Risk, inclusion and energy use: The hard realities of incorporating crypto in Austin

Beneficial or risky?

Vice wrote that a common talking point at SXSW involved the money missed out on if people don’t join in on crypto. But the people who receive the message that crypto is lucrative have some feeling worried.

Tonantzin Carmona, a fellow at the Washington D.C. think tank the Brookings Institution, has noted that there’s a growing number of unbanked or underbanked populations trying their hand at crypto.

“My fear is people are making these claims that cryptocurrencies are going to solve these issues without explaining adequately how cryptocurrencies promote financial inclusion or equity, and how do we know that they aren’t actually hurting the most vulnerable and putting them at risk?” Carmona asked.

She went on to add that offerings like payday loans and subprime mortgages once made similar promises as an innovative step that could help communities who lacked access to mainstream services. In those instances, some users then faced financial woes.

“Are we promoting access to a riskier product?” Carmona said. “How does that solve issues of equity?”

Inclusion and jobs

At last week’s city council meeting, two crypto resolutions passed.

One of them called for the city manager to study how the city could use or hold crypto and the other directs the city manager to see how Austin could foster Web3 and blockchain projects. Some, including Austin Justice Coalition, voiced their thoughts that Austin has bigger priorities.

For many Austinites, some of those priorities may include gentrification and displacement. Other places that have seen an explosion of crypto like Puerto Rico and Miami are also managing soaring costs of living.

But at least having knowledge of crypto may come in handy for Austinites. Abena Primo, a professor in the school of business and technology at Huston-Tillotson University, informally teaches people about decentralized finance through her recently-launched newsletter. On-campus, it's become a natural learning avenue, as many of her students own crypto and ask her questions about it.

"With my work, I'm trying to make it not be a gentrification type of project," Primo said. "I'm hoping that by educating people at Huston-Tillotson University and in the community here, that people of color will not be left behind as they were with the internet revolution."

And it's not as though Defi lessons have taken over since Web3 is "still somewhat hypothetical," Primo says. With HTU placing high value on job attainment for their students, Primo says specialization in something like computer science will make the job hunt easier than only having skills in blockchain technology.

Environmental concerns

Leading up to the vote, some council members voiced worries over crypto's environmental impact and there was confusion over which applications of crypto required greater energy use. Eventually, someone explained the proof of work versus proof of stake methods. Those that rely on proof of work consensus mechanisms, like Bitcoin, involve “significant levels of energy consumption.”

And it's not just consumption. The large quantities of electricity required in crypto mining can have a spillover effect into local economies, like in Upstate New York where residents faced higher electricity bills.

Still, Mayor Steve Adler laid out the debate on its energy consumption.

“I’ve heard both those arguments,” Adler said. “I haven’t heard anybody that I trust actually or feels impartial to actually weigh those two factors, and I hope that’s part of the analysis of Council Member Kelly’s resolution that I think it’s covered there.”

Like others in the city, council seems split on just how crypto should be addressed in Austin. Mayor Pro Tem Alison Alter warmed up to the resolution on fostering Web3 but not the one that'd involve the study of the city holding or using crypto.

“I'm really uncomfortable with the notion of us accepting payments in crypto anytime soon, I'd be happy to take a donation. And I'm pretty sure that if somebody offered a sizable donation in crypto to the city, we'd figure out a way to accept it without this direction,” Alter said before abstaining from the resolution for studying the city's holding or use of crypto.