Bitcoin, Brian Brooks, U.S. discussed on The Breakdown with NLW


We don't discuss how this is actually too critiques in one. First, that Bitcoin is bad for the environment. But second, implicitly, that the Bitcoin industry is worse than other industries for the environment. This is a really, really important note. We talk constantly about which country or state or city or whatever Bitcoin consumes as much energy as. But we don't talk about how it compares to other industries that we value and that we don't have the same critiques for. Part of the issue is that Bitcoin is transparent. And so it's easier to calculate than other industries, but being more transparent and easier to calculate doesn't mean it should have the highest burden. You see a little bit of this in the house memo and mainstream media around this Bitcoin network uses the same energy as Argentina. However, that's much less shocking if we put that in terms of other industries, where gold mining uses about 2.5 argentinas. U.S. household appliances nearly 15 argentinas, and U.S. air conditioning boy oh boy, 30 Argentina's. Nick writes in his newsweek piece, why worry about an industry that consumes approximately 0.55% of global electricity production? After all, energy associated with Bitcoin mining is roughly equivalent to the energy consumption of zinc mining and refinery, and less than the energy associated with the extraction of either copper or gold. It consumes the rough equivalent of the energy associated with running domestic tumble dryers in the U.S. alone. And one 5th the energy used for domestic refrigeration. Brian Brooks and his prepared testimony makes an even more direct comparison saying even more stark is the contrast with the banking system. The market capitalization of Bitcoin over the past 6 months has fluctuated between about 800,000,000,001.2 trillion. The market cap of the global banking system is approximately 8.6 trillion. The banking system consumed just over 4900 terawatt hours to produce that market capitalization, Bitcoin mining consumed 188 terawatt hours to produce its market cap. Put differently the banking system requires 573 terawatt hours of power to produce 1 trillion of value. That is about 2.5 times the amount of power required to produce the same amount of value in Bitcoin. Nexto is a trusted and easy to use crypto platform, where you can buy cryptocurrencies at the touch of a button and start earning up to 17% annual interest that is paid out daily. They support all of the major assets on the market, and even allow you to swap one asset for another or borrow cash against your crypto without selling it. Nearly 3 million people in over 200 countries trust nexo with their digital assets. So whether you're just getting started or you're a seasoned pro, get the most of your crypto today. With nexo, at NE XO dot IO. Today's episode is sponsored by abra. 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There is another underlying assumption in many of the critiques of Bitcoin mining that governments get to determine how private markets use energy. Something I've said frequently on this show often around NFTs just based on where the crypto conversation is right now, is some version of the idea that just because you think a thing is stupid doesn't mean it's not a thing. I think you can apply something similar to Bitcoin when it comes to policymakers and critics. Just because it's not valuable to you doesn't mean it's not valuable. Not to trot out the old tired example of Christmas lights, but there are huge parts of the country and world who don't celebrate Christmas, and so who definitionally don't care at all, but you don't see them calling for a banning. I really like what Brian Brooks had to say about this and his testimony. Quote, from a public policy perspective, the most relevant question should be energy production rather than energy consumption. If the people's representatives decide, we should eliminate or reduce a particular source of energy such as coal or oil. You were elected to do that. But once the energy mix has been established in a market economy like the United States markets, meaning the aggregate decisions of American consumers and businesses should decide the most productive use of the energy that is produced. There is another important discussion to pair this with, which is an acknowledgment of the role that Bitcoin has potentially to play in the maturation of renewable energy markets. In a report from last May, galaxy digital rights, critics often consume that the energy expended by minors is either stolen from more productive use cases, or results in increased energy consumption. But because of inefficiencies in the energy market, Bitcoin miners are incentivized to utilize non rival energy that may otherwise be wasted or underutilized as this electricity tends to be the cheapest. Though the revenue associated with mining varies, miners have the luxury of flexibility with the option to switch their equipment on or off any time. This makes Bitcoin mining the ideal energy sync, anyone anywhere can monetize excess energy by plugging in equipment and switching it off at their convenience. Brian Brooks goes deeper into this problem in his testimony, saying that access production with renewables is often the challenge. Quote, in 2020 in California alone, 1.5 million megawatt hours of solar production, 5% of the total, was curtailed because production exceeded demand. And this figure understates the true extent of the problem at certain peak production hours, California solar projects have as much as 15% excess capacity. This is one reason why solar and wind power as a category have generally been unprofitable and have required government subsidies. Nick Carter's newsweek peace explains this as well, saying the reality is that electricity infrastructure is geographically constrained, and pockets of free negatively priced energy routinely emerge on the grid. Over the last decade negative prices a signal of energy over abundance have become much more common, particularly in the windy vertical corridor stretching from Texas to the dakotas. It's the stranded islands of energy growing in size every year as solar and wind account for more generation while transmission lags that are particularly ripe for Bitcoin miners. And far from driving up prices if a minor is buying energy that no one else wants, he's actually fortifying the grid, making energy available if other industrial consumers move in. Or if transmission lines are built to transport it elsewhere. This is due to the remarkable properties of mining itself. Each individual computation is statistically independent of the last one, meaning that the process of mining can be stopped at any moment without a loss of progress. This allows minors to dial down their usage on short notice if necessary. Grid operators love this as they reckon with increasingly unstable grids due to an influx of wind and solar. Normally great operators have to keep fast reacting natural gas power plants and reserve in order to backstop unreliable wind and solar, but with flexible load coming in the form of Bitcoin mining, these operators have a new tool. They can simply ask miners to produce their consumption to offset a loss of supply and miners gladly do within seconds. Today, the vast majority of Bitcoin miners in North America participate in these demand response programs. So the point of all of this is that the memo was kind of saying all of these issues, which we've seen trotted out over and over again, and some of the testimony as well as other sources like Nick Carter's news week piece have good answers for all of them. But ultimately, the question is what actually happened in the session? And the answer is honest to God not much. The block really nailed it with the title of their summary piece, no fireworks at house's Bitcoin mining hearing. So here's what I noticed personally. First we saw an actual distinction being made between proof of work and proof of stake. On the one hand this led to some why can't Bitcoin just be proof of stake instead type questions. But frankly, I don't think it's a bad thing that Congress is honing in on and judging these technologies on their own merits. Second and very related, there were a lot of basic questions. Of.

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