How Bitcoin Fixes The Impact Of Illegal Gold Mining In The Amazon

Illegal gold miners will cease their operations when gold is no longer as valued as bitcoin, solving the destruction of ecosystems in the Amazon.

Puerto Maldonado in Peru’s Madre de Dios province feels like a frontier town. Dusty streets, ramshackle buildings, new construction and the hustle and bustle of people who want to make it. Tourists are bussed through the town to the many ecotourism companies 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 to the Amazon. The Tambopata River received some fame in ecotourism circles when the clay-licking macaws were featured on the cover of the January 1994 National Geographic issue. The industry has boomed ever since.

Typically, tourists are quickly moved to boats on the Tambopata and make their way to private lodges for the ecotourism operations. Some of these are partnerships with local indigenous groups, while others are outright owners of private land on the banks of the river. Walking through the streets of Puerto Maldonado, you’ll see streets with that frontier feel … and you’ll find lots of gold buyers and associated businesses. The gold trade is flourishing and it is all of the worst origin.

This is not the gold trade of mining companies listed on the stock exchange. This is not the gold trade of private responsible companies. Presumably, this is not Peter Schiff’s gold trade. This is the informal and illegal gold trade. This is the trade that responds to price. This is the trade that abuses the destitute and empowers criminal syndicates and organizations. This is the trade of the underworld. This town of less than 100,000 inhabitants is largely a story of two opposing worlds. Ecotourism depends on a healthy ecosystem and the gold trade which completely obliterates the forest.

Interestingly, the boom in ecotourism led to increased protection upstream from Puerto Maldonado through ecotourism lodges setting aside land on private reserves and running concessions on indigenous land. This has created a buffer zone between the Tambopata National Reserve and the Bahuaja-Sonene National Park. I’ve been visiting this part of the Amazon every year for over a decade and the changes are apparent in the increase of wildlife sightings along the way. To get deep into the forest, one needs 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 the two very different realities in this part of the Amazon. Following the Tambopata River from the Malinowski checkpoint allows you to experience some of the most pristine and dynamic parts of the Amazon basin. You enter one of the most biologically diverse places on the planet; the diversity speaks for itself. The plant diversity is so intense that it can be hard to comprehend. The dynamism of the river is a wonder.

At one side, it is destructive, as it eats away one bank of the river where ancient trees are felled with the decay of the river’s edge into the fast-moving water. The other bank is built up, where the flow slows with silt and sand transported from the nearby Andes. The silt brought down from the Andes also means that these tributaries to the Amazon have brought gold dust down 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’s a truly breathtaking landscape and a sensory experience.

As the new banks are built up, life immediately colonizes. The ecological succession starts with grasses and small, fast-growing plants followed by lightwood tree species. With time, diversity increases. As you travel upriver, you constantly see forest at various stages of succession on one bank and old diverse forest on the other. The dynamism is obvious. The river will braid as islands are formed and oxbow lakes are created as the river changes course. The lakes survive until they turn to swamps and then forest. This dynamism means that there are various habitats that compound the diversity found.

Tourists come to experience the depths of nature of the “lungs of the Earth.” They come to see the various species of macaws and parrots that congregate to eat clay at the clay licks. They hope to spot a jaguar and see a harpy eagle. They are often shocked to hear the red howler monkeys. They are in awe of the agility of spider monkeys. They are paralyzed in fear when they have a group of 40 white-lipped peccaries race past them while stuck in thigh-high mud. 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 pristine forest where the flow of the river does its thing. But the past flow of the river has ensured that a great swath of this forest is growing in silt that contains gold dust.

If you take the other fork in the road at the Malinowski checkpoint, a very different reality awaits. If you follow the Malinowski River, you eventually arrive at 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 is along this highway that miners originally started their operations. Those operations then expanded south toward the Malinowski River. This is not the only area of devastation. A quick Google Maps or Google Earth search of the Interoceanica Sur near the Malinowski and you will be able to see the results of the gold mining for yourself (use these coordinates: -12.8657205,-69.9867795). Remember, that photo was taken in the past; it is worse now. It is hard to exaggerate the hellscape that is produced. Forest to inert dirt. It is the complete annihilation of the forest. It is the complete destruction of the possibility of a forest. It is turning pristine forest into pools of heavy metal contaminated water and dunes of sand and silt. There is no possibility for life. Oddly perhaps, the satellite images reveal beauty in the multicolored pools among sand that is left behind. Even complete destruction can have its beauty.

Mercury is used to amalgamate the gold dust. When it rains some of the mercury makes its way into the rivers where it bioaccumulates and then biomagnifies up the food chain. Estimates are over 3,000 tons of mercury have made its way into the river’s of the Peruvian Amazon in the last two decades. This 2013 study has shown that 95% of people in rural, mostly indigenous communities in Madre de Dios, had elevated levels of mercury above what is considered healthy. The dependence on fishing is the likely cause with studies showing most fish species will have elevated mercury levels. Even in the city of Puerto Maldonado, three-out-of-four citizens show elevated mercury levels with many triple the recommended upper limit.

Heavy metal poisoning is not the only human toll of the illegal gold trade. The gold fields are ripe with sex trafficking, child rape and the exploitation of the rural poor. For more detail on both the environmental cost and human cost, it is worth reading Tomas Munita’s piece in the New York Times, “Peru Scrambles to Drive Out Illegal Gold Mining and Save Precious Land.”

So how does Bitcoin fix this? Illegal gold is responsive to price. Any erosion of the monetary premium of 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 decreases because bitcoin is consuming the monetary premium of gold due to investors recognizing it as an improved money and store of value, then the illegal gold miners will decrease operations. These operators do not produce gold at a loss. Peru’s government has shown itself incapable — or more accurately, unwilling — to solve this problem. Fortunately, for the first time ever, there is a market solution to the illegal gold mining problem. That solution is bitcoin.

This is a guest post by Gilles Buck. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.