those in regions where education in digital literacy is not readily available [30]. For these populations, the world of cryptocurrency remains largely inaccessible because of a gap in resources and education. This gap not only impedes their ability to participate in the emerging digital economy but also places them at a greater risk of exploitation and financial loss [12], [30]. 

Market Access and Equity

Beyond the challenges of the digital divide, the cryptocurrency landscape is fraught with market access and equity issues. Participation in the cryptocurrency economy is not just a matter of having the necessary digital tools and knowledge, it also hinges on the ability to navigate a marketplace that often favors those with substantial capital and insider knowledge.

One of the primary claims by cryptocurrency proponents is its potential to democratize finance, offering a system free from traditional banking and governmental controls. Yet, this vision sharply contrasts with the realities of market access and wealth disparities within the crypto economy. Central to this economy is Bitcoin mining, a process increasingly characterized by large capital investments. These investments not only restrict market access but also lead to wealth concentration, with significant profits possible during cryptocurrency price surges, cementing the position of established players [31]. A telling statistic from a 2021 study shows that 27% of Bitcoin is owned by just 0.01% of holders, indicating a level of wealth concentration far exceeding that seen in traditional finance [32], [33]. Furthermore, a major trading platform reports that the average cryptocurrency owner is a 38-year-old man earning about $111,000 annually, with women accounting for only 26% of investors [32]. The gender disparity in cryptocurrency investment is multifaceted, influenced by factors such as the male-dominated nature of online cryptocurrency forums and existing wage gaps that result in women having less disposable income for such investments.

Ethical Analysis

All of these grievances reveal that beyond the stories of financial windfalls, there lies a narrative interwoven with moral complexities. Cryptocurrency’s meteoric rise and volatile nature have posed significant ethical challenges, inviting scrutiny under various ethical frameworks. With the application of the utilitarian and justice lenses to the technology, it is clear that cryptocurrencies are an immoral burden on society, causing various harms that outweigh any benefits and deepening social inequities.


Analyzing cryptocurrencies through a utilitarian lens, which evaluates actions based on their contribution to overall happiness and reduction of suffering, reveals a predominantly negative societal impact [34]. The perceived benefits of cryptocurrencies are largely speculative, resting on the potential future applications of blockchain technology rather than on current achievements. This potential, however, is overshadowed by immediate drawbacks. The energy-intensive nature of operations and the destabilizing effects on traditional financial systems are substantial issues.

From this ethical standpoint, emphasizing the greatest good and minimal harm, it becomes evident that cryptocurrencies, in their current form, are detrimental to the common good. The distinction between the innovative possibilities of blockchain technology and the practical realities of cryptocurrencies is crucial. The harm caused by cryptocurrencies – ranging from ecological damage to the destabilization of financial systems – significantly outweighs their speculative benefits. Blockchain technology, the very foundation of cryptocurrencies, inherently limits or even discourages comprehensive solutions to these issues, promoting only piecemeal approaches. 

This fundamentally misaligns with the utilitarian principle of maximizing well-being and minimizing harm. While blockchain may hold promise for the future, the existing implementation of cryptocurrencies fails to align with the utilitarian principles of enhancing well-being and reducing harm. Consequently, cryptocurrencies’ current impact on society, from a utilitarian viewpoint, is overwhelmingly contrary to the ideals of collective welfare.


Furthermore, the history of cryptocurrencies reveals an inherent inequity in their structure, where power concentrates among the few. In proposing legislation for the crypto industry, New York Attorney General Letitia James specifically cited the fact that “as cryptocurrency investments have been marketed directly to minority communities, the people most susceptible to fraud and losing significant funds due to financial collapses are disproportionately vulnerable and marginalized Americans” [35], [36]. As mentioned, the digital divide has significantly harmed the elderly community with crypto scams and has excluded those who don’t have access to the necessary technology from participating in the crypto market. Additionally, the inequities in the crypto market have barred many groups from being able to enjoy the benefits of cryptocurrency.

While ostensibly offering an alternative to traditional banking, cryptocurrencies predominantly favor early adopters and technologically savvy individuals. The technological challenges inherent to cryptocurrency pose serious questions about the equitable nature of this new economic system. If the financial liberation promised by cryptocurrencies is predominantly accessible to and accessed by a specific demographic – mainly affluent, male, and tech-savvy users – then the system risks replicating the same inequalities and exclusions it purports to remedy.

This situation not only mirrors but also intensifies existing social inequalities. The reality of the cryptocurrency ecosystem is a reinforcement of privilege and an expansion of the digital divide, rather than the democratization of finance it often claims to be. It also brings to light the issues of market manipulation and the adverse effects of cryptocurrency market volatility on average investors, underscoring the inherent unfairness within the cryptocurrency industry.


Cryptocurrencies, born from the 2008 financial crisis, have evolved into a complex and significant force, but their journey is marred by profound ethical dilemmas and a substantial environmental toll. Contrary to the liberating and egalitarian vision often portrayed by cryptocurrency advocates, the reality enhances the worst inequities of our existing economic system. The digital divide, inequality in market access, and environmental degradation reveal a scenario far from the promised democratization of finance. Cryptocurrencies do not merely fall short of ethical standards; they actively contradict them. They perpetuate and, in some cases, amplify existing social and economic inequalities, making the rich richer and leaving the less privileged further behind.

While cryptocurrencies represent a technological innovation, their adoption and current mode of operation are ethically problematic. They reinforce existing societal disparities, contribute to environmental harm, and fail to offer the inclusive, equitable financial future they often claim to champion. As they stand, cryptocurrencies are a misalignment of ethical paradigms that emphasize fairness, societal well-being, and sustainability. It is important that any future development in this field be critically analyzed from an ethical standpoint to avoid making these issues worse and to ensure a more equitable and responsible digital financial future.

By Simon Lewis, Viterbi School of Engineering, University of Southern California

About the Author:

At the time of writing this paper, Simon Lewis was an undergraduate student in Computer Science. In his prior career, he worked as a chef in Michelin-starred restaurants in London, Paris, and the United States. He owned and operated two restaurants in Paris, France before returning to his hometown of Los Angeles in order to enroll at USC.


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Links for further reading:

The Crypto-Currency

A walk through of Bitcoin’s origins 

Satoshi Nakamoto and the Origins of Bitcoin – The Profile of a 1-in-a-Billion Genius 

Unpacking the mystery of Bitcoin’s founder

How To Invest In Bitcoin For Beginners

An introduction to all things Bitcoin