How Bitcoin Fixes the Impact of Illegal Gold Mining in the Amazon
Illegal gold miners will cease their activities when gold no longer has the same value as bitcoin, thus solving the destruction of ecosystems in the Amazon.
Puerto Maldonado, in the Peruvian province of Madre de Dios, looks like a frontier town. Dusty streets, dilapidated buildings, new construction and the bustle of people who want to do it. Tourists are transported by bus through the city to the many ecotourism businesses that bring people from all over the world to experience the Amazon. Puerto Maldonado is perched on the bank of the Tambopata River, a tributary of the Amazon. The Tambopata River gained notoriety in ecotourism circles when clay-licking macaws graced the cover of the January 1994 issue of National Geographic. The industry has exploded since.
Typically, tourists are quickly moved to boats on the Tambopata and head to private lodges for ecotourism operations. Some of them are partnerships with local indigenous groups, while others are outright owners of private land on the banks of the river. As you walk through the streets of Puerto Maldonado, you’ll see streets with that border feel…and you’ll find plenty of gold buyers and associated businesses. The gold trade is flourishing and it is of the worst origin.
This is not the gold trading of listed mining companies. This is not responsible private business gold trading. Presumably, this is not Peter Schiff’s gold trade. It is the informal and illegal trade in gold. It is trade that responds to price. It is commerce that abuses the poor and strengthens unions and criminal organizations. It’s the underworld business. This city of less than 100,000 inhabitants is largely the story of two opposing worlds. Ecotourism depends on a healthy ecosystem and the gold trade which completely wipes out the forest.
Interestingly, the ecotourism boom has led to increased protection upstream from Puerto Maldonado through ecotourism lodges setting aside land in private reserves and operating concessions on indigenous land. This created a buffer zone between the Tambopata National Reserve and the Bahuaja-Sonene National Park. I have visited this part of the Amazon every year for over a decade and the changes are evident in the increase in wildlife sightings along the way. To get deep into the forest, you have to continue upstream about six hours from Puerto Maldonado. There is a government checkpoint where the Malinowski River flows into the Tambopata.
This “fork in the road” speaks to two very different realities in this part of the Amazon. Following the Tambopata River from Malinowski Checkpoint allows you to experience some of the most pristine and dynamic parts of the Amazon Basin. You are entering one of the most biologically diverse places on the planet; diversity speaks for itself. Plant diversity is so intense that it can be difficult to grasp. The dynamism of the river is a marvel.
On the one hand, it is destructive, as it eats away at a river bank where old trees are felled with the decay of the river’s edge in the fast moving water. The other shore is built up, where the flow slows with silt and sand transported from the nearby Andes. The silt brought from the Andes also means that these tributaries of the Amazon brought gold dust from the mountains. The Puno Highlands can be seen from this part of the Amazon, and on a clear day the snow-capped peaks contrast with the green tapestry of the forest. It is truly breathtaking scenery and a sensory experience.
As new banks are built, life immediately colonizes. Ecological succession begins with fast-growing grasses and small plants followed by light-wooded tree species. Over time, diversity increases. As you travel up the river, you constantly see forest in various stages of succession on one bank and diverse old forest on the other. The dynamism is evident. The river braids as islands form and arcing lakes are created as the river changes course. The lakes survive until they turn into swamps and then into forests. This dynamism means that there are various habitats which add to the diversity encountered.
Tourists come to experience the depths of nature from the “lungs of the Earth”. They come to see the different species of macaws and parrots that congregate to eat lickstone clay. They hope to catch a glimpse of a jaguar and see a fierce harpy. They are often shocked to hear the red howler monkeys. They are impressed by the agility of spider monkeys. They are paralyzed with fear when a group of 40 white-lipped peccaries overtake them as they are stuck in mud up to their thighs. It’s not for everyone but visiting this part of the Amazon is special. These experiences, as well as the ecological functioning of the forest, depend on a healthy virgin forest where the flow of the river does its job. But the past flow of the river has caused much of this forest to grow in silt containing gold dust.
If you take the other fork of the road at the Malinowski checkpoint, a very different reality awaits. If you follow the Malinowski River, you eventually come to the informal and illegal mining operations that have devastated this part of the Amazon. The road that connects the Pacific and the Atlantic and connects Peru to Brazil via the Amazon, Interoceanica Sur, runs parallel to the Malinowski. It was along this highway that the miners initially began their operations. These operations then expanded south towards the Malinowski River. This is not the only area of devastation. A quick Google Maps or Google Earth search of Interoceanica Sur near Malinowski and you can see the gold mining results for yourself (use these coordinates: -12.8657205, -69.9867795). Remember, this photo was taken in the past; it’s worse now. It is hard to overstate the hellscape that is produced. Forest on inert earth. It is the complete annihilation of the forest. It is the complete destruction of the possibility of a forest. It transforms the virgin forest into pools of water contaminated with heavy metals and dunes of sand and silt. There is no possibility for life. Curiously perhaps, satellite images reveal the beauty of multicolored pools among the remaining sand. Even complete destruction can have its beauty.
Mercury is used to amalgamate gold dust. When it rains, some of the mercury enters the rivers where it bioaccumulates and then bioamplifies in the food chain. It is estimated that more than 3,000 tons of mercury have entered the rivers of the Peruvian Amazon over the past two decades. This 2013 study showed that 95% of people in rural communities, mostly indigenous to Madre de Dios, had high levels of mercury above what is considered healthy. Fishing addiction is the likely cause, with studies showing that most species of fish will have high levels of mercury. Even in the city of Puerto Maldonado, three out of four citizens have elevated mercury levels, many of which are triple the recommended upper limit.
Heavy metal poisoning is not the only human toll from the illegal gold trade. The gold fields are ripe for sex trafficking, child rape and exploitation of the rural poor. For more details on the environmental cost and the human cost, it is worth reading the article by Tomas Munita in the New York Times“Peru is scrambling to drive out illegal gold mining and save valuable land.”
So how does Bitcoin solve this? Illegal gold is price sensitive. Any erosion of the monetary premium for gold will have an immediate effect on the destruction of the Amazon. If the price of gold rises, the destruction will intensify. If the price of gold declines because bitcoin consumes the monetary premium of gold due to investors recognizing it as an enhanced currency and store of value, then illegal gold miners will reduce their operations. These operators do not produce gold at a loss. The Peruvian government has been unable – or more accurately, unwilling – to solve this problem. Fortunately, for the very first time, there is a market solution to the problem of illegal gold mining. This solution is bitcoin.
This is a guest post by Gilles Buck. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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