Hear Crypto Out
The Cyclical Pattern of Booming and Busting
In the 1880s we had a bicycle bubble. When the bubble burst, the poor-quality companies got washed away, but great business and designs survived.
Plenty of companies that went public in the 1990s during the dot-com boom didn’t seem relevant or frankly, good. But there are plenty of successful businesses which still dominate today, including Amazon, Google, and Nvidia.
There are many underqualified crypto businesses, and many tokens themselves, will go bust in the coming months. But, plenty of great projects and great ideas out there will continue to innovate – evolving a decentralised financial system is the endgoal for many crypto firms that will be around for the long haul.
No time to panic – there’s still an abundance of innovation in crypto.
📅 This Week in Crypto 📅
- JPMorgan to bring Trillions of Dollars of Tokenized Assets to DeFi
Global consultancy firm McKinsey & Company released a new report on the Metaverse, stating that in eight years, the field could be valued at $5 trillion – around the same size as Japan’s economy. The report “Value Creation in the Metaverse” drew data from two surveys, including 3,104 consumers across 11 countries and 448 companies across 15 industries.
📰 Digital Take Away 📰
Keep that same Energy
The issue of Bitcoin’s sustainability has been in the spotlight for years, drawing criticism and fuelling the scepticism of many towards the digital assets world.
We may have heard – the energy consumption of Bitcoin mining is close to that of Norway.
It’s a fact that’s objectively scary to imagine, but is this the most appropriate comparison to be drawing if we want to get an understanding of the environmental impact of cryptocurrencies?
Climate change is real and demands urgent action in order to tackle it. However, this can only be done by putting things comprehensively and comparatively into perspective. Below are some key aspects that are worth keeping in mind in the conversation around Bitcoin’s sustainability, starting from the fact that Bitcoin mining only uses 0.05% of the global energy consumption.
Bitcoin and TradFi over the years
The Cambridge Bitcoin Electricity Consumption Index (CBECI) has been the most cited source for estimating Bitcoin energy consumption, pointing at a rough figure of 122 TWh per year. If we take into account the average lifespan of Bitcoin mining machines, as well as the rate at which new IT materials are created, that figure goes down to 88.95 TWh per year. While it’s true that traditional banking has more users than crypto, it makes sense for this comparison to be drawn as the TradFi industry is what DeFi is constituting an alternative to. When we compare this to the energy consumption of the entire TradFi ecosystem, which is estimated to be around 4,981 TWh per year, the contrast is staggering. The Banking industry uses 56x more energy than the Bitcoin network.
The fact that Bitcoin mining facilities can be set up relatively quickly nearly anywhere the world enables miners to tap into so-called ‘stranded’ energy assets which other industries struggle to use, and make us of idle energy, allowing Bitcoin mining to make use of energy that would have otherwise been lost or wasted. The transmission and distribution electricity losses in the US alone are double what’s needed to power the Bitcoin network, and the recovery potential of global gas flaring would be enough to do so x6.5.
When it comes at looking at carbon dioxide, in 2021 CoinShares estimated Bitcoin mining’s emissions to amount to 41 metric tonnes. As a comparison, this is less than 48 times that emitted by the aviation industry, and nearly 37 times emitted by the marine transportation industry. Air conditioners and electric fans (984), data centres (100) and even tumble dryers (53) emit more CO2 than Bitcoin mining does. Bitcoin mining could also reduce the oil industry’s methane emissions (25 times more environmentally damaging than CO2) by actively using the gas as opposed to releasing it into the atmosphere.
The conversation around the sustainability of the Bitcoin network is multifaceted, requiring us to look at it from a multifaceted perspective. It would be reductionist to expect a newsletter article to exhaust the topic, but I hope this can at least serve as a prompt to look beyond the attention-grabbing headlines.
And if you’re still not sold on Bitcoin, there are a number of other “greener” cryptocurrencies to look into: SolarCoin is generated by creating one coin for every Megawatt hour generated from solar technology, Cardano uses a ‘Proof of Stake’ consensus mechanism where network participants are required to buy tokens in order to join the network, the Nano platform uses Open Representative Voting (ORV) system, where chosen representatives voted by account holders work to securely confirm blocks of transactions, IOTA uses Fast Probabilistic Consensus for consensus and has to only partially rely on Proof of Work in part, making the network’s overall energy consumption very small.