On The Brink with Castle Island - Weekly Roundup 02/12/21 (BNY Mellon supports Bitcoin, the Bitcoin energy debate, Elon Day) (EP.178)

Episode Date: February 12, 2021

Nic and Matt return for one of the most explosive weeks in the history of the podcast. In this episode:  How Nic ended up at war with the Dogecoin fans CIV closes a $50m fund Tom Brady wins the Super Bowl Should responsible CFOs own Bitcoin on their corporate balance sheets? Bitcoin on the balance sheet as a signaling mechanism BNY Mellon announces support for Bitcoin The St Louis Fed is writing articles about DeFi Nic orangepills Central Bankers Our guesses for the first central banks to adopt Bitcoin Nigeria contemplates a Bitcoin ban Mastercard is supporting cryptocurrency on their networks – what does this mean? The Bitcoin energy debate Can you compare Bitcoin to Visa? Are Christmas lights wasteful Content mentioned in this episode:  Nic in Coindesk, What Bloomberg Gets Wrong About Bitcoin's Climate Footprint St Louis Fed, DeFi coverage Nic on Bloomberg, Bitcoin's Impact on the Environment  

Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called a Bitcoin.

Bitcoin. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. It's nice to see you over Zoom. I'm used to seeing you on television. Oh, yeah? You have Bloomberg this week, CNBC. It's been a busy week.

Yeah, I did. I woke up at 4 a.m. to do CNBC Europe. I don't know why I agreed to do that. And then, you know, they asked me to comment on Dogecoin, and I told them what I truly felt, which was that it was kind of an empty husk, and it had been entertaining in 2013-14, but that original spirit had long departed the project.

And then that got written up into an article which started trending on the CNBC website, and then I got relentlessly trolled by the Dogecoin fans after that. So let that be a lesson to you. Never make your true feelings known on Dogecoin. It's true. And in honor of that, I'm glad you brought up the Dogecoin thing because there's a lot of interesting things in that interview.

And somehow you ended up talking about Dogecoin. But I figured that we'd actually start off. We had a lot of mail, a lot of listener mail to this program. And usually it's very nice and we don't read it on air. But I figured we'd read one of the feedback points from your Dogecoin article. So here was an inbound. What a rubbish article, absolute crap about Dogecoin you put on MarketWatch. Read the comments below the article.

people are laughing at you and sharing the link. My two-year-old boy would write a better article. Me and you can make a bet anytime Doge will hit $1 very soon and it will progress towards $10 after. You just lost total credibility. So that's a listener mail of the week. Yeah, I didn't write an article on MarketWatch. So I don't know. I think there was an article on Market Watch written about my comments, which also should not have occurred because they were not newsworthy. But I would say thanks for watching. And if you're listening, you know, thanks for the comments. We read them all.

Yeah, you got to take your lumps. That's just part of being in the crypto industry. Got to deal with angry, angry coiners. A lot of angry coiners this week. We also had some news this week. We announced the closing of our second fund, a $50 million fund. So excited about what that means in terms of investing in new and exciting companies. So we're going to be around for a while.

Yeah, we're not leaving, as they say. And it's interesting because we announced that on the same. day. We announced that on Elon day. Yeah, Elon just couldn't give us a day. So we had planned to announce it on Monday. We had this whole thing worked out. And then Elon decided to buy Bitcoin on that day and very much stole our thunder. I mean, not to mention he stole Tom Brady's thunder. We haven't even talked about Tom Brady, the greatest quarterback of all time, greatest athlete, greatest just person. Yeah, so Tom Brady did win the Super Bowl. So congrats to Tom Brady. We were both supportive. recording him. So, you know, it's always good to see him doing well.

It looked like he wasn't doing so well yesterday during the parade. I don't know if he cut any of that. Yeah. I feel like he doesn't drink very often. That's fine. You can tell. I guess. Yeah. So a good result for Tom, good result for CIV. Now we're on to CIV 2. And a good week for the corn for sure. We're trading at 47,000. right now, which is ridiculous. Yeah, it's been a busy week. And we also had some good podcast this week as well. Yeah, so we did our second Erbit episode.

The first Erbit episode was really, really popular. People still refer to it. Dare I say, it's one of the canonical Erbit explainers. And so then Erbitt's actually come a long way since then. So we got Galen on the show to talk about how you can actually use Erbit without having to use the command line anymore, which is pretty great. In Why, Arbit matters now because the internet itself is becoming politicized who can get access to internet infrastructure.

So it's an urgent time for it. And we also did Edañago with Sovereign who is working on Bitcoin native defy. So this is maybe a new narrative that's emerging. We also talked about that with Blockstack. So it could be the case that we have defy on Bitcoin. shortly and maybe flipping the script a little bit. Could have defy on a lot of things. I don't think it's leaving Ethereum anytime soon, but it's a,

there's a lot of space for innovation here. Yeah, there's an interesting discussion to be had about using Bitcoin on Ethereum's defy networks or just using native Bitcoin on a second layer or a smart contracting layer built on top of Bitcoin itself. I think there's a subtle distinction there. So more to come on that. Well, let's get into some deals of the week, and then we'll talk about the news. So to lead us off Leden, which is a crypto asset brokerage, they raised $2.7 million from

White Star, Coinbase Ventures, Global Founder Capital, CMT, Kingway, and Darrow Holdings. So congrats to the Lennon team. Next up, we have ZeroX Labs. They are the decks. They're one of the original dexes. They have the XRX token. There is $15 million in around Lennon. by Pantera with participation from jump capital, blockchain ventures, and Coinbase ventures.

Next one up is CELO. This is a blockchain payment startup. I'd never say this one right. Sometimes I call it cello. Sometimes I call it CELO. It's just a word that I'm not good at. Yeah, it's a tough word. It's not Cello. It's not Celo. They raised $20 million. They're a payments-focused blockchain platform. They raised that from Andreessen Horwitz, Electric Capital, and Greenfield One. Next up we have SCB10X. They're the venture arm of Thailand's Siam Commercial Bank. So they establish a $50 million fund to invest in blockchain startups. Pretty cool.

Yeah, we know these guys. They're all in on this industry. So that's exciting to see. And then the last one of the week is Haymeyer Trading, which is a Chicago-based trading firm. They announced that they're merging with a Swiss-based company called Nordide Capital. So those are the deals. There was a fair amount of news this week, I guess. And I don't know how we don't cover Elon first here.

This is what we have to get into. So Tesla announced on Monday morning that they have purchased $1.5 billion worth of Bitcoin holding it on their balance sheet. Talk about a way to start the week. Yeah. And you know, I think I was talking to a journalist recently and I said that Elon actually buying Bitcoin was less exciting than Elon putting Bitcoin in his Twitter bio. And I actually stand by that because, you know, putting Bitcoin in his bio was a real, I don't think he was joking. I mean, I think that was a real vote of confidence and that was him signaling to us that he was a Bitcoiner.

And then buying Bitcoin was just consummating that. So we all kind of expected Tesla to buy Bitcoin at that point. It's an incredible development. I mean, I feel like I missed this whole balance sheet story. I did not see it coming with Micro Strategies Square and then obviously Tesla. But certainly the story so far for the past year has been just these big moves and the fact that it is now a corporate treasury asset, which as you look back on it, sort of makes all the sense in the world when you listen to the rationale around having an asset that is not depreciating on your balance sheet. But caught me by surprise. And I guess my question to you here would be, what is the domino effect here?

And are we going to start to see more and more of this? Well, I mean, I also said this on the CNBC appearance. I don't think it's necessarily the most prudent move if you're a CFO to put Bitcoin on your balance sheet. I hate to say that. You want high quality, highly liquid assets that are convertible into cash, you know, probably short-term maturities. I mean, of course, Bitcoin is fairly liquid, but it's also very volatile. It's way more liquid than corporate paper. Well, in a sense, it is.

But as we all know, Bitcoin is the most illiquid liquid market in the world because it trades around the clock, but that doesn't mean it has deep liquidity around the clock. I still think it has better liquidity than commercial paper by some metrics. I mean, it probably is more saleability. like you can use it in a wider variety of contexts, but just in terms of bit-ass spreads, I don't know, I'd have to look at the data.

But yeah, I mean, I see it more as, especially in the context of Square and Tesla, as these companies vouching for the asset class and saying, hey, we're progressive forward-looking businesses, we're signaling to you that we believe in this phenomenon. We believe in this like civilizational tier project. I don't think they're necessarily doing it for the profit potential. They don't, you know, Tesla is doing fine now.

They don't need to raise their profile anymore. I think it is more about the signaling than it is about an attempt to prudently manage their cash reserves. And then micro strategy is a special case, I would say. So I guess part of your reason for being a little bit skeptical on just this whole evolution is that, the same logic that an activist would have towards an industrial company where it's just not pure exposure to the operating business and you think that it should be separated? Is that kind of what you're saying? Well, it's just that if I was a CFO of these companies, I probably wouldn't have a Bitcoin position. I think the Bitcoin position is a function of the CEO preferences,

treating the company as a political signaling mechanism. And of course, I agree with the signal being sent. But, you know, I think maybe it would make sense to have crypto on your balance sheet if you operate in a jurisdiction where you don't have access to sort of high quality instruments or there's a risk of expropriation or being nationalized or something like that. I think if you're in a jurisdiction with weak property rights with weak rules of law, then you might take seriously the idea of having a stable coin or a Bitcoin balance sheet. You know, Tesla doesn't strictly need that exposure, right? It's interesting to have a corporate treasure on the show at some point

and think about firms that have to hold many different types of fiat currencies on their balance sheet and how they think about the risks of the FX exposure and how that's hedged. Because that's kind of how I come at it from, is just this is a kind of an option value play on fiat currencies continually being debased, and particularly in a year where we've just had massive interventions. Yeah. You can see why that rationale could make sense to a lot of corporate treasurers.

But I guess if you think about comparative advantage, like Tesla is really good at making cars, Square is really good at making, you know, payment processing hardware and software. they're not necessarily the best at being hedge funds or managing a portfolio of risky assets. So, you know, if I were an investor, which I'm not, I would want them to stick to their comparative advantage, not to be a wet blanket or anything. I guess that's also potentially outweighed by the premium that you get for being a Bitcoin forward company, which clearly that exists. That's a real thing.

But I don't know if that premium is going to exist for the 50th company to do that. this. Well, I mean, you start talking about, you know, getting 50 public companies to do this. You start to talk about this is a speculative attack on the dollar, basically. Yeah, Lin Alden on Clubhouse said the exact same thing. By the way, very excited that she's on clubhouse now. One of my absolute favorites. I will be doing a Clubhouse show with Lin Alden, Luke Roman, moderated by Eric Torrenberg next Monday, all announced that on Twitter. she said this exact thing on her inaugural clubhouse session that it is going to put pressure ultimately because corporates are the ones that hold lots and lots of U.S. treasuries.

So if they all divest all at once out of treasuries into Bitcoin, that absolutely does put pressure on the Fed. Yeah, this is like one of those things. If you're not paying attention, you probably should be. Yeah, you certainly have no excuse now. So what about the other big news of the week? This is kind of one of those gradually than suddenly moments. It actually really hit me that I said it this morning.

There are some days now where more adoption events occur than we had entire years prior to 2017. So for instance, Bank of New York Mellon supporting Bitcoin. How big is that? I mean, this is huge. So Bank of New York, Mellon is one of the top five global custody banks in the world. They might be the number one or two, actually. This is enormous news. I mean, in any other week, this would have been the story of the month, really.

So they, just to put some numbers to that, they've $41 trillion worth of assets under custody or administration and $2 trillion. So, you know, let's think about why this. actually matters. So first of all, it's just a, you know, it's obviously a big signal. They're a big reputable bank. Slow moving is all hell in terms of risk and compliance. So clearly in order to bring something to market here, we'll have had to do a lot of research. And I think that will be confirmatory on, you know, not only the networks, but some of the infrastructure companies that are going to be providing services and liquidity into this. If you think about what this unlocks, this is just going to unlock different pools of capital that otherwise would not be able

to hold these types of assets. The fact that Bank of New York Mellon is going to get into the fray, they are the custodian of record for a tremendous amount of institutional capital. And so this will, in a lot of ways, just be a infrastructure piece that accelerates the market tremendously. So that's one take. The other one is that if you are a global custody bank right now and you don't have a plan here, then this is a bad next board meeting. because back of New York Mellon getting into this, if you're Chase, if your city, if you're Brown Brothers Harriman, you state street, you know, where are your efforts? Are you still doing private blockchains or are you supporting public blockchain networks?

So I guess the question is, though, at what point, because we've been talking about these key infrastructural pieces, the plumbing of the crypto markets, the connections to the traditional financial markets forever. That's kind of the whole premise of this show, basically. at what point do we reach a threshold such that we can say okay we've actually crossed the chasm here and all those pieces have been built so the expected price appreciation that comes with those additional pieces being built were there already i mean it's so so early still i mean the fact that they're tiptoeing in who even knows what this means but if you think about the exchange landscape and trading technology and custody providers, we're nowhere yet. And not to mention the fact

that most of the asset allocators don't really have a firm thesis around Bitcoin, let alone all the other exciting things are happening in this industry around Defi and things like that. So I think it's incredibly early. It'll be a multi-generation type of a thing, but it'll probably start pretty boring, which is, you know, custody my Bitcoin for me. Yeah. So speaking of other things that I would have not believed if I'd seen five years ago. The Federal Reserve Bank of St. Louis wrote a paper on defy called Decentralized Finance on blockchain and smart contract-based financial markets and they laid out an entire taxonomy of defy, which is like reminding me of stuff that I've seen on bank lists, basically. And now it's the Federal Reserve writing about it.

Yeah, the Federal Reserve of St. Louis has just put out some great stuff over the years. I believe it's David and Alfato who'd been writing about Bitcoin since like 2012 or something like that. This one is from Fabian Schar. It's a very well-written article. It's, you know, he has this D-Fi building blocks thing that he lays out that almost reminds me of like one of Joel Mnagro's old USV posts in terms of laying out the application stack for the industry. So it's great to see that type of work from a central banker. Yeah, defa is not going anywhere so i think it's great that the central banks are starting to pay attention yeah i'm not going to name names but um i did introduce a central banker to bitcoin this week uh and they were

they were very excited to uh to get their hands on their first bitcoin so it's possible did anybody did they buy it themselves or did they go just put their central bank in it because that would be there's a difference there i gave them some bitcoin that's my offer uh to former all former central bankers or current, you know, I'll give you a hundred bucks of Bitcoin if you show enough enthusiasm about it. Yeah. I mean, there could be a lot of people out there who are at central banks that could be hitting you up. I mean, we could go from a week of you just getting harassed about Dogecoin to you getting harassed by people that say they work at central banks and

$100 worth of Bitcoin. Yeah. Well, that could be a very expensive offer. But it's always good to get them on board. You know, that's really the best way to get people involved is give them a very small amount of financial exposure. And then they have to pay attention to it from that on. Well, it's not going to be long until a nation state starts to publicly announce a position here. So I don't know if that's a 2021 thing, but it's coming. Yeah, so I put out a poll on Twitter about this.

I suspect that, and I don't know if we want to say this out loud, but I suspect that Iran, North Korea, and Venezuela all currently hold Bitcoin at the state level. Yeah, I don't think that's a controversial thing to say. I think there's no doubt that's true. That's acknowledged. Okay. And Iran, I think, has acknowledged it the most explicitly. Venezuela, we have enough evidence that we can say that with full confidence. You can actually renew your passport.

You can pay for that in Bitcoin in Venezuela, so I'm told. But the question is, what is the first non-pariah state to buy Bitcoin at the state level in their foreign exchange reserves and admit it? So, you know, I had a lot of guesses, but maybe for fun we'll do it here. Maybe we can each list one or two names. Okay. Why don't you go first? All right. So this is like kind of cheating, but I'm going to go with Singapore because Singapore is,

is already pretty pro-crypto. Arguably, they already have exposure to Bitcoin through their sovereign wealth fund, I believe through some investments they've made, maybe not directly. They're very progressive in terms of crypto legislation. Bitcoin's very well understood there. And they have a history of these subtle monetary regime transitions.

So I think Singapore would be my bet here. But they probably wouldn't announce it until long after they've taken the position. I'm going to go with Norway. And the rationale is that Norway has a large sovereign wealth fund and has a lot of experience with oil. And so maybe they would be predisposed to seeing this as a commodity asset.

And maybe they would want to purchase it. Okay. So maybe we can return to that in a year's time, see if we're right. I'm actually going to throw a third one. And I actually think the United States, would be extraordinarily well positioned for something like this through the lens of, you know, they've confiscated a lot of Bitcoin over the years, right? So having Marshall's

auctions for Silk Road Bitcoins, I believe they still haven't marshaled, Marshall auctioned off the latest seizure. You could see a groundswell of congressional interest to maybe just not do those auctions. I think there are members of Congress that are really big believers in this technology and maybe, maybe, you know, who's to say they wouldn't say, try to influence the government not to sell that. Yeah, we have, I mean, Cynthia Lemmes has effectively stated that she wants the U.S. I don't want to misrepresent her views. I believe she implied on POMP's podcast that she thinks the U.S. should have a Bitcoin position.

I'll tell you who's probably not going to be recommending something that positive for the industry is our local representative, Stephen Lynch, but that's neither here nor there. He of the Stable Act fame, he who does not like startups in the FinTech and crypto ecosystem. Has he done anything bad recently, or is it just the same bad old stuff from before? Just the same Stable Act thing before.

Not a good act. Not a good act. No. We're not going to let people forget about this Stable Act thing, even though it didn't go anywhere. It's just the dumb. act of all time. They might try it again. Who knows? Speaking of regulatory risk, so apparently Nigeria is contemplating a full Bitcoin ban. Good luck with that. Well, it's notable because

Nigeria is basically the most vibrant Bitcoin market in Africa, as far as I can tell. So, huge Bitcoin penetration there on a sort of absolute and a per capita basis. So pretty hostile. relatively high inflation so you can see why and there are a bunch of comments from parliamentaries in Nigeria you know effectively saying Bitcoin is stripping us of the ability to manage our currency well it's stripping them of the ability to manipulate their currency for sure you know Bitcoin is kind of the aprax predator of money here that is it will eat the weaker sovereign currencies first and I think Nigeria would be in that bucket yeah this has been our view

that it's a disciplinary force on the most, on the soundest central banks and on the weakest central banks, it potentially demonetizes them. Whether it's Bitcoin or whether it's crypto dollarization, which I think is happening in concert, it poses a real threat to some of these weak monetary regimes. You know, it's going to be interesting because, so let's say they're successful in doing this, which I have no reason to believe they wouldn't be, then it'll just mean that the on and offerams get shut down. And so we'll be back in a situation where you remember like 2013, 14, 15 time period when we did not have cryptocurrency exchanges in a lot of these jurisdictions, but you had local

bitcoins peer-to-peer transactions happening. And you could see what the rate was in local markets. And it was just, it would skyrocket in these regimes where you didn't have like internet infrastructure to transact it. So like the US dollar price of Bitcoin, if it were banned in Nigeria, would probably double whatever it was on a liquid spot market in the United States. We're talking about like 100K Bitcoin, probably like overnight. Well, and it's interesting because that premium acts as an inducement for arbitrageers to make markets.

So it's just there's always economic incentives to route around the censorship. And if Bitcoin gets harder to acquire in Nigeria, then it expresses itself in the form of premium. And then some smart entrepreneurs will skirt the ban and make markets, whether that's on. on local bitcoins or Paxville, or whether it's on peer to peer trading groups on Telegram. That's, if you listen to our episode with Bois Sobrato on Cuba, peer to peer markets are banned too,

but there is a vibrant Bitcoin exchange market and that's through Telegram. Yeah, I mean, if you wanna shut down Bitcoin, then you might as well try to shut down the whole internet because that's the only way that you're really gonna be able to be successful. Actually, that was, I don't know if you saw these comments.

So Hester Purse went on, on Coin Desk TV today, actually. She made some comments about the crypto asset market. One was she suggested again that, you know, we should be ready for a Bitcoin exchange trade product, basically, saying that, you know, there's a lot of demand, a lot of the conditions have been met. She also suggested that the narrative that cryptocurrencies are used

for terrorist financing is very overblown and was suggesting that there's kind of like the genies out of the bottle. I'm paraphrasing there. but it's a regulator that clearly understands this technology. Yeah, what a gem. What a gem truly. So there's another big piece of news, which we hadn't covered yet on another week

would probably have been the headline. So MasterCard has announced they're going to support cryptocurrencies on their network. Yeah, so I'm not exactly sure what this means. Does this mean that we're going to have like Bitcoin and Ethereum, flowing through the MasterCard pipes? What exactly do you think they're doing here? So it's not clear, but what they said now in their statement is we're preparing right

now for the future of crypto and payments announcing that this year MasterCard will start supporting select cryptocurrencies directly on our network. Doing this will create a lot more possibilities for shoppers and merchants, allowing them to transact an entirely new form of payment. So it's not exactly clear what they mean. But they also did caveat it in a number of ways. So it's not clear that this actually extends to Bitcoin. It seems to me that it's more about stable coins, frankly.

So if you read the statement, they say things like these digital assets must follow local laws and regulations and the regions that they're used. Eligible cryptocurrencies will need to offer the stability. People need in a vehicle for spending, not investment. So those statements seem to suggest that they're not thinking about Bitcoin, more thing about stable coins. I'd just like to congratulate MasterCard on this press release because it's probably the most confusing thing I've ever read in my life. And it feels like it was written by about 39 different people, including 26 lawyers. So it's very ambiguous. It's very ambiguous. It seems like a reaction to Visa diving in headfirst.

I mean, Visa has been very progressive, not just directly integrating with stable coins, but also saying, they will create their crypto asset as a service, you know, create sort of crypto APIs as a service allowing people to get exposure to Bitcoin. So to me, this seems like MasterCard, you know, trying to catch up to Visa's groundbreaking work here. How about the second to last paragraph where they brag about having 89 blockchain patents and an additional 285 blockchain application pending patents? It's like you want to just do the Howard Dean yeah Like congratulations

That's a very boomer reference but I'll allow it I mean I think the Howard Dean scream was in what 1989 or something Howard Dean, are you kidding me? No he ran against Al Gore So what in 99? Yeah it was like 1999 2000 Some of our listeners weren't born yet when that happened probably. Well, in any event, it's kind of weird to be bragging about blockchain patents when the whole thing is like public decentralized infrastructure. I don't know. This is like a little private blockchain need to me.

Nothing says crypto-native like patents and intellectual property. That's right. So yeah, mixed on the MasterCard front, but still pretty interesting that they are feeling compelled to jump in here. The other news that probably would have been a big story in any other week was Pratigo, which is Cryptoasset custodian. They became the second firm to get a OCC bank charter, a second crypto asset firm to receive the OCC bank charter. So that's really positive. And we continue to see the OCC being one of the most forward-thinking regulators, at least in the United States. Yeah, we'd normally be all over us because this is totally our bread and butter bank charters regulation. But it's eclipsed by the other news of the week. Pretty crazy.

Did you see Bill Miller's flagship fund? They noted that they're going to have the ability to increase their GBT exposure. So I can never tell which Bill Miller this is, if it's Bill Miller, Senior or Bill Mellow Jr. Didn't we do this last week? It's like, I don't know, they're both part of the tribe. They're both big corners, which doesn't help. Yeah, it's not the third. basement from the Red Sox. We talked about this. Okay. Well, another piece of news, BlockFi is launching a

Bitcoin Trust to compete with the Grayscale Bitcoin Trust. Coin Metrics will be providing the index and pricing data for them. FDAS will be providing the custody that's Fidelity Digital Assets. So lots more providers jumping into the trust game. Congrats to the BlockFi team. All right. So why don't we come back to actually why you were actually on TV in the first place, which was not to talk about Dogecoin or Castle Island Fund 2 or anything like that. You're actually asked to speak about the energy footprint of Bitcoin. And this is somehow this is back to being a really hot topic. So why don't you kind of break down why you went on and what you think? Yeah. So this was the case for both shows. So it actually was interesting. This happened last time I went on TV as well. I wrote an article

and then the article got a ton of press and then a few stations asked me on to talk about it. So what's funny is I wrote this op-ed for CoinDesk a long time ago called the last word on Bitcoin's energy production consumption. And then unbelievably, other people had more words following that. It wasn't the last word. It failed to be the last word. So I had to have a last last word,

which was my newer piece for CoinDesk. what Bloomberg gets wrong about Bitcoin's climate footprint. I was responding to this Bloomberg opinion piece, calling Bitcoin an incredibly dirty business, and making these per-transaction energy comparisons with Visa and other networks, it really riles me up the analysis of amortizing Bitcoin's energy use and applying it to transactions as if individual transactions consume energy, which is just not how Bitcoin works.

And I don't understand why people still believe in this notion of quantifying the energy output of transactions. I mean, there's a lot wrong with the analysis. People don't understand that, you know, Bitcoin's energy, a unit of energy being consumed is not homogeneously equivalent to a certain unit of carbon being, you know, expelled into the atmosphere. It depends how the energy is produced. So that's one thing to be aware of. We don't even have to get into that. Everybody knows a lot of Bitcoin is mined with otherwise curtailed energy like hydro and increasingly natural gas in certain places. But really my animus is with this comparison to Visa, which is false. And this per transaction energy cost metric, which is,

doesn't make any sense. Yeah. Well, I have a, I've, I've, issues with it from a number of angles actually before i do i was wrong about howard dean by the way he ran against john carrie in 2004 not algor okay all right so slightly less boomer not really that boomery um i mean we had internet at least um but the the back to what you're saying here the the thing that really wrangles me about the whole like bitcoin is wasteful thing is first of all like compared to what and for who is kind of how it is kind of how it or that. It's like, well, if it was, if it was useless, then people wouldn't be spending money to mine it and participate in this network. And so it's a free market here. If people thought it was

useless, then there would be absolutely no mining going on. People would ascribe no value to it. So that's my first thing. The second thing is I think you, you kind of have to look at the energy to maintain a non-sovereign currency, almost through the lens of what it would take to maintain a sovereign currency, which would be an awful lot of infrastructure. Like just look at, you know, an economy. Look at one of the, I don't know, how big is like the Nigerian economy. It's an awful lot of infrastructure to maintain that, right? They have an army.

They have a defense department. They have all sorts of infrastructure. So I don't know how you think about this, but it's, I don't, I think it would be, you'd have to look at something much bigger in scale as an analog. Absolutely. And this is why you can't compare Bitcoin to Visa. Bitcoin is the entire monetary stack and everything that entails. And Visa relies on the do.

stack at the end of the day, relies on the banking system, corresponding banking system. It actually relies on the global, highly integrated dollar economy to function. And there are costs associated with that. They're harder to compute than the Bitcoin costs. That's where the critics, that's why the critics are able to slam Bitcoin is because it's not that hard to figure out how much energy Bitcoin uses. Bitcoin's very transparent, which works to its detriment. when it comes to critics, whereas the dollar is very opaque what the cost of the dollar are.

Arguably, you could say the cost of the dollar is inequality. It's the hollowing out of the middle class. The dollar system, you know, the breaking of the convertibility to gold since 1971, you can directly track the inequality metrics and see them flowing from there. You can see that the working class has been crushed because our export sector has decreased. So that's one cost of the dollar, but it's hard to track. Another cost of dollar is our military adventurism. The fact that the dictators that we've deposed are the ones that tried to sell oil for something other than dollars.

So Gaddafi, Saddam, both of them tried to do that, and then we went to war with them. That costs a lot of lives. Those are costs. You could talk about the cost of the dollar in oil terms. We have a military treaty with Saudi Arabia. we saw the military equipment that they use in, you know, proxy wars in the Middle East. That's American missiles. You know, that's Lockheed and Raytheon.

Those are the missiles that are out there killing the Houthis. That's a consequence of our dollar diplomacy with the Saudis because they sell oil for dollars. That's an explicit agreement. That's the petro dollar. That's the petro and the petro dollar. So there's a huge number. And then, you know, you could even say the business cycle is a function of Federal Reserve policy. You know, it's not like we've had any less volatility since we've, you know,

gone to this true fiat standard. So there's all these costs associated with the dollar that the critics don't acknowledge when they look at Bitcoin. With Bitcoin, it's a very transparent, very quantifiable. What's the cost of the banking and the credit and the dollar system enormous? Yeah. It's unfortunate that the kind of memetic value of just having this, like, it's wasteful is pretty powerful. It takes a lot to explain it. But I think it's worth having these type of conversations and getting it out there because I think we're only going to see more of this. Bitcoin is wasteful because the energy footprint is not going down anytime soon. And wastefulness is completely in the eye of the beholder. I consider there's a lot of activities

out there that I consider very wasteful, but I'm not calling for them to be abolished because it's people's free choice, what they choose to spend their time and their energy on. And yet Bitcoin is the one that gets singled out. And other industries and other sources of energy usage don't at all. And, you know, many of them are, you know, pure distractions like watching Netflix. Bitcoin is something that provides support to tens of millions, probably over 100 million people worldwide. So there's always this anglo-centrism with the Bitcoin critics. They don't seem to acknowledge.

They won't engage with the fact that you've got dissidents in Belarus, Russia, Nigeria. All of this is provable that are using Bitcoin, Venezuela, Colombia, like all of these countries that are using Bitcoin as a way to find financial freedom to make donations to nonprofits that are unstoppable, to dollarize, to exit their local monetary system. This is happening. And the critics of Bitcoin never acknowledge it when they talk about the wastefulness. it's incredibly anglicentric their view. Well, I think we should start a crusade against Christmas lights.

I mean, actually, maybe just colored Christmas lights. I think colored Christmas lights are incredibly wasteful. I think that the white lights, the kind of softer ones, those are fine. But colored Christmas lights, that's an awful lot of energy. That's wasteful. There are some great ones out on the Boston Common. And I actually really found a lot of enjoyment in them. I thought they were great.

So I think they're a little bit, I think colored Christmas lights are a little tacky. I stand with the Christmas lights on this topic. Like, that's a lot of electricity. At the end of the day, though, we disagree. I'm not trying to tax your usage of Christmas lights the way that critics of Bitcoin are trying to tax Bitcoin. But the solution is not to moralize about distinct energy uses. It's to make the grid more sustainable. That's obviously the solution.

And the answer is nuclear, clearly. We need more nuclear energy. I will agree with that. I think that's a very good. And off grid. Yeah. I mean, and to the extent that Bitcoin can be used with otherwise, can be mined with otherwise curtailed source of energy. That, you know, that's the nuance that everyone misses too. Bitcoin's energy, you know, when Steve Barber is mining Bitcoin in Alberta, Canada off grid with natural gas that's otherwise flared, that's not depriving anyone of energy. Because there's these pockets of energy. Energy is not this fungible thing. People aren't turning on their lights in the morning and having them not work because of Bitcoin mining. Even if the Iranian government is claiming that, it's not true. So that's it for the week. I don't know how we're going to top it. I don't know what can top Elon Day. We had Elon Day and we had Sailor Day. Those are both pretty good. The only thing that tops it for me is a central bank buying Bitcoin.

So we'll wait for that. But either way. We got some great episodes lined up for you next week. And we'll see you on there.