Q: How is crypto mining improving the energy grid? [Free, #27]
In our ongoing series about mining and consensus mechanisms, we examine exactly what the impact on climate and energy grids mining has.
Well hello there!
Yet another week in paradise for we blockchain few, with wonky prices and wacky news. The story everyone with a foothold in the world of crypto has been watching is the rollout of Bitcoin in El Salvador, as well as it’s official declaration of legal tender status taking effect this week.
Despite all the headwinds to change, the rollout has been relatively painless for something of its magnitude, and it has spurred other countries (even outside LatAm, like the Ukraine) to begin to consider following suit and declaring Bitcoin legal tender as well.
It’s too early to say what effect this will have around the world, but there’s a growing body of evidence being assembled by many analysts that this could have far reaching impact in the US (and subsequently, the world) with how they regard cryptocurrency.
One of the primary reasons the US tax code treats cryptocurrency the way it does (and all other agencies, subsequently) is due to it not having legal tender status anywhere in the world at the time of the guidance and evaluation. This has now shifted, and so too must US regulators re-evaluate their positions on the whole of cryptocurrency and blockchain.
As interesting as all that is, our deep dive this week is a continuation on our focus on mining and consensus mechanisms. Every time there’s bullish news for crypto, traditional finance narrative about how bad crypto is for the environment creeps into the news cycle somehow. Where does this come from, is it true, and what does a Norwegian billionaire have to do with all that? We’ll focus on that in this week’s deep dive!
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Blockchain Bulletin
Coinbase threatens to sue SEC over crypto lending program. The SEC recently threatened to sue crypto exchange company Coinbase if it launched its yield-earning product Coinbase Lend, so Coinbase CEO Brian Armstrong threatened to sue it back, reported Yahoo! Finance.
Mastercard acquires crypto tracking firm CipherTrace. Credit card company Mastercard has acquired crypto tracking firm CipherTrace with the intent of providing additional transparency and trust to its digital asset ecosystem, reported Decrypt.
El Salvador buys 400 BTC as Bitcoin becomes legal tender. El Salvadoran citizens can now use Bitcoin as legal tender as landmark legislation becomes law and the country finalizes purchase of 200 BTC, making a total of 400 BTC bought buy the country, reported CNBC.
Blockchain Behind the Scenes
Algorand Foundation puts $300M fund behind growing DeFi innovation. Algorand Foundation announced that it launched a $300 million fund called the Viridis DeFi Foundation with the intent of supporting DeFi innovation.
Ukraine becomes the latest country to legalize Bitcoin. The Ukraine recently became the latest country to legalize Bitcoin through regulatory legislation after a nearly unanimous vote in the country’s parliament.
Blockchain Deep Dive: How is crypto mining improving the energy grid?
Any time there’s good news for crypto, the entrenched traditional finance industry finds ways to create news to counteract it.
A common trope is to rail on about how bad for the environment blockchain technology is.
The vast majority of the bad data used by the media in these instances comes from a set of debunked studies from a traditional finance analyst named Alex de Vries, published under the moniker “The Digiconomist.”
de Vries has since 2014 promoted the improper conflation of mining energy usage on a per-transaction basis in such a way that leads less sophisticated analysts to assume that when transaction volume increases, so will energy usage (discussed in previous issues!).
I and others have published research debunking various aspects of this propaganda over the years (as far back as 2014 at SiliconANGLE).
This year, the propaganda has made the leap into pop science content, with folks like Hank Green engaging in unhinged rants on how crypto mining is destroying the planet.
Pundits like Green often seize on news events (like the failed coal mine in China), and try to correlate them to seasonal shifts in mining power as evidence that crypto mines do nothing but churn smog into the atmosphere.
Actual reasons behind it have more to do with avoiding rainy seasons in China, and flatly discard that China’s grid is reportedly 10% “greener” than the US grid.
Widely published estimates say that between 74 and 76% of energy used to power Bitcoin is from renewables, contrary to de Vries and Green.
Two relevant industry terms you should know: stranded energy and rejected energy. Rejected energy is energy that is produced, but does not power anything for some reason.
This is up to 67% of US energy production according to the Lawrence Livermore National Laboratory. An example of this is gas flaring, which gas at drilling sites is simply burned off because it can't be captured.
Worldwide, capital investors are waking up to this fact, including Norwegian billionaire Kjell Inge Røkke, who says that without bitcoin mining, investment in renewable energy for his country would simply not be possible.
Brief sponsored message from Swan Bitcoin.
Swan Bitcoin is proud to present This Machine Greens, a film that explores Bitcoin’s complex and nuanced relationship with energy. The film is produced by Enrique Posner and directed by award-winning British filmmaker Jamie King whose Steal This Film series (2006-2010) is one of the most downloaded documentaries of all time.
The film will stream on Swan’s YouTube channel tonight at 12pm PT / 3pm ET tomorrow, and will be followed by a discussion and Q&A with the filmmakers.