Ether has reached new heights, more people than ever are “bitcoin long” and controversy over bitcoin’s energy consumption is fierce.
The top shelf
Out of the ether?
Ether (ETH), the native cryptocurrency of the Ethereum blockchain network, hit a fresh high of $ 1,439.33, up $ 19 from its previous record level of $ 1,420 in 2018. The currency is up well over 1000% since ETH’s initial public sale in 2015, according to Messari. Will Foxley of CoinDesk reports that ETH has a different value proposition for bitcoin, which has also been on a tear in recent months, due to its programmability, developer-friendly community and its legacy of serving as the foundation of some of crypto’s biggest trends including ICOs and DeFi.
Bank of America found that “long bitcoin” is now the most crowded trade among fund managers, finally dismantling “long technology”. Essentially, this means that investors place bullish bets on bitcoin – for what I assume are a variety of reasons including bitcoin’s deflationary attributes at the center of record currency printing as well as herd mentality. The survey found that reducing the dollar is now the third most popular trade. JPMorgan, meanwhile, believes bitcoin needs to cross $ 40,000 again to keep it from bleeding investors while South Korean fintech company Dunamu has unveiled a “scare and greed” digital asset index.
Supply the chain
The UK National Health Service tapped the classified ledger Hedera Hashgraph and software company Everyware to track the temperature of COVID-19 vaccines in cold storage. NHS facilities in the UK’s South Warwickshire, Stratford Upon Avon, and Warwick hospitals region will initially use the technology, with a wider rollout planned as vaccine rollout progresses.
OTHER BTC ETP: Launches on the SIX Swiss exchange, this time developed by CoinShares. (CoinDesk)
WHITELISTED: ENJ is the first gaming ticket to receive regulatory (self) approval in Japan. (CoinDesk)
UNISWAP UNIVERSITY: The Blockchain Initiative and FinTech Harvard Law, a student organization, are the latest “University” deputy. (Twitter)
LAST DAY: Brooks OCC is stepping down. (Twitter)
FORGOTTEN MILLIONS: Binance unlocked 16 million BNB to be released for staff in July 2020. (Decryption)
666,666: A biblical message at the height of a bitcoin block was recently encoded corresponding to “the beast’s mark.” (Decrypt)
Consolidation and rotation
With all eyes on ether, which crossed the record level, market analysts are still confident in their assertion that traders are allocating to altcoins. Bitcoin reported two straight days of earnings, but is still trailing in the $ 34,000 and $ 40,000 range – hovering near $ 37,000 at press time. “This consolidation phase is building a solid foundation, giving those who wish to sell bitcoin plenty of time,” according to cryptocurrency exchange company Diginex.
With bitcoin at record levels, many critics have come out of the woodwork to present recent market rally counter-narratives or reasons why the cryptocurrency should be banned. Of all the age-old criticisms of the cryptocurrency, the most damaging, and perhaps most sympathetic to outsiders, is bitcoin’s energy consumption.
On Sunday, London-based software engineer Stephen Deihl composed a twitter thread discuss the environmental impact of bitcoin mining. Quoting WolframAlpha data, Diehl claims that the “bitcoin network wastes 78 TWh (terrawatt hours annually),” which is said to be enough to power “several million US households.”
This is “A huge smoldering Chernobyl sitting at the heart of Silicon Valley,” Diehl writes. He is not alone. Apple engineer Fredrick Jacobs joined the fracas saying that bitcoin’s financial incentives can lead to wasted, “often not green,” energy.
Bitcoin is undoubtedly a consumptive commodity. Just as mining gold has a range of externalities, as does bitcoin. In 2018, the World Economic Forum (WEF) estimated that the global bitcoin network consumes as much energy as Ireland. I have also heard Austria and Venezuela as points of comparison. For those who see little of the value of a non-centralized distributed currency, this is undoubted. It’s enough to turn any sane observer into Kaczynski’s crypto.
As ever, bitcoin fans have come out to counter these claims. Schelling bitcoin’s promoters have landed this time around the idea that “bitcoin is a battery.” Not only is bitcoin a store of value, but it could be considered a useful store of energy.
As Meltem Demirors, CoinShares’ Chief Strategy Officer writes, bitcoin “makes energy mobile, portable, honorable and transferable by turning it into money.” In other words, bitcoin is a “battery” because it takes energy and turns it into a currency that can be used to pay for energy later.
Loads of ideological and material assumptions are baked into this battery idea. But is it wrong?
At the most basic level, this is exactly the bitcoin miners business model. Owners and operators of bitcoin specialized mining equipment use their systems wherever there is cheap, readily available power. These machines solve complex mathematical problems that secure the ~ $ 700 billion network and are rewarded with a bitcoin subsidy.
This payment is then often exchanged for money to pay the power bills. Complicating this idea a bit, Bitcoin advocate and author Knut Svanholm, an early promoter of the “bitcoin battery” concept, said: “It’s important to remember that it is not directly converting energy into value but electricity into digital shortages . Digital shortages that can then be programmed to express value. “
This does not directly address the issue of bitcoin’s energy withdrawal, but it is a defense of bitcoin as a rare, valuable asset worth powering. A similar line of defense is to compare bitcoin with other energy-intensive goods or services. What about Netflix? What about Twitter? Aren’t most web platforms pulling on the power grid with arguably limited usability?
I was born at the tail end of the millennial generation, and as such I am painfully aware of the environmental catastrophe humanity is staring down. I turn off the lights when I leave a room. I buy nuts and grains in bulk. In elementary school, I reported on recycling and have kept to the habit. I am committed to the idea of using less and keeping more.
For this reason I want to take bitcoin’s environmental footprint seriously.
The last line of defense (which I will cover) is the idea that bitcoin is green, to an extent. It is often alleged that the majority of bitcoin mining is powered by renewable sources. CoinShares estimated that in 2019, 73% of bitcoin’s “energy mix” comes from renewable sources. Others say that a large amount of bitcoin is mined using energy that would otherwise have been wasted – such as from a natural gas blaze.
“Bitcoin thrives on the margins, where energy is lost or cut,” Nic Carter wrote in a CoinDesk op-ed called “Last Word on Bitcoin’s Energy Consumption.”
Along these lines, WEF argued in 2018 that renewable energy providers, such as wind or solar farms, should consider switching on crypto miners whenever there is a surplus of energy when the sun is shining and the air is flowing. “[I]f the grids are overloaded, clean energy is heavily wasted, ”they write. “For every block added to the chain by this method, there will be no carbon emissions to match.”
This is not a bad idea. But I think there is a blind spot that could also explain one of the weakest claims that bitcoin is green. In short, a block subsidy earned by an eco-friendly miner is not carbon-free, a whole network of miners is competing for the same subsidy that may not be plugged into a hydroelectric port.
Bitcoin is wasteful by design. No matter what percentage of hash power is green besides the point. Proof of work is wasteful, and people will always be offended by that. And ideas of coordinating the bitcoin network to turn on and off depending on energy production will never work. At present, it is easy to coordinate a network of bitcoin miners, because there is no coordination – people plug their miners in and let them shiver.
Underpinning the environmental discussion is a hypothesis about whether bitcoin has any value, and whether that value is worth the cost. Energy value of bitcoin framed by Capital Unchained in almost apocalyptic terms:
“Fundamentally, future economic stability is why there can be no more important source of demand for energy use than the security of bitcoin’s financial system, especially when the alternatives (fiat and gold) are structurally flawed.”
It doesn’t have to be so black and white. But when it comes to the future of bitcoin, it’s worth asking what powers bitcoin could impose.