Also: BTC bleeds, Buterin burns SHIB, ransomware risks

What you need to know today in crypto and beyond

May 17, 2021

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Today's must-reads

Top Shelf

BTC BLEEDS: Bitcoin slipped to $42,212 early Monday, a 3.5-month low. Centralized exchanges recorded inflows of over 35,000 BTC in the past five days, according to data source IntoTheBlock. Investors typically move coins to exchanges when they intend to liquidate their holdings. The total cryptocurrency market cap shed more than $400 billion during this price pullback.

RANSOM RISKS: Exposure to cryptocurrency could have a “profound” impact on the risk profiles of financial institutions, according to a new report by insurance giant Allianz. Firms that offer crypto trading or custody services take on new “third party” risks, including with cybersecurity or regulation. Indeed, a new Chainalysis report found cybercrime is on the rise: Ransomware-linked crypto addresses banked a record $406 million in 2020.

BUTERIN BURN: Vitalik Buterin burned $6.7 billion worth of Shiba Inu (SHIB) tokens, sending the majority of his holdings of the so-called “DOGE killer” to a burner address. Buterin previously donated $1.2 billion worth of SHIB to a COVID-19 relief charity. The memecoin’s developers had sent half the token supply to Buterin, unsolicited, prompting the Ethereum co-creator to say today, “I don’t *want* to be a locus of power of that kind.”

CRYPTO CLAMPDOWN: Iran is cracking down on crypto miners using household electricity. The measure comes as the country faces a hydropower shortage during unusually dry conditions, reports the Tehran Times. Meanwhile, Indian crypto traders are seeing their bank accounts close and bank transfers fail as an unofficial ban appears to take shape.

–Daniel Kuhn

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Countdown to #Consensus 2021

First COVID. Then Gamestop. Then Coinbase. The events of the last year have destined bitcoin to play an integral role in our world.

Next week at Consensus by CoinDesk, our virtual big-tent conference, we explore the place of bitcoin as an asset, as a worldview and as a response to the extraordinary policies coming out of our financial, technological and societal institutions.

Join our Explorations track "Bitcoin as a Worldview" with Cynthia Lummis, Lyn Alden, Dan Held, Meltem Demirors and more at Consensus by CoinDesk, May 24-27. Register today.

Overheard on CoinDesk TV

Sound Bite

"The blockchain community is a much bigger whale than what we can see Elon move."

–Lindsay Joo of BitBull Capital, on CoinDesk TV's "First Mover."

What others are writing...

Off-Chain Signals

Galaxy Digital has published a report claiming bitcoin is more than twice as green as the international banking system (Decrypt)
After filming "SNL," Elon Musk and girlfriend Grimes reportedly went to a crypto-themed afterparty where servers dressed as aliens handed out Dogecoin cupcakes (Business Insider)
Elon Musk clarifies that Tesla has not sold any bitcoin, though he seems increasingly miffed with bitcoiners on Twitter… (CNBC)
Crypto in context: What’s Driving Cryptocurrencies’ Rise and the Challenges Ahead (WSJ)
Square Has ‘No Plans’ to Buy More Bitcoin After $20 Million Loss (Barrons)

–D.K.

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Sponsored Content

Circle: NFTs and the New Frontier of Mainstream Crypto Adoption

By now, it’s quite clear: 2021 is the year of non-fungible tokens. A day doesn’t go by when there isn’t some news of another huge celebrity coming to the NFT space, or some new auction setting new records, or some new community driven collectible taking over the Twitter-sphere.

Putting the news in perspective

The Takeaway

Bitcoiners' Approach to the Climate Change Fights Isn't Working – This Might

Tesla giving in on the bitcoin and energy fight doesn't mean Elon Musk actually believes bitcoin is a net harm for the environment. It just means Tesla has realized this is a fight that's not worth waging because it can't be won. Tesla is right.

Bitcoiners are never going to win the fight over energy on their own.

Crypto, more broadly, is losing the fight over climate and energy, because refutations don't work. Facts and reason never persuade anyone.

Whomever sets the terms of a debate in the public mind wins that debate. Arguing this argument is a losing proposition. The only way to win it is to create a new conversation.

The narrative that bitcoin uses too much energy is set. It's a fixed thing in space. The only way to get past it is to create another narrative that is more compelling.

I believe there is another narrative, one with the useful property of also being correct, but to advance it will require bitcoiners to do something many are loath to do: acknowledge the utility of other blockchains.

There's potential for cryptocurrency to help the grid go green. Energy production as we know it wastes a lot of energy, particularly in transmission over great distances and in waste heat. More sources of energy closer to their users, including more small renewable sources, would reduce waste on the grid, but lots of energy sources create a new set of problems: coordination problems.

What technology shows promise in coordinating multiple competitive parties? Cryptocurrency and blockchain.

The electricity grid and global banking are similar. They are both highly centralized. They are both industries where incumbents use regulators to keep out competition and control their markets.

Energy waste is wired in, literally
Transmission is a key issue in reducing waste.

Because folks like to throw national equivalents around, the United States wastes something like 5% of its power in transmission, which is roughly the equivalent of what the Netherlands and Colombia combined consume in total each year. And that's just energy wasted in wires here.

The U.S. grid transmits comparatively efficiently. Other countries waste a much greater proportion of their produced energy moving it around.

Beyond transmission waste, cities and towns would also be able to get more sources of alternative energy online if the grid were better able to manage them. Micro-grid is the term of art for power sources that can be islanded from the larger grid as needed, but can oftentimes also contribute excess power to that grid. Sometimes micro-grids are deployed to protect infrastructure that simply can't go down (such as transportation systems or military bases), but they also have real advantages in terms of waste reduction and increasing renewables in the energy mix.

A single house can be a micro-grid unto itself if it's able to communicate with the broader grid about when it should shut off as needed.

The trouble with micro-grids for the energy as we know it is the wires can only hold so much juice, so it's important not to overload them. At times of high capacity on the network, some parts of the grid need to be shut off so wires don't melt. It's also crucial when the power is out, so workers can safely make repairs.

The grid needs to figure out on the fly which sources should be connected and which shouldn't. It's a complex and contingent conundrum. In other words, it's a market.

Cryptocurrency looks like it could be very useful in sorting out markets just like that. Markets in general are good at coordination problems, but with energy one is needed that can operate at internet speed and one in which no one actor can dominate to shut others out. A fast blockchain that can handle lots of tiny transactions super fast might be a great help here.

So if the cryptocurrency technology Bitcoin pioneered really does prove to be a key infrastructure component of a green future, that provides a crucial cover for Bitcoin, because Satoshi's invention will have enabled it.

But advancing this story would require bitcoiners to accept that all of crypto is one big industry and the future is not, in fact, one that belongs exclusively to bitcoin.

Arguing that bitcoin mostly uses renewables isn't working and it should be obvious why: that argument accepts the premise.

How discourse works
Bitcoin and energy use are part of a larger dialectic about human impact on climate. Dialectics are large meetings of ideas that move history forward: The world comes to a consensus around one idea, which dominates, until it's confronted with another compelling idea.

"Bitcoin isn't green" is a thesis that rests on a larger thesis, a correct thesis, that humans have had an adverse effect on climate.

"Bitcoin's really not that bad and actually this argument's whole premise isn't fair anyway" isn't an antithesis to that thesis; it's just quibbling. Bitcoin needs to put forward an antithesis. The crypto industry as a whole needs to advance another narrative that stands on its own.

Centralization of power inherently wastes energy: That is a good antithesis.

Cryptocurrency looks like it might be very good at enabling decentralized, real-time markets. Markets are good at coordination and that's why this industry could be crucial to a less-wasteful economy.

Compelling narratives win controversies; facts and reasoning do not.

As someone who has cared about climate change for much, much longer than he's been interested in cryptocurrency, I happen to think I'm right about the role this technology could play in addressing climate issues (but we won't know until someone tries it). Being right is nice, but it's not especially useful in winning society-wide arguments. The very good refutations bitcoiners make are only making headway with bitcoiners.

Being right doesn't move a dialectic, but telling a compelling story does.

The industry's current approach to this controversy is not compelling. How do I know? Because it's not working.

–Brady Dale

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