Cryptocurrency: ESG, Hydropower, Digital Power for Freedom

grarpamp grarpamp at
Mon Jul 12 20:21:33 PDT 2021

“Old money is not going to pick us up; it pushes us down.
The digital rebellion is here. -- Spike Lee"

"China’s Ban on Bitcoin Follows a Pattern Frequently Used by Beijing
Since the End 2000s: Anything that promotes freedom is banned by the
Chinese authorities."

"It’s ok for Billionaires to go to space for no reason and burn a ton
of rocket fuel but nooooo we can’t have any crypto mining going on
cause you know the oceans are LITERALLY ON FIRE because of crypto

"This block was mined with a carbon negative power source -- Block 690688"

The ESG Case For Crypto

First, let’s state the obvious: Bitcoin mining uses a lot of
electricity, so it’s bad for the environment. Anyone who claims
otherwise is either a salesperson or a fool. Arguing that mining is
good for the environment because it encourages investment in
renewables is like arguing that smoking saves lives by driving cancer
research. All of the energy comparisons to the traditional banking
system are also foolish.

There are various nuances to this debate, but none change the fact
that Bitcoin has a significant carbon footprint.

But so do a lot of things.

Tellingly, none are as controversial.

What’s the carbon footprint of people cranking the AC, ordering
takeout and watching Netflix? Significant, but seldom debated. Every
kind of human activity impacts the environment, and plenty of mundane
activities use “more power than some countries” when measured in
aggregate. Deciding which ones are worthwhile requires an objective
cost-benefit analysis and comparison to similar activities. Bitcoin
mining is rather unique, but for the sake of argument, let’s compare
it to the US military.

Like Bitcoin, the US military uses more energy than some countries.
Also like Bitcoin, a big reason why is to secure the purchasing power
of a currency. But unlike Bitcoin, the military does this in a
roundabout way, protecting unsavory regimes who price their exports in
dollars and dropping the occasional bomb. The relationship between
money and power is almost as old as money itself, with those issuing
the former often utilizing the latter to keep their currency on top.
Bitcoin’s clever contribution is to make this previously implicit
relationship explicit. People trust its coins because they require a
lot of power to produce.

The ESG case for crypto starts with the recognition that the power
consumption of coins like Bitocin and Ether is a feature and not a
bug, the most important component of a novel security mechanism that
achieves something remarkable: a global monetary system that is
independent of any corporation or government, and strictly opt-in.

There are no exclusive legal tender laws, capital controls or naval
fleets that force people to trust Bitcoin. And yet, hundreds of
millions do, perhaps for that very reason.

Crypto has no coercion. It uses transparency, math and economic
incentives to build trust where it wouldn’t otherwise exist. Crypto is
meritocratic. Anyone can do anything — from mining to using to saving
— and lots of people all over the world do. Like Lady Justice herself,
crypto is blind. It doesn’t care (or even know about) anyone’s
nationality, race, age, gender or sexual orientation. It’s the first
electronic payment system that is accessible to anyone anywhere, from
undcoumented workers in Western countries to women in Islamists ones
to dissidents fighting dictators. The environmental impact is
therefore offset by the social benefits, a negative E in exchange for
a positive S.

That tradeoff is worth it, thanks to the increasingly tragic failures
of the traditional monetary system. Not in terms of devaluation and
inflation — though that may come later — but in terms of access. Over
one and a half billion global unbanked, most of them poor,
undocumented, minority and innocent. That last adjective is important,
because the exclusionary nature of our existing financial system is no
accident. It’s a direct consequence of a system built on a presumption
of guilt.

As proof, consider the simple fact that opening up a bank account is
often more intrusive than having open-heart surgery. Your doctor
doesn’t have to collect a bunch of legal documents and perform a
background check before doing her job, but your banker does. Most
industries operate on a presumption of innocence. They accept anyone
as a customer until individual behavior or law enforcement gives them
a reason not to. Banking works on the opposite principle. Everyone is
a potential terrorist or money launderer until they prove otherwise.

This presumption of guilt is a minor nuisance for the affluent, but an
existential threat to the underprivileged. It’s one reason why poor
neighborhoods feature more pseudo-financial services like check
cashers and pawn chops than bank branches, even in rich countries.
It’s also a contributor to the growing wealth gap. Those who have the
least amount of money pay the highest fees, keeping them ensconced in
poverty. It’s not that banks don’t want to serve these communities.
It’s that so-called anti-money laundering (AML) know-your-client (KYC)
& sanctions regulations make it too hard or too expensive for them to
do so.

Bitcoin itself may not be the solution to this problem, but the
tokenized financial system that it represents can, because it’s built
on a presumption of innocence. Unlike banks and Fintechs who have no
choice but to rely on legal identity — the kind that 10 million
undocumented workers in America don’t have — tokens rely on
cryptographic identity. Math doesn’t discriminate, so anyone who wants
to access a blockchain network — to transfer Bitcoins, dollars or any
other store of value — is able to. It goes without saying that the
vast majority won’t be doing anything illegal. They’ll order goods
online or send money back home, without having to pay exorbitant fees.

Here the crypto critics chime in with the now-cliched canard about
illicit use. They claim that a financial system as open to
undcoumented Mexicans as it is to affluent Americans will be rife with
criminal activity. The inherent racism and classism of this argument
aside, it fails a basic smell test. It would be one thing if the
existing financial system, for all of its exclusionary tendencies,
actually prevented crime. But the numbers indicate otherwise.

According to the World Economic Forum, an estimated 2 to 5 percent of
global GDP — some two trillion dollars per year — is laundered through
the banking system. There is $30b a year in credit card fraud, and
according to acclaimed economist Kenneth Rogoff, up to a third of all
hundred dollar bills are used in illegal activity. The most reliable
estimate for the amount of Bitcoins used in illicit activity in 2020 —
as published by Chainalysis, the leading government contractor in this
domain — is only ten billion dollars, equal to the amount of
money-laundering related fines global banks paid in the same period.

If the existing approach was remotely successful at keeping out the
bad guys, then we could have a debate about whether the social costs
were worth it. But guilty until proven innocent has failed on both
fronts, so it’s time for a new approach, one that shifts the focus
from keeping out bad actors to isolating bad money — know your token
as opposed to know your client. Here the transparency and immutability
of blockchain networks come in handy. Unlike duffel bags full of cash
or structured wire transfers, tokens leave a perfect audit trail, one
that is increasingly used to solve crimes.

source: Chainalysis

The social benefits of crypto don’t end there. Tempting as it might be
to shift the ESG debate away from speculative bitcoin to less power
hungry platforms or central bank digital currencies, we should not
shortchange what Bitcoin itself has achieved, which is to appreciate
significantly. Skeptics love to complain about its volatility, despite
the fact that it has always resolved to the upside. This critique can
even be heard on Wall Street, where lots of things — including credit
default swaps, Tesla stock and negatively priced oil futures — are
also volatile. The inconsistency might have something to do with who
has benefited.

Bitcoin has made a lot of poor, foreign, minority and young people
rich, even when factoring in the recent decline. This is in stark
contrast to other high flying investments such as venture capital,
private equity or real estate, access to which is restricted. Before
Bitcoin, a majority of people had no access to the majority of assets
— a socioeconomic failure so astonishing that it’s worth repeating:
poor people don’t get to invest in most things, due to a nasty
combination of misguided laws, high minimum entry prices, lack of
infrastructure in poor countries and KYC regulations in rich ones.
According to the FDIC, up to a third of all African Americans remain
underbanked, and people who have a hard time getting bank accounts
have an even harder time opening brokerage ones. But anyone could have
bought bitcoin at any time, and even a few dollars invested five years
ago would be worth thousands today.

But that’s not how crypto investing is presented. Tellingly, the only
time when investment luminaries like Warren Buffet or central bankers
like Neel Kashkari comment on the investment potential of Bitcoin is
to criticize it — “rat poison squared” according to Buffett and
“burning garbage” per Kashkari. Their ignorance of what Bitcoin has
achieved for ordinary people brings us to the final ESG argument for
crypto, its superior governance.

Crypto governance is egalitarian. Anyone can contribute, and lots of
people all over the world do, by holding tokens, validating
transactions, hosting nodes or submitting code. Crypto governance is
also meritocratic. There are no politically appointed positions,
entrenched incumbents or captured regulators. Some of the most
important participants are pseudonymous, because the community doesn’t
care where someone comes from or what school they attended.

All that matters is their contribution, the ultimate embodiment of
Emerson’s “doing well as a result of doing good.”

This is in stark contrast to traditional governance, where power is
usually shared by a small group of people who attend the same schools,
work at the same companies and exist in the same power circles. No
wonder then that Mr. Kashkari (Republican, Wharton MBA, former Goldman
banker) and Mr Buffett (Democrat, Wharton MBA, former Goldman
shareholder) share a disdain for crypto. If traditional governance was
more like crypto governance, then Mr. Kahkari, chief architect of the
U.S. government’s TARP program, would have never been able to engineer
the taxpayer funded bailouts that disproportionately benefited Warren
Buffet’s investment portfolio, almost half of which was in financial
stocks at the dawn of the 2008 crisis. Despite his poor judgement at
that time, Mr. Buffett is now only richer for the experience. The
countless people who lost their home or their job in the same crisis
are not.

Perhaps more than anything, the ESG case for crypto begins and ends
with what it isn’t, which is the old way of doing things.

New York Hydro Power Plant Mines Bitcoin Because More Profitable Than
Selling Electricity To Grid

This year, some of the hottest trends in the crypto industry have been
bitcoin adoption and environmental, social, and governance factors
into crypto mining.

Tesla CEO Elon Musk pushed bitcoin's environmental concerns into the
forefront, calling for "renewable energy" to be used for mining
instead of fossil fuels. It's no secret that bitcoin mining takes a
massive amount of electricity. It's estimated that energy consumption
exceeds the power consumption of countries like the Netherlands and
the UAE.

With the push towards ESG-Friendly bitcoin mining operations, there's
one historic hydroelectric plant near Albany, New York, using power
generated from its massive water turbines to mine crypto.

    "We think this is the oldest renewable energy facility in the
world that's still running," Albany Engineering Corp. CEO Jim Besha
told the Times Union.

    He said the plant "could actually make more money with bitcoin
than selling the electricity to National Grid.

Albany Engineering Corp. receives around 3 cents per kilowatt-hour
when it sells energy to National Grid. Mining bitcoin makes about
three times the amount of money, Besha said.

"It's the best (type of bitcoin mining) because we're using renewable
energy," Besha said. "We're just doing it on the side, experimenting
with it. We're buying used servers."

Each week Besha converts thousandths of a bitcoin into fiat rather
than 'HODL' because he's worried about crypto volatility.

The hydroplant was constructed in 1897 and is getting new life amid
China's crackdown on miners, resulting in the hash rate —the
computational power available to mine the cryptocurrency, reflecting
the efficiency of the bitcoin blockchain network, plunging since

The only issue Besha has to worry about is a bill that would ban
cryptocurrency mining in New York.

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