🧘‍♂️ The Truth About BTC

We’ve heard the FUD. What about the facts?

Dear Meditators

We all recall the moment. The words that shook the market. Typed on the keyboard. Sent. To millions: “Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions.” 

🌍 Whilst many have been quick to speculate, panic or curse, few have actually tried to unpack this statement. How much energy does BTC actually consume? Does this mean we ought to suspend BTC mining and transactions? 

It’s time to determine the truth about BTC energy consumption. We use this Harvard Business Review article to present the argument in today’s newsletter. 

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🌍 Myth Buster: The Truth About BTC Energy Consumption 

According to the Cambridge Centre for Alternative Finance (CCAF) Bitcoin currently consumes 84.58 Terawatt Hours per year. This is just under 0.55% of global electricity production or just under the annual energy draw of small countries like Malaysia or Sweden. This certainly sounds like a lot of energy. However, we cannot rely on energy consumption alone. We also can’t trust some of the common misconceptions around BTC energy usage:

1️⃣ Energy consumption is not the same as carbon emissions

You cannot extrapolate the associated carbon emissions of energy consumption without knowing the precise energy mix. For example, one unit of El Salvadorian geothermal energy will have much less environmental impact than the same unit of coal-powered energy. To calculate energy consumption we can look at hashrates. Carbon emissions are harder to ascertain (mining is an intensely competitive business and miners are not typically forthcoming around details of their operations). Not only are they harder to obtain but they vary significantly by region. Conclusion: we cannot really focus on energy consumption alone and we don’t have clear enough data on Bitcoin’s carbon emissions.

2️⃣ Bitcoin has the potential to be carbon neutral

A key factor that makes Bitcoin’s energy consumption different from that of most other industries is that it can be mined anywhere. This enables miners to utilize power sources that are inaccessible for most other applications. The process of oil extraction today releases significant amounts of natural gas as a byproduct. Constrained to the location of remote oil mines, traditional applications have been unable to effectively leverage that energy. But Bitcoin miners from North Dakota to Siberia have seized the opportunity to monetize this otherwise-wasted resource. Of course, this is still a minor player in today’s Bitcoin mining arena, but back of the envelope calculations suggest that there’s enough flared natural gas in the U.S. and Canada alone to run the entire Bitcoin network. 

Or just today we heard news that Stronghold Digital Mining raised $105 million in funding. The business uses waste coal (an environmentally toxic byproduct of coal mining) to fuel its electricity generation.

3️⃣ Bitcoin transaction energy usage

The vast majority of Bitcoin’s energy consumption happens during the mining process. Once coins have been issued, the energy required to validate transactions is minimal. As such, simply looking at Bitcoin’s total energy draw to date and dividing that by the number of transactions doesn’t make sense — most of that energy was used to mine Bitcoins, not to support transactions. If we can create a more sustainable means of mining, we will be able to make significant progress.

There’s hundreds if not thousands of factors impacting bitcoin energy consumption. These can be listed and debated but it really comes down to the following question: How much energy should a monetary system consume? 

Your answer will likely be based on how you feel about Bitcoin. If you believe it offers no utility beyond serving as a ponzi scheme or money laundering device, then it would be logical to conclude its energy consumption is wasteful. If you are one of millions of individuals using it worldwide as a tool to escape monetary repression, inflation, or capital restrictions, you will likely think that the energy is extremely well spent. 

Whether you feel Bitcoin has a valid claim on society’s resources boils down to how much value you think Bitcoin creates for society. As members of the crypto community, we then all become responsible for reducing Bitcoin’s carbon footprint and demonstrating that the societal value Bitcoin provides is worth the resources needed to sustain it.

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🧳 They Hired Who?

Dapper Labs have just hired a new Marketing Chief who used to be a VP from which sports company?

1. NFL

2. NBA

3. MLB

🗳 Votes Are In 

Last week we explained that the Kusama Parachain Auctions are beginning and today the winner of the first auction slot was announced. 

The very first winner, with over 15,000 KSM tokens locked up in its favour, was Karura:

• Karura is a token trading application that allows users to build scalable DeFi applications without large transaction fees. 

• The auction win secures Karura a 48 week lease to build on Kusama (Polkadot’s pre-production environment, otherwise known as a canary network). 

• Kusama shares much of the same code as Polkadot but allows for more experimentation and faster upgrades (making it highly sought after and the auctions particularly competitive).

The auctions come in a wider move amongst networks like Polkadot, Solana and Cosmos all aiming to provide developers with a way of avoiding the increasing cost and congestion on Ethereum. The second auction is set to commence today, with three further auctions commencing in the next 3 weeks.

Unfortunately, it is not the case that success in these auctions alone is a guarantee of the consequent success of a project. Rather, a project with strong fundamentals would be further propelled by securing one of these auction slots. When it comes to assessing projects, remember the core values we look for: 

• The project whitepaper

• The capability of the team

• Tokenomics

• Market capitalisation & liquidity

For more information on analysing projects, check out our Project Metrics & Indicators Guide.

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1. NFL

Dapper Labs have hired Dave Feldman, a former Vice President of Social Media Marketing for the National Football League. He was there for nearly 7 years prior to his move. If you guessed Major League Baseball you were also close, as prior to being at the NFL Feldman worked as Director of Social Media at MLB. ALthough he wasn’t a VP there.

This move coincides with the millions of dollars that Dapper Labs has earned in venture capital to build on the success of NBA Top Shot, its flagship product.

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Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here. 

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