Key Post Bitcoin is a clearly identifiable economic bubble

[tecate]

I am not questioning the data. I am questioning the assumption that any mathematical fit for this phenomenal performance is in any way a pointer to the future. What if the data analysis started at ATH of $67k? More relevantly I am sure a mathematical fit for Amazon's performance since its launch would also demonstrate amazing "skewness" and it too would suggest 1 in 1,000 "bliss" scenarios where Amazon is bigger than today's whole stockmarket cap combined.

Fidelity make the point today that Bitcoin is just a young scut by comparison with present day Facebook. Presumably they'd say the same thing about Amazon.

 

[DublinHead54]

Isn't this where the big banks have come unstuck, bogged down by rickety systems that they can't get out from under while challenger banks have taken to eating their lunch?

I don't think any challenger banks have eaten their lunch. The challenger banks have really only taken some of the retail client base, which is not 'Wall Street'. Post 08 and the various regulations brought in big banks could no longer leverage customer deposits, so the benefit of having a retail bank with an investment bank was removed. Given that interest rates were 0 or negative, there was no profitability for retail banking customer deposits, so I don't think banks really cared if challenger banks took those customers.

I'm pretty sure most challenger banks only started posting profit since interest rates started to increase last year.


The rickety systems are an issue on a whole, but the important systems are actually cutting edge. Blockchain was only really being looked at as aback office use to help with reconciliations and settlements. For Wall Street there is probably not really a competitive advantage to gain from using blockchain over existing systems.

 

[tecate]

Blockchain was only really being looked at as aback office use to help with reconciliations and settlements. For Wall Street there is probably not really a competitive advantage to gain from using blockchain over existing systems.

We'll probably have to park up the broader blockchain discussion as veering away from Bitcoin but I'd imagine it will find use cases across all industries over time. In financial services, the biggest single use case will be the tokenization of real world assets and stocks, bringing about disintermediation and removing some degree of counterparty risk.

 

[Robzig]

.......the biggest single use case will be the tokenization of real world assets and stocks, bringing about disintermediation and removing some degree of counterparty risk.

That's the way I'm looking at it too - it will be interesting to see if even this is acknowledged by some on here.

 

[DublinHead54]

We'll probably have to park up the broader blockchain discussion as veering away from Bitcoin but I'd imagine it will find use cases across all industries over time. In financial services, the biggest single use case will be the tokenization of real world assets and stocks, bringing about disintermediation and removing some degree of counterparty risk.

That's the way I'm looking at it too - it will be interesting to see if even this is acknowledged by some on here.

It will be interesting to see how the plays out. I'm not convinced that it will deliver as strong a statement as 'bringing about disintermediation and removing some degree of counterparty risk.'

I think it will just make financial markets more efficient and safer without fundamentally changing markets from a perspective of access. Prior to my time in Crypto, I worked in Counterparty Risk Management post the financial crisis on wall street. It had made leaps and bounds post crisis through introduction of Central clearing parties, better collateral requirements etc.

 

[tecate]

It's report time again, but this one isn't for you Duke - given that you don't seem to give a damn that Bitcoin is boiling the oceans.

This one is from KPMG - I checked them out and they definitely don't own any bored ape NFTs. It's geared towards Photuris pyralis given his overwhelming concern for the environment.

LINK

They have a special section on 'Methane Reduction' which sadly isn't something that AAM is doing enough about.

 

[Duke of Marmalade]

You got me right @tecate. Nonetheless I read the document with some interest. Why would KPMG make such a defence of bitcoin's eco credentials? Well it has actually taken on board some bitcoin but also has a commitment to net zero, so I guess this note fits that agenda. Of course it is written with a bias, for example I am sure that wicked Russians also use it as well as heroic Ukrainians. But I don't know whether they are saying anything false.
Key take away for this topic is that KPMG seem to be believers though we can't be sure whether this is just tokenism so as to woo this constituency.

 

[tecate]

True for you - nothing gets put out by anyone - individual or corporation - without bias (to differing extents). The good thing though is that anyone is free to dissect whatever it is they put across and tear it apart if there's any element of it that's inaccurate.

 

[DublinHead54]

Question @tecate. There is no denying that Bitcoin mining consumes energy, it will never not consume energy. It might get to net zero through some of the suggestions in that linked paper.

However, where is the incentive or rather the governance structure to do so?

If we take oil producer BP for example who have set 'net zero' targets, they are motivated by shareholder pressure, governments, regulation etc. There is a corporate governance structure to enact the change.

As bitcoin is decentralized, who can actually push that the entire protocol becomes net zero? It appears that individual miners may receive pressure from their local environment i.e. government, access to renewable energy.

But within Bitcoin who can mandate change across the entire network?

 

[tecate]

However, where is the incentive or rather the governance structure to do so?
But within Bitcoin who can mandate change across the entire network?

Delighted you brought this up. All we've had over recent years with Bitcoin in general and particularly with the energy debate has been an ignorant prejudiced view that its an abomination - shut it down with no accommodation or desire to develop a more informed, nuanced view. We had Greenpeace, who took $$$$$ from a very much centralized crypto project and used that to run a campaign against Bitcoin (thanks, Greenpeace - a complete self-own) exactly like this. They say it can do Proof of Stake - a totally ignorant view and one that demonstrates that they couldn't give a toss about decentralized technology. They were quite happy to sell out and accept corporate $$$ to run the campaign though.

I've touched on this subject recently - and it applies here to. Bitcoin and decentralized crypto/blockchain doesn't exist in a vacuum. If someone was to say, we're regulating Bitcoin mining - it can only be carried out where there's excess energy, I've no issue with that. Crypto folk are not anti-regulation, that's inaccurate. In fact, they've been calling for regulation relative to various facets of this innovation for years - but regulation that works with the innovation, not regulation designed to stomp it out.

Other than that, let me turn that around on you - what governance structure exists for data centers internationally? How is that any different? The activity is similar (although bitcoin miners don't necessarily need to be running 24/7 - and that's an opportunity to be exploited relative to times of excess energy and times of potential energy shortage).

Bitcoin can't have a 'governance structure' for such a thing - as by its very nature, it's decentralized. However, the protocol itself is clever - because its driving efficiency in the use of energy. Of all sectors out there, bitcoin mining has a higher level of renewable/excess power use than all others. At this point, it's almost impossible to turn a profit in that industry if you don't have access to energy with a near-zero cost.

 

[DublinHead54]

Delighted you brought this up. All we've had over recent years with Bitcoin in general and particularly with the energy debate has been an ignorant prejudiced view that its an abomination - shut it down with no accommodation or desire to develop a more informed, nuanced view. We had Greenpeace, who took $$$$$ from a very much centralized crypto project and used that to run a campaign against Bitcoin (thanks, Greenpeace - a complete self-own) exactly like this. They say it can do Proof of Stake - a totally ignorant view and one that demonstrates that they couldn't give a toss about decentralized technology. They were quite happy to sell out and accept corporate $$$ to run the campaign though.

I've touched on this subject recently - and it applies here to. Bitcoin and decentralized crypto/blockchain doesn't exist in a vacuum. If someone was to say, we're regulating Bitcoin mining - it can only be carried out where there's excess energy, I've no issue with that. Crypto folk are not anti-regulation, that's inaccurate. In fact, they've been calling for regulation relative to various facets of this innovation for years - but regulation that works with the innovation, not regulation designed to stomp it out.

Other than that, let me turn that around on you - what governance structure exists for data centers internationally? How is that any different? The activity is similar (although bitcoin miners don't necessarily need to be running 24/7 - and that's an opportunity to be exploited relative to times of excess energy and times of potential energy shortage).

Bitcoin can't have a 'governance structure' for such a thing - as by its very nature, it's decentralized. However, the protocol itself is clever - because its driving efficiency in the use of energy. Of all sectors out there, bitcoin mining has a higher level of renewable/excess power use than all others. At this point, it's almost impossible to turn a profit in that industry if you don't have access to energy with a near-zero cost.

If it doesn't have a governance structure who specifically has been calling for regulation within the ecosystem as it pertains to bitcoin and mining? I'm only aware of calls for regulation as it pertains to the markets of crypto.

The data centre question is easy, they are owned by centralised enterprises that have governance structures and ESG goals.

As you point out bitcoin can't have a governance structure. So my question was in the absence of this how does BTC move to net zero?

It seems a bit of a challenge.

 

[tecate]

If it doesn't have a governance structure who specifically has been calling for regulation within the ecosystem as it pertains to bitcoin and mining? I'm only aware of calls for regulation as it pertains to the markets of crypto.

Firstly, its a decentralized activity and it needs to stay that way. So that maybe why you haven't heard those calls. Secondly, those calls have largely been reactionary to instances of punitive regulation in the space. Here's an example. Mining needs to stay decentralized so if you have an expectation of the whole thing coming together in unison under one organization, not only will that not happen, nobody in the community would want to see any attempts towards that for obvious reasons.

That said, the Bitcoin Mining Council did emerge amid some controversy a couple of years ago , and it has been active in calling for equal treatment compared with similar activities like data centers.

The data centre question is easy, they are owned by centralised enterprises that have governance structures and ESG goals.

Ah but its not. If we're talking environment, then we're talking about the entire world - not just those that go along with western-driven initiatives. Other than that, its interesting that other such activities have lower renewable usage rates comparatively, if they're so well regulated.

As you point out bitcoin can't have a governance structure. So my question was in the absence of this how does BTC move to net zero?

It seems a bit of a challenge.

I don't see it as a major challenge. For those that are bothered about net zero, then it can be regulated within each jurisdiction accordingly. Other than that, it is way ahead of other activities anyway. You may have missed the point I made above but as an activity, it is far and away greener than other such activities.

For the most part, I don't see a challenge (beyond the perennial haphazard environmental policy that exists globally in general anyway), I see opportunity - if (a big if) - authorities approach the activity positively rather than politically motivated attempts disguised as regulation - in an effort to stomp the entire thing out. The Biden Administration's recent soundings of punitively taxing bitcoin mining is a clear example.

Another opportunity which is slowly but surely being exploited is that companies like BP can collaborate with bitcoin miners to utilize flared gas (that is otherwise wasted as no other use case out in the middle of nowhere) and bring down very damaging methane emissions.

Remember that by protocol design, its simply uneconomic for most miners in most regions to mine bitcoin using anything other than near-free energy right now. The most likely free-energy is waste energy that's otherwise not being utilized or excess renewable energy (which always exists because of the nature of renewable energy generation).

Last point....recent years have seen people try to clobber it over the head by (comparatively) misrepresenting the E element of ESG relative to bitcoin....while ignoring entirely the S and G in ESG.

 

[DublinHead54]

Firstly, its a decentralized activity and it needs to stay that way. So that maybe why you haven't heard those calls. Secondly, those calls have largely been reactionary to instances of punitive regulation in the space. Here's an example. Mining needs to stay decentralized so if you have an expectation of the whole thing coming together in unison under one organization, not only will that not happen, nobody in the community would want to see any attempts towards that for obvious reasons.

I don't have expectations, I asked a question of how a decentralized network can embrace Net Zero.

Bitcoin mining is driven by money by design, so for BP to start using flared gas to mine bitcoin the economics would have to work out. You've cited plenty examples, but those options have been around for years, how do they actually become reality when the network is decentralised?

 

[tecate]

I don't have expectations, I asked a question of how a decentralized network can embrace Net Zero.

We arrive at the same point. If you have no expectations, then it's because you recognize that it's a decentralized network/protocol. It isn't taking any decisions re. Net Zero. Actors concerning themselves with Net Zero and Bitcoin can if they so choose.

Bitcoin mining is driven by money by design, so for BP to start using flared gas to mine bitcoin the economics would have to work out. You've cited plenty examples, but those options have been around for years, how do they actually become reality when the network is decentralised?

I wouldn't say they've been around for years. They've been piloted in recent years. That's not quite the same thing.

Beyond that, the answer to your question is the same as above. Net Zero, ESG - they're constructs independent of Bitcoin the network. If those that concern themselves with those initiatives want to apply them relative to Bitcoin mining activity, they can. I don't see much difference between regulating Bitcoin mining and regulating data centers. That's a matter for individual jurisdictions.

 

[DublinHead54]

We arrive at the same point. If you have no expectations, then it's because you recognize that it's a decentralized network/protocol. It isn't taking any decisions re. Net Zero. Actors concerning themselves with Net Zero and Bitcoin can if they so choose.


I wouldn't say they've been around for years. They've been piloted in recent years. That's not quite the same thing.

Beyond that, the answer to your question is the same as above. Net Zero, ESG - they're constructs independent of Bitcoin the network. If those that concern themselves with those initiatives want to apply them relative to Bitcoin mining activity, they can. I don't see much difference between regulating Bitcoin mining and regulating data centers. That's a matter for individual jurisdictions.

I was asking the question because you posted an article on ESG and climate impact of Bitcoin. I am asking a simple question, the answer doesn't need to be what my views are.

I've got the answer now, ESG / net zero from a bitcoin perspective is irrelevant as it can't be put in place in a decentralised network. It can only come through regulation or government in the locations of the miners.

Thanks @tecate

 

[tecate]

I've got the answer now, ESG / net zero from a bitcoin perspective is irrelevant as it can't be put in place in a decentralised network. It can only come through regulation or government in the locations of the miners.

For sure. I mean, the only way it kind of gets driven by the protocol itself is via its design - given that its at the point where a miner starting out today needs to source free or almost free energy in order to be competitive (which is most likely to be energy that would otherwise be wasted, excess energy from renewables, etc.).