Category Archives: Bitcoin

Bitcoin uses a lot of electricity. So do electric cars, space travel and civilization in general, but few things burn energy so shamelessly. To assuage critics, Elon Musk and Michael Saylor announced late last month that Bitcoin miners in North America had agreed to form the Bitcoin Mining Council, an organization that would promote energy transparency and sustainable mining practices. A noble effort, to be sure, but one that drew much criticism. Participants in a decentralized currency tend to be sceptical of efforts at cooperation, which is just a politically correct term for collusion. To them, a Bitcoin mining council sounds a lot like OPEC or, worse, the Federal Reserve.

The idea of Bitcoin mining was originally imagined as one-CPU-one-vote, where individuals around the world could run the Bitcoin software and join in recording transactions. Mining is essentially a lottery, where computational power is proportional to the chance of winning the right to record a new block. As with most things, however, Bitcoin mining benefits from economies of scale. Large companies can invest in custom silicon chips, or pool digital resources to amortize mining revenue. As a result, a small number of firms dominate the vast majority of Bitcoin mining. When crypto mining is performed in massive data centres with specialized hardware, a single CPU doesnt stand a chance.

Bitcoin is actually highly centralized, with a supermajority controlled by handful of big mining (aka hashing) companies. For governments, the concentration of mining power has some benefits. If a miner gains over half the computing power in the network to wield the majority hash rate, it can selectively censor participants by refusing to include their transactions in new blocks. That means known ransomware operators, for example, can be blocked from spending their Bitcoin.

Earlier this year, Marathon Digital Holdings, one of the largest Bitcoin miners in North America and member of the newly formed Mining Council, announced that it would be fully compliant with US protocols, including anti-money laundering practices and the Office of Foreign Asset Controls standards. As a result, Marathons mining pools began excluding non-compliant transactions from their mined blocks.

In theory, economically rational Bitcoin miners elsewhere could pick up dropped transactions and place them in the next block, collecting transaction fees along the way. However, a colluding council could choose to ignore subsequent blocks that dont adhere to the rules. The software protocol dictates that users must always follow the longest chain, so a group with most hash power will [prevail]. Theres a saying that Bitcoin is for enemies. Not only does the protocol accommodate mutually hostile participants, it thrives on this hostility.

Bitcoins single value proposition is its ability to resist human arbitration, made possible by the fact that participants are unable to cooperate and change its software. Yet, if Russia, Iran and North Korea contribute big hash power to the network, it is unlikely that US banking regulations will be enforced by the Bitcoin protocol.

Last weekend, the Bitcoin network prepared for a privacy upgrade. Though Marathons mining pool had attracted attention for its initial refusal to signal support, its chief changed course amid pressure from the Bitcoin community. It released a statement saying the companys mining pools would cease to filter future transactions.

However, lack of regulatory compliance will not last. The Joe Biden administration is already reportedly discussing cryptocurrency guardrails. Even if North American Bitcoin miners intended to follow the tenets of censorship resistance, the formation of a council presents a tempting target for regulators. Congress will have warm bodies to drag in for testimony and tongue-lashing.

Without pressure from legal tender laws, Bitcoins value comes from a shared belief in its resistance to censorship. In earlier days, the prospect of centralized mining would be enough to turn participants away. In 2014, one Bitcoin mining pool briefly gained 51% of the total hashing power, prompting a global sell-off. Even though it might have been possible to exploit majority hash power for profit, the possibility of shattering the illusion of decentralized trust motivated that pools operators to back off. The company issued a statement promising to keep future power below 40% and urged others to do the same.

Now that Bitcoin seems to have achieved institutional support, participants are not as hasty to head for the exits over a loss of decentralization. Instead, investors will lean on Bitcoins potential for subsidizing clean energy and adherence to sustainability as its primary source of value. Bitcoin purists will need to decide whether the price increase is worth it.

Elaine Ou is a Bloomberg Opinion columnist and a blockchain engineer at Global Financial Access in San Francisco

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Elon Musk has been dragging Bitcoin where it dreaded to go - Mint

Financial services firm Square Inc. will partner with blockchain technology provider Blockstream Mining to build an open-source, solar-powered bitcoin mining facility, Blockstream announced in a press release Saturday. Square confirmed the news in a tweet, saying it was committed to driving further adoption and efficiency of renewables within the bitcoin ecosystem.

According to the release, Square will invest $5 million in the facility, which will be a proof-of-concept for a 100% renewable energy Bitcoin mine at scale, and will be built at one of Blockstreams sites in the US. We hope to show that a renewable mining facility in the real world is not only possible but also prove empirically that Bitcoin accelerates the world toward a sustainable future, the release states.

Bitcoin mining uses a lot of electricity, and the pursuit of sustainable methods for mining it is top of mind for many in the industry. Tesla CEO Elon Musk said in April the automaker would stop accepting bitcoin as payment for vehicles (after having the policy in place for roughly a month), noting that cryptocurrencies like bitcoin come at great costs to the environment. He met with bitcoin miners in May, and the group agreed to form a Bitcoin Mining Council, to promote energy usage transparency [and] accelerate sustainability initiatives worldwide.

Square CEO Jack Dorsey, who is also CEO of Twitter, is another big proponent of bitcoin (its the only word in his Twitter bio at the moment), saying in 2018 that he thinks bitcoin will become the worlds single currency within 10 years. Square invested $50 million in bitcoin in October , adding another $170 million in February. Users of Squares Cash app can use it to buy bitcoin. And during remote testimony before Congress in March, a bitcoin clock could be seen in the background of Dorseys video stream.

On Friday, Dorsey tweeted that Square was considering making a hardware wallet for bitcoin building it entirely in the open and in collaboration with the community.

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Square will invest $5 million to build solar-powered bitcoin mining facility - The Verge

Thousands flocked to Miami from all over the world for Bitcoin 2021, billed as the largest crypto event in history. The conference was also Wynwoods first big event since the pandemic started.

On day two of the festivities, Miami-Dade County Commissioner Danielle Cohen Higgins gave the opening remarks to a sold out crowd.

This is an entire industry visit," Cohen Higgins said. "These are businesses. These are financial industries and we want them to have a home and I think Miami-Dade County is the perfect home.

City of Miami officials welcomed the conference with open arms, in hopes of becoming the newest big tech hot spot.

County leadershave also created a task force to look into how residents could use cryptocurrency as a form payment for taxes, fees and services.

One of the most anticipated events of the conference was a demo by skateboarding icon Tony Hawk, who gave one of the keynotes on Bitcoin and skateboarding as countercultures that have gone mainstream.

Skateboarding legend Tony Hawk shows of some of his moves at the 2021 Bitcoin Conference in Miami

Other notables on the closing day of the conference were Kevin O'Leary from CNBC Shark Tank, who spoke about mining as a public company and comedian Tom Dillon.

Many crypto-related announcements were made throughout the two day conference, including how Bitcoin will be going to the moon later this year by robotics technology company Astrobotic.

Also, in a video broadcast on Saturday, the president of El Salvador, Nayib Bukele, announced a partnership with digital wallet company, Strike, to build the countrys modern financial infrastructure using bitcoin technology, as it looks to become the world's first country to adopt Bitcoin as legal tender.

Bitcoiners from far and wide came to learn and network within the Bitcoin community and many believe the hype is real.

I think the hype about it, to me, is people having their money," said Lacey London, a day trader who came to Miami just for the conference. "So we own our money. Its no longer in centralized banking.

Originally posted here:
We Own Our Money': Bitcoin Conference In Miami Is The Biggest Yet - NBC 6 South Florida

Bitcoin continued its decline on Saturday after potentially positive catalysts from El Salvador and Square Inc. were unable to assuage investor concerns over Chinese regulatory risks.

The worlds largest digital coin slipped to trade around $35,220 as of 6:31 p.m. in New York, down 5.3 per cent in the past 24 hours. The move extends its downtrend for a second day after a cryptic tweet from Elon Musk that hinted at a potential split with the cryptocurrency.

Weibo, a Chinese social-media service, appears to have blocked some crypto influencer accounts on Saturday, citing violation of unspecified laws and Weibo community rules. While Weibo has cracked down on various crytocurrency-related accounts in the past years, the news came on top of recent harsh Chinese regulatory rhetoric that have already led to a plunge in prices for many digital coins.

Square Inc. said Saturday it will invest $5 million to build a solar-powered Bitcoin mining facility at a Blockstream Mining site in the U.S. through a partnership with the blockchain technology provider.

Weekends in recent months have been rocky for crypto, which trade every day of the week. Before this weekend, Bitcoins average swing on Saturdays and Sundays this year comes in at 5.35 per cent .

Musk has agitated Bitcoin and other digital coins with his social media posts. On Saturday, he tweeted that Goods & Services are the real economy, any form of money is simply the accounting thereof.

Bitcoin is struggling to break above its 20-day moving average -- it failed to do so on Thursday and Friday -- and is having a hard time advancing toward $40,000. If the coin were to breach that round-number level, it would probably test its 200-day moving average of around $41,500, something many chartists would consider a bullish catalyst.

However, as Bitcoin continues to fluctuate in a narrow range, a retest of the $30,000 level could also be in play until more positive catalysts emerge.Still, many point out that the crypto space has always been volatile. Its price swings -- up and down -- are a characteristic of the market, they argue, and many of its long-term investors are undaunted by its fickle day-to-day swings.

Our investor base has experienced market volatility many times and they know that this comes with the territory -- the ability for there to be pretty pronounced movements in price are native to investing in crypto, particularly at this point in cryptos life cycle, said Michael Sonnenshein, CEO at Grayscale Investments. Investors dont really get phased.

Its very difficult to make a fundamental case sometimes for some of these, and so I think thats your primary risk, JJ Kinahan, chief market strategist at TD Ameritrade, said by phone.

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Bitcoin falls on fear of Weibo suspending some crypto accounts - Economic Times

Bitcoins wild gyrations in 2021 have made sure of one thing: The future of money will be electronic, but it wont remotely resemble a cyberpunk utopia. Peoples power will bow to sovereigns might.

The mania and panic that have gripped decentralized cryptocurrencies are heightening the attraction of their coming rivals: digital cash, issued by central banks. These tokens will be staid, centralized and state-controlled. Thats exactly what users will want in an Internet of Things world where machines need to settle claims with one another all the time, instantaneously, but without contributing to global warming.

Official electronic coins will be a new type of central bank liability alongside physical cash, though for investors betting on the future value of the dollar, yen or the euro, they wont be a novel asset class.

That has clear advantages. To avoid becoming a lightning rod for fresh speculation means that a global economy powered by FedCoin, digital euro and Chinas e-CNY will make far less onerous demands on energy resources than cryptocurrencies. In the absence of a trusted intermediary, the mining, or proof-of-work protocol that keeps the blockchain secure from double-spending attacks, requires power-guzzling hardware. Between Bitcoin and Ethereum, the electricity consumed can light up 16 million American households.

Not so for the distributed ledgers that will verify transfers of official coins. These ledgers will only be held by a select group of intermediaries with the central banks permission. Instead of being in a race to solve puzzles faster than malicious actors, as we see with decentralized cryptocurrencies, the nodes in the network can lock their own funds to back legitimate transactions.

This approach, known as proof-of-stake, will require a fraction of the energy proof-of-work needs. Ethereum intends to switch. The cryptocurrency Ether will replace hardware and electricity as the investment needed to secure the network. Validators will earn fees by locking up at least 32 Ether. (Thats a $72,000 commitment as I write.) If they misbehave, go offline or fail to do their job, the processors can lose their collateral.

A central authority can perhaps run such a network better. After all, those who are vouchsafing transactions must have skin in the game, as they claim and somebody trustworthy must ensure that they do. As Chi Lo, an economist at BNP Paribas Asset Management Asia, says: A holders identity is inevitably required for verification of balances on a digital ledger.

Who has the legal identity of coin holders? The government!

Central banks that arent constrained by how much fiat money they can create out of thin air use that flexibility to avoid catastrophe, as they did recently during the Covid-19 pandemic. By contrast, a bitcoin-ized economy can be dangerous because of finite money supply. As Lo says, if you fix nominal variables, real output has to adjust violently to absorb any economic shocks.

Besides, perfect anonymity of cryptocurrencies is impractical. It comes with unacceptably high risks of money laundering and terror financing. Governments do not want to pry into all or even most online transactions. But they wont give up their right to lift the veil of pseudonyms when they want. Hence, the interest worldwide in digital cash. Chinas plans are most advanced, but other central banks are also in the fray.

If cryptocurrency adoption is a headache for governments, an overwhelming popularity of digital cash could also be an issue. Banks could lose deposits should customers prefer having a direct claim on their monetary authorities. Lenders financing long-term loans with short-term market liquidity might get into trouble later. These risks arent new. But by ignoring them to a point where subprime mortgage-linked banking losses had to be socialized, authorities created a trust gap with the public: Techno-anarchists burst through it with the template for an electronic payment system based on cryptographic proof instead of trust.

More than a decade later, the cyberpunk movements success is to be measured not by the highly volatile, speculative asset class it has helped spawn and popularize, but by the rising influence of blockchain technology within the traditional financial system. Digital cash with in-built, self-executing software code will alter the future of money in a way that cryptocurrencies never could. Tokens will win. But trust won't lose.

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Why Bitcoins wild ride bodes well for the future of digital cash - Business Standard

By Elaine OuBitcoin uses a lot of electricity. So do electric cars, space travel and civilization in general, but few things burn energy so shamelessly.

To assuage critics, Elon Musk and Michael Saylor announced late last month that Bitcoin miners in North America had agreed to form the Bitcoin Mining Council, an organization that would promote energy transparency and sustainable mining practices.A noble effort, to be sure, but one that drew much criticism. Participants in a decentralized currency tend to be skeptical of efforts at cooperation, which is just a politically correct term for collusion. To them, a Bitcoin mining council sounds a lot like OPEC or, worse, the Federal Reserve.

The idea of Bitcoin mining was originally imagined as one-CPU-one-vote, where individuals around the world could run the Bitcoin software and participate in recording transactions. Mining is essentially a lottery, where computational power is proportional to the chance of winning the right to record a new block.

As with most things, however, Bitcoin mining benefits from economies of scale. Large companies can invest in custom silicon chips, or pool computational resources to amortize mining revenue. As a result, a small number of companies dominate the vast majority of Bitcoin mining. When crypto mining is performed in massive data centers with specialized hardware, a single CPU doesnt stand a chance.

Earlier this year, Marathon Digital Holdings, one of the largest Bitcoin mining companies in North America and member of the newly formed Mining Council, announced that it would be fully compliant with U.S. protocols, including anti-money laundering practices and the Office of Foreign Asset Controls standards. As a result, Marathons mining pools began excluding noncompliant transactions from their mined blocks.

In theory, economically rational Bitcoin miners outside of North America could pick up the dropped transactions and place them in the next block, collecting transaction fees along the way. However, a colluding council could choose to ignore subsequent blocks that dont adhere to their rules. The software protocol dictates that users must always follow the longest chain, so a group with majority hash power will eventually overtake any offshoots.

Theres a saying that Bitcoin is for enemies. Not only does the protocol accommodate mutually hostile participants; it thrives on mutual hostility.

Bitcoins single value proposition is its ability to resist human arbitration, made possible by the fact that participants are unable to cooperate and add changes to the software. If Russia, Iran and North Korea contribute significant hash power to the network, it is unlikely that U.S. banking regulations will ever be enforced by the Bitcoin protocol.

Last weekend, the Bitcoin network prepared for a privacy-enhancing software upgrade. Though Marathons mining pool had attracted attention for its initial refusal to signal support, its CEO changed course, amid pressure from the Bitcoin community. The company released a statement announcing that the companys mining pools would cease to filter future transactions.

However, the lack of regulatory compliance will not last. The Joe Biden administration is already reportedly discussing cryptocurrency guardrails. Even if North American Bitcoin miners intended to follow the tenets of censorship resistance, the formation of a council presents a tempting target for regulators. Congress will have warm bodies to drag in for testimony and tongue-lashing.

Without pressure from legal tender laws, Bitcoins value comes from a shared belief in its resistance to censorship. In earlier days, the prospect of centralized mining would be enough to turn participants away. In 2014, one Bitcoin mining pool briefly gained 51% of the total hashing power, prompting a global selloff.

Even though it might have been possible to exploit the majority hash power for profit, the possibility of shattering the illusion of decentralized trust motivated the pools operators to back off. The company issued a statement promising to keep future power below 40% and urged others to do the same.

Now that Bitcoin has achieved institutional support, participants are not as hasty to head for the exits over a loss of decentralization. Instead, investors will lean on Bitcoins potential for subsidizing clean energy and adherence to sustainability as its primary source of value. Bitcoin purists will need to decide whether the price increase is worth it.

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View: Elon Musk is pulling Bitcoin where it loathed to go - Economic Times

Despite Bitcoin BTCUSD, -0.46%, Ethereum ETHUSD, -0.01% and Dogecoins DOGEUSD, -0.16% wild ride last month, more financial advisers than ever are recommending their clients have some crypto in their portfolios.

Some 14% of financial advisers have already added cryptocurrencies to their clients portfolios or are recommending it to them, according to a survey released Tuesday of 529 financial advisers conducted by the Financial Planning Association in March.

Some 14% of financial advisers have already added cryptocurrencies to their clients portfolios or are recommending it to them

Thats up by 13 percentage points from last year when less than 1% of advisers were recommending it, the poll found. More than a quarter (26%) of advisers are planning to recommend or add crypto to their clients portfolios in the coming year.

Last year however none of the 242 respondents to the same survey anticipated that theyd recommend crypto to their clients in 2021, the survey commissioned by Onramp Invest, a crypto portfolio management software company concluded.

So why the change of heart? Clients appear to be less concerned about asset market volatility this year compared to last, despite the rollercoaster ride in cryptocurrencies in recent months.

More than half (52%) of advisers said their clients inquired about market volatility over the past six months, whereas last year some 76% of advisers fielded questions from their clients about it over a six-month period.

Investors may also be drawn to cryptocurrencies lately because they view them as a hedge against inflation, which in the U.S. is hovering at a 13-year high.

Whereas stock-market investors will effectively earn less on any gains they realize this year due to inflation, investors in cryptocurrencies like bitcoin, which has a limited supply like gold GC00, +0.03% or silver SI00, -0.04%, could have a better shot at earning more money as investors flock to them. Or not.

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Few, if any, financial advisers expected to recommend bitcoin and dogecoin to clients --- here's how many now suggest buying crypto - MarketWatch

Follow us @crypto for our full coverage.

Bitcoin and other cryptocurrencies are unlikely to escape regulatory oversight as supervisory authorities respond to the sheer popularity of the phenomenon, according to the governor of Swedens central bank.

Though monetary policy officials have voiced near universal skepticism toward Bitcoin and its rivals, cryptocurrencies have continued to build an enthusiastic following. Thats prompted some of the biggest names in finance to move in, as Wall Street banks such as Goldman Sachs Group Inc. offer trading services tied to crypto.

Read More: Kuroda Joins Chorus of Central Bankers Casting Doubt on Bitcoin

When something gets big enough, things like consumer interests and money laundering come into play, Riksbank Governor Stefan Ingves said on Monday. So theres good reason to believe that [regulation] will happen. Erik Thedeen, the head of Swedens financial regulator, said on Tuesday that its quite evident that some form of regulation is needed.

Photographer: Mikael Sjoberg/Bloomberg

Swedens financial markets minister, Asa Lindhagen, said the government is already in the process of tightening standards for crypto exchange platforms. But she called it a work in progress at the international level. She also said that addressing the risk of money laundering that cryptocurrencies represent is a very important issue that will require cross-border work.

Its far from clear how to regulate a product thats designed to evade the scrutiny of national authorities. But governments are already trying, with China in particular stepping up pressure on crypto loyalists. The Peoples Bank of China recently told financial institutions that theyre not allowed to accept cryptocurrencies for payment, which followed a crackdown on crypto mining. There are signs, though, that traders are still active, underscoring the scale of the challenge.

In the U.S., Federal Reserve officials are in the process of studying the various ways to address this issue, Randal Quarles, the Feds vice chairman of supervision said in May. But federal agencies need time to ponder the right regulatory approach before they can then create a framework for oversight, he added.

In the European Union, the commission has put the matter to a hearing as it tries to figure out how best to create a regulatory framework for crypto assets. In September, it proposed a pilot regime for market infrastructures interested in trading crypto assets. Thedeen said an EU regulatory framework for cryptocurrencies is now under way.

On Tuesday, Riksbank Deputy Governor Per Jansson underscored concerns that Bitcoin and its peers continue to fluctuate extremely, with nothing concrete or substantial underpinning their actual value.

Sweden, like China, is one of the more advanced countries in its efforts to develop a central bank digital currency. Thats as monetary authorities try to prepare for the disappearance of cash as a payment form, and try to ensure that cryptocurrencies dont fill the void. Ingves has previously estimated Sweden might have its own central bank e-krona in about five years.

Read More: Carpe Diem - Central Banks in a Digital Future

Regulation of cryptocurrencies will probably come at different times in different areas, Ingves said.

Fears of a digital dollarization with a gradual loss of control over monetary conditions is one reason for central banks to introduce digital currencies of their own (as an alternative to private cryptocurrencies). As central banks accelerate moves toward a public digital payments option, its also likely that they will step up efforts to keep the volatile cryptocurrencies in check.

--Johanna Jeansson, Nordic economist

With assistance by Rafaela Lindeberg, and Love Liman

(Adds comment from head of Swedens financial regulator)

Before it's here, it's on the Bloomberg Terminal.

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(BTC USD) Bitcoin, Crypto Unlikely to Escape Regulation: Riksbank Governor - Bloomberg

With international focus on sustainability sharpening, the energy consumption of the worlds first ever popular virtual currency, bitcoin, is being put under the microscope. Its most vehement detractors argue bitcoin uses an unjustifiable amount of energy, and represents a thorn in the side of the wider green transition. Bitcoins advocates, on the other hand, claim this is an oversimplification, and measures can be taken to ensure the blockchain network becomes sustainable long-term.

Due to climate concerns, Elon Musk today announced that Tesla will no longer accept Bitcoin. But how much energy does bitcoin actually use? And can anything be done to ensure cryptocurrencies-at-large scale sustainably?

Bitcoin is the worlds oldest and best-known cryptocurrency, invented in 2008 by an unknown entity under the alias, Satoshi Nakamoto. The virtual coin started to be used in 2009, once it was released via open-source software. As a decentralised form of currency, bitcoin is not tied to any central bank or administrator, meaning transactions must be verified by a network of nodes, or machines, distributed across a public ledger otherwise known as a blockchain.

As a reward for validating bitcoin transactions and therefore maintaining the integrity of the system the peer-to-peer network gives the node that completes the job first, 6.25 bitcoins (correct as of May 2020). This process, also known as bitcoin mining, requires miners to run a time-consuming Proof of Work (PoW) procedure, whereby a new block or transaction is added to the chain once an anti-fraud, cryptographic hash puzzle is solved, via bitcoins Secure Hash Algorithm 256 (SHA256) function.

Naturally, PoW involves a considerable amount of mathematical calculations, computational power, and therefore energy. When they first emerged in late 2014, the machines used to mine bitcoin application-specific integrated circuits (ASICs) had an efficiency of around 0.77 Joules per Gigahash (J/Gh), according to the Cambridge Centre for Alternative Finance (CCAF)s Cambridge Bitcoin Electricity Consumption Index (CBECI), although this figure has since dropped considerably. Together, this network of machines is estimated to consume 146.38 terawatt hours (TWh) per annum (correct as of May 2021) more energy than Sweden uses in a year.

Against a backdrop of the sharpening focus on sustainability, and initiatives such as the Net-Zero emissions agreement, this has led some to criticise bitcoin, and call for tighter regulations around the virtual currency, in order to mitigate its environmental impact. Others, however, argue the issue of bitcoins energy consumption is not as black and white as it may appear, and can be resolved in time.

So, how brown is bitcoin? And what can be done to decarbonise this controversial cryptocurrency?

Making cents of the issue

Arguably, since miners are rewarded for completing PoW processes first, the bitcoin network naturally selects computers that are bigger, faster, and more powerful than others on the system.

In an interview with Finextra, Michel Rauchs, research affiliate, CCAF responsible for helping to develop the CBECI noted: In 2009, you could mine bitcoin on a central processing unit using your desktop. A year later, miners already needed a graphics card. After 2013, specialised chips started to be manufactured exclusively for bitcoin mining, known as ASICs. During these early days, hardware replacement cycles tended to be between 2 and 6 months. If miners did not upgrade their inventory, theyd be put out of business.

Today, the Dalian Mining Farm currently one of the largest bitcoin mining centres in China boasts a computational power of 360,000 TWh, and makes up3% of the entire bitcoin network.

In this tragedy of the commons model, ever-increasing energy consumption seems built into bitcoins evolution. According to aForbes article, Chinese researchers revealed that by 2024, bitcoin mining could be responsible for 130 million tons of carbon emissions annually about the same as the Czech Republic.

The potential environmental impact of this upward trend is deeply concerning. In aTed Talk on the future of cryptocurrencies, Tara Shirvani noted that if energy-intensive technologies such as bitcoin continue to expand at their current rate, we could reach 2 degrees of global warming as soon as 2033. This is 0.5 degrees above what the UN says will engender irreversible climate catastrophes.

The wallet is half full

Bitcoins proponents, however, would argue there are more nuanced ways to look at this issue.

Projections that show bitcoins energy consumption increasing ad infinitum seem to be erroneously extrapolating on the current footprint of mining activity. This approach can be misleading, as it fails to consider bitcoins halving model, whereby every four years or every 210,000 blocks mined the reward given to miners for validating a transaction is reduced by 50%. This form of synthetic inflation serves to gradually reduce the amount of bitcoin in circulation.

As such, all available 21 million bitcoins will eventually be mined. According to Nic Carter, founding partner at Castle Island Ventures, we are currently around 88% of the way through that process meaning miners revenue will soon be sourced from fees, as opposed to the more energy-intensive PoW process.

In the long-term, this essentially means the energy consumption of the bitcoin network is likely to drop or at least plateau.

Milking the cash cow: increasing efficiencies

What is more, bitcoin mining seems to have been getting increasingly energy efficient and at a faster pace when compared to any other method of value transfer in the world, notes Carter. This observation is borne out in the CCAFs figures, which reveal that the efficiency of equipment used to mine bitcoin has gone from 0.77 J/Gh in July 2014, to 0.04 J/Gh in February 2021.

However, the most notable efficiency improvements may be behind us, argued Rauchs: In the first two to three years after the first ASICs came out, there were big equipment efficiency improvements often by two or three orders of magnitude. Computer chip sizes were being slashed from around 100 nanometers (nm) to 10 nm. The efficiency of mining machines continued to increase in this way until around 2018. Since, improvements have been marginal we are reaching the limits of physics.

When it comes to discussions of bitcoins efficiency, it is also important to be aware of the pitfalls of comparing bitcoins energy consumption to nation states, argues Lawrence Wintermeyer, executive co-chair, Global Digital Finance in aForbes article. Indeed, while bitcoin uses more energy per year than Sweden, the cryptographic network considerably more efficient: It is logical to ask whether the energy required by bitcoin should rival that of an entire nation, but doing so must take into account value. The GDP of Ukraine, for example, is around $150 billion. The value of all mined bitcoin is $940 billion greater than the combined GDP of Ukraine and the next biggest energy consumer, Sweden, with a GDP of $530 billion.

We must also acknowledge the lack of a true benchmark for bitcoin, in any comparison to a countrys energy consumption, noted Rauchs. There is nothing you can directly compare bitcoin to. It is a synthetic digital commodity that is at the moment, held mainly for investment purposes a unique thing in and of itself.

So, while comparisons to the energy consumption of nation states, for instance, are in a sense arbitrary, they are a necessary evil, in order to put this debate into perspective. Either way, bitcoin is clearly greener in terms of value than its critics let on.

Change in the weather: scaling sustainably

If we are worried about the environmental impact of bitcoin, which is the crux of this debate, it would be remiss to not examine bitcoins energy mix, as opposed to just its energy consumption. Indeed, consumption can go up, but bitcoin can, in theory, decarbonise. Promisingly, a recent Global Cryptoasset Benchmarking Study revealed that 39% of PoW mining is already powered by renewables.

According to what we observe, said Rauchs, although bitcoins energy consumption has been increasing, the actual carbon emissions may have not increased proportionately. This is because miners are seeking out the cheapest form of energies, which is often renewables. This source of stranded energy asset is in high demand among bitcoin miners.

In China, for example one of the most prolific bitcoin miners in the world provinces such as Sichuan and Unan have adopted seasonal practices, whereby hydropower is utilised more during wetter periods of the year, due to the overabundance of green energy.

This is a promising trend. And, aside from the obvious environmental benefits, the strategy serves to use surplus renewable energy that would otherwise go to waste. This is particularly convenient in Sichuan and Unan, added Rauchs, where hydropower plants have only been built in the last decade, and the necessary battery storage capacity and transmission lines needed to distribute the green energy to distant demand centres, is lacking.

The anonymised founder of a large mining operation in the United States, Pylon Finance,points out: Companies often rely on miners to utilise unused electricity especially during the pandemicHydro companies in Washington and Canada, for example, practically give away electricity due to excess production and low utilisation, in addition to not being in a favourable location for retail; miners, however, set up in front of power plants, saving transmission costs.

This energy arbitrage could be leveraged by regulators, argues a paper, published on 6th April 2021, byNature journal: Miners should be encouraged to shift their operations to regions that provide abundant low-carbon electricity. Under this site regulation model, Natures study found only 20% of bitcoin miners remained in coal-intensive energy regions resulting in lower carbon emissions per dollar earned, compared to the alternative higher taxation scenario.

Interestingly, the CBECI demonstrates that there is, in fact, already enough renewable energy to power the entire bitcoin network. For instance, the globes current stock of hydro stores which produce 4,164 TWh could power the entire bitcoin network28 times over.

So, it seems the path of decarbonisation for bitcoin is clear, albeit logistically challenging.

Note-worthy improvements

Until the infrastructural challenges of distributing this energy are met, the worlds most popular cryptocurrency will have to find ways to considerably reduce its energy consumption, in order to limit its environmental impact in the short-term.

Possibly the most widely discussed of these methods is shifting bitcoin from the PoW model, to a Proof of Stake model (PoS). Instead of rewarding the first miner that solves a cryptographic hash puzzle with new coins, the PoS model maintains the integrity of the blockchain by selecting one person to mine according to how many coins they hold, and penalises them if an infringement against the laws of the system takes place. By eliminating the competitive element, the energy demand of the network is limited, and the tragedy of the commons principle is circumvented. Thus, in theory, what is good for the environment is good for miners, under a PoS model.

There are promising movements to this end. Altcoins such as Ethereum have announced their intention to move to the greener PoS model, while others, like Nxt, are already there.

Proof of Harvest

Although PoS is far less resource intensive than PoW, it has some concerning flaws.

Not only does PoS incentivise miners to hoard tokens, it comes with a greater chance of a 51% attack particularly for smaller altcoins. Indeed, Ethereum-based apps that use PoS in their backend have fallen victim to numeroussecurity hacks and coin thefts.

Another consensus mechanism contender is the Proof of Harvest (PoH) model, invented byRubiX, which is cryptographically 1,000,000 times more secure than the ECDSA 256 system used by Bitcoin, and represents an enterprise-level, zero carbon blockchain alternative.

XRP Ledger Consensus Protocol

The altcoin XRP, meanwhile, which is issued and managed by Ripple, uses a proprietary XRP Ledger Consensus Protocol (XLCP), whereby only validators on Ripples centralised unique node list (UNL) are trusted by the network.

While XRP sacrifices the security of bitcoin for the speed that comes with centralisation, the kicker is thatRipples altcoin is not mined. Ripple minted the entire supply when the network was launched, and intermittently releases portions of the supply from an escrow, and sells them on the open market.

This model means ultimately XRP consumes less energy than the bitcoin network. In a FinextraTV episode, Monica Long, general manager of RippleX, said the energy use of this method, versus mining, is 120k times more energy efficient. The energy used is the same as running an email server. Ripple uses XRP ledger in its product offering for that reason it is sustainable at scale and green by design.

Despite the promising alternative models out there, there is always a trade-off involved be it in terms of security, network speed, or energy efficiency.

Either way, co-ordinating bitcoins shift to an alternative consensus mechanism will be very challenging for several political reasons let alone the fact it is decentralised and represents hundreds of billions of dollars, said Rauchs. Any fundamental change to the bitcoin model would take years, if it was ever actioned, and past attempts have shown that a general resistance to change is structurally engrained in the community.

Dimes are changing: Industry decarbonisation initiatives

Clearly, the environmental impact of bitcoin and altcoins is being addressed through decarbonisation and increasing renewables usage. These efforts are receiving strong backing, but more needs to be done, argues Long: What is holding back wider assent to the decarbonisation of cryptocurrencies is an industry-wide, concerted push. Key industry players need to commit to work toward a carbon neutral future.

With this in mind, RippleX recently partnered with non-profit organisation, Energy Web Foundation, and co-developed a tool calledEWZero. It is completely open source, meaning any blockchain can use it to evaluate its carbon footprint, and either identify greener energy sources, or adopt offsetting tactics. It is free for anyone to use, and we hope others in the industry will take it up, said Long.

Since Finextras interview with Long, further steps have been taken, on an industry-level, to mitigate the environmental impact of cryptocurrencies-at-large. According toForbes, an alliance of research groups and private firms announced [in February 2021] they are pooling resources with the intention of completely decarbonising all cryptocurrencies by 2040. The bodies that formulated the proposal, known as the Crypto Climate Accord, say the transparency that is by definition built into cryptocurrencies makes them ideal tools to bring trust to decarbonisation efforts.

Wherever you sit in this debate, the Crypto Climate Accord spells good news for the ability of bitcoin and altcoins to scale up sustainably.

My two cents

The discourse surrounding bitcoins energy consumption has been heated and muddy since the get-go. With each commentator owning a horse in the race, a plethora of contradictory perspectives on the issue seem to surface daily. The invaluable role of organisations such as the CCAF is to cut through the noise, and present the raw data with which stakeholders can respond to.

While bitcoin does indeed appear to be consuming a large amount of energy, those who campaign for its elimination are falling victim to a stagnation fallacy, by failing to recognise that the peer-to-peer network will improve in both efficiency and sustainability in the long-term.

In practice, bitcoin miners are increasingly committing to carbon neutrality because the cryptocurrencys footprint is becoming an existential threat to the industry. The negative press bitcoin is receiving in this area is causing some institutional investors to reconsider their capital allocation plans, and remove bitcoin from their balance sheets. This impacts bitcoins price, which spells bad news for miners. Thus, it is in the long-term interest of the bitcoin network to decarbonise.

Ultimately, bitcoin is not going anywhere the virtual goldrush is far from over. Today, the job of the financial services industry is to be informed by the data, and steer the development of digital currencies down a path aligned with the all-important Net-Zero target.

Link:
The real price of the bitcoin gold rush - Finextra - Finextra - Finextra - Finextra

Theres no question that Bitcoin often gets sold as an inflation hedge. So much of the story is about the Fed printing all this money and how theres only 21 million bitcoin, and so something something something, the number will go up due to inflation. Youve heard it a million times.

Well, today we got one of the hottest inflation prints in years. By one measure, the consumer price index had its fastest gain since 2009. So hows Bitcoin doing? Not great. Heres the intraday chart, with the time of the CPI print marked bythe vertical line

Chart: Bloomberg

Now you might say, well sure, but the hot inflation was well-known, it was priced in, in some way. And that the number we got today helps explains the extraordinary gains over the last year. But thats pretty weak. Its clear that the CPI reading did, in fact, surprise other assets. Five-year yields are up substantially on the day, showingtraders did not anticipatesuch a big increase in inflation.

Look, to be fair, this is just one day and you cant make big sweeping conclusions about the role an asset plays in global portfolios from fourhours of trading. Nonetheless, we do have a few more clues out there. In addition to Bitcoin selling off, were seeing tech get hammered (down 2%) and the real speculative stuff like the ARKK exchange-traded fund down over 3%. So from that perspective it looks like Bitcoin is simply behaving as a risky,speculative asset, which both explains its action today and also over the last year. Gold is also down on the day (speaking of assets mis-sold as an inflation hedge).

Of course, gold, highly speculative tech, and Bitcoin all have something in common, which is that they dont generate cash flow in the here and now. When economic growth is sluggish, thats not really a big deal, of course, cause nobodys making much money in the first place. But when the economy is red hot, and you can make good money with lumber or gasoline or chips or labor, then why put your money in such future-oriented assets that arent paying anything today?

Before it's here, it's on the Bloomberg Terminal.

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Bitcoin Isn't Behaving as an Inflation Hedge. Its Move Still Makes Sense - Bloomberg