Everyone’s getting in on it – BlackRock, MassMutual, SkyBridge Capital, and of course, the one man who can change the economy’s gravitational field with one tweet: Elon Musk. In a word, #bitcoin. 

Why is bitcoin hitting so hard right now? And with prices skyrocketing to upwards of $47,000 per coin and chatter about volatility, is it a safe investment for most Americans?

On my podcast this week , my guest was former White House Press Secretary Anthony Scaramucci. Anthony recently kicked off his bitcoin-centric investment fund, and he helped me make sense of the current crypto craze.

In Anthony’s words, bitcoin is to cryptocurrency what Amazon is to retail, what Google is to search engines, and what Facebook is to social networks… And speaking of Facebook, the Winklevoss Brothers pitched him on bitcoin back in 2014 at a SALT Talks Conference. He didn’t bite then, though.

He said that, at the time, bitcoin didn’t pass the Metcalfe Law stress-test. This Internet-centric theory purports that any network’s value roughly equates to its number of users squared. Or, put cleanly, in 2014, not enough people were trafficking in bitcoin for it to be a viable investment opportunity.

Think of Steve Jobs. Since the 80s, Apple’s products – personal computers, smartphones, iPads – didn’t initially have many users. But now, nearly everyone has each of these. And bitcoin shows the same strength for adaptation and growth, as it keeps scaling exponentially and more investors are becoming aware of its potential.

For many readers, you still want an answer to the more beguiling bitcoin question: what exactly is it?

Bitcoin is a cryptographic code on the Internet that’s sequenced and transferred to you over a blockchain in the most literal terms. If that last sentence meant nothing to you, here’s the takeaway: Bitcoin’s a thriving, decentralized financial network: portable, transferable, safe, and scarce, i.e., very valuable.

Crypto transactions take out the middlemen and have a fully transparent ledger – this is wildly appealing to consumers. And since bitcoin started saturating the market, it caught the attention of regulators. And any time regulators get involved, you know it’s legitimate. Bitcoin’s also insanely safe and almost impossible to hack – the code itself can be stored on your own digital devices (USB/SIM card) or at institutions as Fidelity Digital Assets .

In terms of a potential ROI on bitcoin, Anthony served up a hypothetical. If you put $10,000 in Amazon on its IPO date in 1997, you’d have 21 million dollars by now. He thinks these same kinds of gains are possible with bitcoin (if you’re able to suffer some losses along the way).

At this moment, there are 21 million bitcoins, 105 million users, and Anthony himself has put 25 million dollars of his own company’s capital in a crypto-fund. Bitcoin currently sits as a store of value and will be treated like gold over time (or already by millennials).

Whether bitcoin has a chance as an actual currency is still unknown. What is apparent is the ever-growing enthusiasm around it – and there’s only so much of it. Even if you don’t understand developers mining for coins or blockchain , try grasping the idea that this is a finite digital resource. And anyone can appreciate the value in that.

If you want to grapple with the existential question of what bitcoin is worth, think of all the legal tender in humanity’s history.

Whether it was the paper money of the 20th century or digital inputs on a bank ledger now, money has always been an idea, a representation of something else, an entity worth far less than the goods and services it backs. In short, money’s an agreed-upon bit of fiction meant to correlate to reality.

And our current reality is a landscape where everything is digitized, a trend ramping up even more so since the pandemic. So, why wouldn’t that happen with our monetary networks? Cryptocurrency like bitcoin provides more transparent, secure, and safer fiscal transactions for Americans. As its network expands, so shall its undeniable worth.

Did any of you even know what Zoom was in 2019? Exactly. But now it’s ubiquitous. That will be bitcoin in just a few years… a phenomenon that seemingly comes out of nowhere and ultimately, we won’t be able to live without it.

Read our latest issues of   American Consequences.

Love us? Hate us? Let us know how we’re doing at   [email protected] .

Trish Regan Publisher,   American Consequences With Editorial Staff February 13, 2021

The Industrial Revolution swept through England in the 19th Century like a wildfire. It changed the world greatly and was one of the reasons why the sinister slave trade was outlawed as the industries in the United Kingdom needed a robust and thriving market in Africa to sell their goods to.

One group of workers in England was not happy with the revolution as they erroneously felt that the machines would replace their human labour. This group of workers was known as the Luddites and physically broke the machines to prevent their immediate ‘redundancy’.

History repeats itself because man in his usual frailty learns the stories but never the salient lessons. The Central Bank of Nigeria behaved like the modern-day Luddites with the banning of cryptocurrency on February 5, 2021. Their reasons were that it was used to finance terrorism and it is largely unregulated.

The reasons given by the CBN are largely asinine and don’t reflect a regulatory authority who is in tune with the digital banking realities of the 21st century. Ever since cryptocurrency commenced in 2009 allegedly by an anonymous Japanese trader, it has passed through the fire to become a globally accepted means of exchange today. There were initial scepticisms as a result of its unregulated nature. Wall Street and many American banks warned the American public of the risks inherent in dealing with it. The world’s wealthiest investor, Warren Buffett, aired his views on its high risks as well as its unregulated nature. There were also concerns as to its volatility as it rises and falls faster than the speed of light.

However, the narrative is now changing as many of the world’s global banks like JP Morgan and Goldman Sachs etc now have cryptocurrency desks. Many banks in Europe have followed suit with the Central Banks in those countries becoming compliant in its risks management. They have not banned it outright as that will amount to the futile attempt of killing a fly with the sledge hammer. Many people especially the younger generation are heavily involved in its trading and usage. In a world that is rapidly changing, no thanks to the disruptive effects of technology, banning it will be extremely anachronistic.

There is massive youth unemployment in Nigeria as the National Bureau of Statistics puts it at over 21%. Many youths here have taken their economic destiny into their own hands by trading in it and using it to bring home the bacon. The ill-thought-out directive has only compounded their financial woes. Why are the economic policies of the President, Major General Muhammadu Buhari (retd.), so anti-people? Recall the ban Treasury bills to individuals which was a steady source of revenue for many economically strangulated Nigerian youths.

A major reason that stands out is that of the financing of terrorism but the truth of the matter is that terrorism financing or money laundering can still be done through the regular banking system without the use of crypto currencies. When the Tamil Tigers ravaged Singapore for about twenty-five years before their eventual defeat, were they crypto currencies? When the Al-Qaeda terrorist network attacked the Twin Towers of the World Trade Centre on September 11, 2001, were they cryptocurrencies? When terrorists bombed the London Underground on July 7, 2005, were there cryptocurrencies? It is tragic that our regulatory officials are digitally lazy and want to be left behind like the Luddites in the days of yore.

Nigeria has the second largest volume of crypto currency trading in the world put at about $500 million. What message is this ban sending to foreign investors? Why do we keep having our economic policy inconsistent? At a time when youth unemployment, insecurity, poverty with our recent naming as the poverty capital of the world, what we need are public policies that will greatly stimulate the ailing economy and not further strangulate it. What the so-called ‘Giant of Africa’ needs are jobs, jobs and more jobs, an enabling environment for the private sector to come in as well as for foreign direct investment to be created. This archaic policy does the exact opposite of what this economy so badly needs.

Fintech as well as online payment solution companies like Paypal have begun to accept cryptocurrencies as a medium of payment. It would have been only a matter of time for the local ones like Paystack, Fluterwave etc to follow suit. You can imagine the financial exclusion to the tune of hundreds of millions of dollars by this policy! Many foreign investors especially the portfolio investors would have been more comfortable with the use of cryptocurrency as it would better aid the movement of their investments to their home countries. There would have been no harm for the CBN to have set up a department for cryptocurrency regulation to minimise the risks inherent with it. Risk management is part and parcel of any business and it has assumed the status of a full-fledged profession especially in the financial sector. The intellectual sloth of the CBN is highly unacceptable in the 21st century and is rather unfortunate that while the rest of the world is rapidly moving forward, we are stuck in the Stone Age like cave men.

Tony Ademiluyi, Ikeja, Lagos State

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Key facts:

10 years ago, 1 bitcoin was worth 1 US dollar for the first time.

There are more barriers to overcome in the way of the Bitcoin standard.

On February 10, 2011, 10 years ago, the price of Bitcoin (BTC) reached the value of 1 United States dollar (USD) for the first time in its history.

A month earlier, on January 11 of that year, a user of the BitcoinTalk forum, proposed to celebrate the “Parity Party” or the BTC / USD parity party. User jimbobway uploaded a photo of a young man (presumably himself) holding a sign that read in English “Stop the Federal. Use Bitcoin »(Stop the Fed. Use Bitcoin), referring to the United States Federal Reserve.

This entity is responsible for the supply and issuance of the US currency, a centralized model that Bitcoin aims to correct in the universal financial system. The forum user, founded by Satoshi Nakamoto, was enthusiastic about how close the BTC / USD pair was.

In the same comment thread, Bitcoin pioneer Hal Finney commented that he found it strange that everyone saw the possibility that 1 BTC would become worth $ 1 very soon. On the other hand, he said that other stock investments such as Apple, Facebook or investment in metals such as gold, would not have the same performance of BTC when it was worth $ 1.

“We are lucky to be on the verge of a new and explosive phenomenon. Considering the disadvantages of most investments that triple the money, Bitcoin would have a good place in a percentage of your portfolio, “said Hal Finney, who was also the first person to receive a Bitcoin transaction.

User Jimbobway posted this poster on February 10, 2011 on BitcoinTalk to celebrate Bitcoin reaching a value of $ 1 for the first time in its history. Source: Bitcoin Talk / bitcointalk.org.

Notably, that same year, several organizations began accepting Bitcoin for donations, one of the most frequent use cases of cryptocurrency. In June 2011, WikiLeaks adopted Bitcoin. Also, by that time, the darkweb Silk Road market was beginning to take its first steps, contributing a significant volume of transactions to what was then the Bitcoin network.

Today the price of Bitcoin and its behavior in the market place it as a store of value in the eyes of many investors, rather than as a payment method.

However, the reality is that constant innovation in second-layer solutions such as Lightning, Liquid and RSK, could allow the transfer of small fractions of Bitcoin, a capacity that becomes more useful as the price of the cryptocurrency increases.

Satoshis are the denomination by which the subdivided fractions of Bitcoin are expressed. 1 BTC equals 100,000,000 satoshis (100 million satoshis). With the price of Bitcoin hovering around $ 47,500, 200 satoshis would be roughly equal to 1 penny, while USD 1 equals almost 2,000 satoshis.

In this way, the various milestones in the price of Bitcoin could also be counted, taking as a reference the unit of account that could predominate in the future in the use of the protocol.

There are still approximately 2 million 374 thousand bitcoins to be mined before reaching the maximum emission of Bitcoin (21 million coins), which is estimated to happen from the year 2040.

The ability to subdivide to 8 decimal places, plus the reward reduction every 210,000 blocks (roughly every 4 years), will balance out the Bitcoin economy. Thus, the cryptocurrency will become a universal standard, although to reach this point they may have to cross several scenarios.

The next celebration could be see the price of Bitcoin at $ 100,000, where 100 satoshis would be worth 1 cent. With the recent rally or price escalation, many don’t see that figure very far.

Recently, CryptoNews reported how Bitcoin surpassed $ 1 billion in market capitalization. Likewise, and not least, we report that the processing power of Bitcoin has exceeded its historical levels.

But the great event of this century would be when Bitcoin is worth $ 1 million. Thus, in addition, 1 satoshi would have parity with 1 cent. Hopefully, by that time, the value of money would not be measured in fiat, but in bitcoins. We hope it is.

Cryptocurrencies can no longer be ignored by banks and categorized as a fringe movement, something which has become increasingly evident lately as investment in the cryptocurrency market has grown considerably, and high-profile names such as Elon Musk are promoting the widespread adoption of digital currencies.

The cryptocurrency market has now reached a value of hundreds of billions of dollars and is attracting more and more investors every day, both individuals and well-known companies. Thus, banks and the entire current financial system are under pressure from customers requesting crypto assets.

In addition, Wall Street banks are being forced to accept bitcoin as a legitimate asset class, according to CNBC.

JPMorgan co-chair Daniel Pinto said at an internal meeting that he was open when it comes to Bitcoin, and the company's decision to adopt Bitcoin would be made if a critical mass of customers wanted the company to trade in it.

"If over time an asset class develops that is to be used by various asset managers and investors, we will have to be involved," Pinto said in an interview, according to CNBC, adding: "The demand is not there yet. but I'm sure it will be at some point."

JPMorgan traders are not the only ones turning their attention to cryptocurrencies. Last week, Goldman Sachs hosted a private forum with Mike Novogratz, CEO of crypto company Galaxy Digital, for employees and customers. During this meeting, Novogratz presented his thesis for bitcoin, ethereum and other digital assets, as well as their macroeconomic history.

Wall Street's new openness to cryptocurrencies shows that the industry is forced to tackle bitcoin, as its latest dizzying rise to near the $ 50,000 threshold and increased adoption among institutional investors, corporations and fintech competitors raise fears of being left behind.

Banks, which generally face the highest regulatory control among financial firms because of the breadth of their operations and the crucial role in the economy, have been largely reluctant when it comes to the crypto market, preferring to focus on related technology, including the blockchain. However, experts believe that if one of the six largest US banks decided to adopt bitcoin, it would be a major seal of approval for the developing asset class, according to CNBC.

The publication mentions that during the bitcoin growth cycle of 2017, banks, including Goldman, flirted with the idea of setting up dedicated crypto trading desks, but in the end most of the plans remained at the idea level. Born less than a decade before the global financial crisis, bitcoin was considered too speculative and risky for the bank's customers. As the price of bitcoin rose sharply in late 2017, JPMorgan CEO Jamie Dimon called bitcoin a fraud that would not end well.

But simply by continuing to exist until 2018 and 2019, weak years known as crypto-winters, when Bitcoin traded below $ 4,000, the technology has shown its staying power. Then the coronavirus pandemic hit, and governments unleashed billions of dollars in support of markets, businesses and individuals during the crisis.

So a new narrative has emerged, seemingly adapted to the current context and adopted by billionaire hedge fund managers such as Paul Tudor Jones and Stanley Druckenmiller: Bitcoin, which is limited in terms of availability through its structure, is a haven from inflation and the deterioration of the US dollar.

Fear of currency devaluation is the main theme of American customers asking about bitcoin, according to the head of a major company that manages wealth for customers with at least 25 million net worth, according to CNBC. The bank is studying how to integrate cryptocurrency into its risk management systems.

However, jokes are making the rounds in the market - in a few years, bitcoin has moved from an idealistic technology designed to eliminate banks and other intermediaries, to a means of protecting value used mostly by rich people so that they can stay rich.

Now, as a steady stream of news about adopters seems to be pushing bitcoin more and more, those in the industry say it's only a matter of time before traditional banks get more involved.

In particular, Pinto, from JPMorgan, last month cited the move by BlackRock, the world's largest asset manager, to add bitcoin futures as an eligible investment in two of its funds as evidence of wider adoption. Regulating bitcoin trading could be manageable, Pinto said, adding that if it happened, trading would involve verified customers and reputable exchanges, including Coinbase.

Just last week, electric car maker Tesla became the latest company to invest capital in bitcoin, and payment network Mastercard and custodian bank BNY Mellon said they would become more involved in the crypto market. With each announcement, the likelihood that banks, including JP Morgan and others decide to join the trend, is increasing.

"For large banks, the volume of customer demand will break the current system, at some point", said Damien Vanderwilt, co-chair of Galaxy and head of its global markets division, according to CNBC. "Eventually, banks become heavily armed in the development of these products by their customers," he added.

Vanderwilt suggested future collaborations with traditional banks, saying that "Galaxy may help Goldman and other banks not face the same challenges of the past; we are uniquely positioned to do this, like Nexus for financial services in the digital assets sector. "

As for corporate adopters, Vanderwilt said many companies have not yet publicly disclosed their investments in bitcoin. "You will see a series of versions in 2021, there will be more companies, pensions, more insurance companies" investing in bitcoin, he said.

Meanwhile, as the price of bitcoin continues to rise, some big bank traders are looking at the charts with envy. Just two months ago, bitcoin crossed the $ 20,000 mark for the first time, and on Saturday it was close to the $ 50,000 mark, according to Coin Metrics.

"In this industry, we are always looking for things that will make money," a trader who wanted to remain anonymous told CNBC. "And there's this brilliant thing, so weird, volatile, and we're told we can't touch it - it's like the forbidden fruit."

On the other hand, the number of companies and online stores that accept bitcoin or other cryptocurrencies is constantly growing, and this creates a safe climate for the use of cryptocurrencies to pay for products online and the use of bitcoin in Ecommerce. In fact, in our country there are more and more companies that accept bitcoin. From travel agencies to fitness passes, beauty salons and even restaurants or home appliance stores.

All this close attention to cryptocurrencies has also attracted comments from regulators, who support the need for closer controls on cryptocurrencies.

Cryptocurrencies attract the attention of regulators

All this close attention to cryptocurrencies has also attracted comments from regulators, who support the need for tighter controls on cryptocurrencies.

US Treasury Secretary Janet Yellen recently said that virtual currencies have made promises, but have also been used to launder money by drug traffickers and terrorists. However, she added that innovation could help solve these problems and that the technology could be used to fill digital gaps.

In addition, European Central Bank President Christine Lagarde has expressed similar concern, calling for global regulation of bitcoin. At a Reuters press conference, she said: "Bitcoin is an extremely speculative asset, which has led to some funny business and some interesting and totally reprehensible money laundering activities."

Both the US and the EU are talking about regulations in the cryptocurrency market. India is not far behind either. Recently, the Minister of State for Finance, Anurag Singh Thakur, declared that a bill for cryptocurrencies is being finalized and that it will soon be sent to the Union Cabinet. Finance Minister Nirmala Sitharaman, while answering the question from Rajya Sabha, said that a high-level committee - formed to study issues related to virtual currencies - had recommended a ban on all private cryptocurrencies in the country. It is unknown at this time whether the government will go through with this and it will ban krypto, but the crypto-club is hoping they won't.

Even the Deputy Governor of the Bank of Canada, Tim Lane, was quite vocal about his views on cryptocurrencies. He called crypto a "flawed" payment method, adding: "The recent rise in their prices is less like a trend and more like a speculative mania."

Existing laws are clearly on one side, even as more and more institutional investors and corporations enter the crypto market.

Given the divergent views and clear division over cryptocurrencies, even within the investor community, a confusion between the two sides (a lot of loyal money and believers vs. regulators) things could end rather badly. This is a big risk and not just for the cryptocurrency market.

CNBCTV states in an overall analysis that estimates put the market capitalization of over 8,000 cryptocurrencies at over $ 1.4 trillion. Of those, bitcoin alone is nearly $ 900 billion, followed by Ethereum with $ 200 billion. In contrast, the global stock market capitalization is $ 90 trillion, the S & P-500 market cap is $ 31 trillion, and India's market capitalization is $ 2.8 trillion. So virtual currencies are still a fairly small but not negligible asset. However, what is more important is the pace at which the valuation is rising. The price of bitcoin has risen from $ 11,000 to $ 48,000 in 5 months. And if it continues to grow at this rate, the calculations may indicate the direction it is heading.

According to the CNBCTV analysis, crypto is a fast growing market and although the collective value is relatively small compared to other asset classes, such as stocks, it is not so small as to be ignored.

At the same time, the CNBCTV analysis shows that the S&P-500 and bitcoin have had a positive correlation of 0.84 in the last 14 months - from January 2020. The S&P-500 and oil are also positively correlated, but to a slightly lower degree, of 0.77 in the same period. What this suggests, according to the analysis, is that bitcoin and stocks tend to move in tandem, though not at the same pace. Therefore, it is quite likely that if one of these markets is affected, the other feels the effects as well.

Money finds its way to several assets, but when this money is affected in a single market, being a link, there are some effects in others as well.

So any action by regulators on cryptocurrencies could not only lead to a sudden correction in their values, but will also cause a similar effect on other asset markets, especially stocks.

CNBCTV analysis also shows that crypto bubbles are not new. From a high of nearly $ 20,000 in 2017, the price of Bitcoin dropped to nearly $ 3,600 by the end of 2018.

The main question in the market is whether history will repeat itself.

However, for equity investors, the message is clear. Everyone has to watch the crypto space carefully, because what is happening there can also cause a blow to everyone's portfolio.

Estimated Reading Time: 9 min

Currency relies on trust to function. And yet, fewer than ⅓ of Americans trust the US financial system and over 40% are actively displeased with the state of the economy. 

In my previous series, I described the logic behind a fiat (government-backed) currency. But just as important as the logic of fiat are its limitations and the burden its debt-based system currently places on the average person.

In the face of trust issues with fiat, one can understand being hungry for an alternative foundation to an economy other than the government. It is in part due to this distrust and other objections to fiat that cryptocurrency arose.

A Brief Explanation of Cryptocurrency: For those who may be unaware, a cryptocurrency is three things: a digital token, a mechanism for creating that token, and a database (also called a ledger or a blockchain) that tracks who owns what token. One of the unique features of this system, that serves as the foundation to what differentiates it from fiat, is that cryptocurrencies are not run by any individual institution. Instead, the database is copied across and maintained by millions of people. 

Why would people spend their time and money maintaining a database for a digital token? Because the act of maintaining the database gives you the opportunity to create that digital token for yourself. That is because the act of maintaining the database and the act of creating (also called mining) the token is one and the same, the result of running the same software program. When a new token is created, the most recent list of transactions is saved to the database.

It’s worth noting that the process of creating a token is a race. Every person mining a cryptocurrency is racing to run their code faster than anyone else and only the winner earns a token. The result is that a miner typically needs to both use specialized hardware as well as partner with other miners in order to successfully win the race and earn a new token.

If you simply want to use a cryptocurrency, you aren’t required to be one of these miners. Instead you simply need to find somebody willing to sell you Bitcoin, agree to the sale, and then log that exchange onto the database by sending the record of the account transfer to the miners. The miners then save the record once the latest token is mined.

What’s the appeal of a cryptocurrency from a trust perspective? 

The ledger is fully public, so anybody can check the ledger and verify every single transaction that has ever occurred 

The ledger is decentralized, so there’s no need to trust a single institution

The ledger has defined rules that require a majority consensus to update, so it’s arguably a democratic system

These features can be used to argue for cryptocurrency as an alternative to fiat currency. But in trading one solution for another, would we actually be moving towards a definitively better solution? Or would we instead be exchanging one set of problems for another? To dig into this question, we’ll focus on Bitcoin, the most popular of the cryptocurrencies, and compare it with fiat currency in three separate questions.

Any financial system requires some rules for the currency, like how it gets manufactured. As such, a core component of trusting any financial system lies in trusting the rulemakers - trust that the establishment of and adjustments to the rules benefits the users of the currency. Without trust in the rulemakers, present trust in a currency can be eroded by any future changes to the currency.

With Bitcoin, the rules are set by whoever builds Bitcoin’s software. The mechanism for creating new Bitcoin and the mechanism for maintaining the database are both defined in the Bitcoin code. This means the people who set Bitcoin’s rules are its developers, of which there are roughly 50 in any given month and there have been around 780 in total.

These proposed rules must then be accepted by a majority of miners, the people who maintain the Bitcoin database. These roughly one million miners of Bitcoin are the ones who effectively vote through any new rule to how Bitcoin operates.

The number of people who actually own Bitcoin and trade it is much higher. By one measure, there are tens of millions of Bitcoin traders, which means less than 10% of Bitcoin users vote on its use.

Furthermore, many of these Bitcoin traders can not become voters without losing money. To be able to vote you need to mine Bitcoin, and to do that one needs thousands of dollars to buy the latest Bitcoin mining hardware. From there, turning a profit with this upfront investment requires cheap access to electricity lest you bleed money in the monthly electricity costs. Also, by design, every new person who starts mining Bitcoin makes Bitcoin more difficult and therefore more expensive to mine.

As we are right now, Bitcoin miners use the same amount of power yearly as Chile and create the same yearly carbon footprint as Switzerland. So increasing the number of voters in the Bitcoin blockchain would not only be financially infeasible for many people but would also be environmentally expensive.

With a government-based financial system, the rules are unsurprisingly dictated by the government. In the US, this specifically comprises a mix of elected and appointed officials. Presidents and Congressmen are elected by the voting populace, but key roles like Federal Reserve seats and the Secretary of the Treasury are appointed by the President and approved by Congress.

For reference, in the 2020 US general elections, 62% of the voting age population voted. 93% of the voting age population is eligible to vote, so we haven’t reached full levels of representation, although we have a majority of the US represented in our elections.

No financial system to this point has proven itself to produce the perfect currency. Therefore, the potential for change must be baked into any system to account for potential improvements. Sometimes the change may be as simple as defining how much money banks can lend sometimes the change may be as significant as replacing one currency for another. Because of this requirement for adaptability, trust that a currency can continue to function in the face of adaptation becomes crucial.

As mentioned before, whenever the rules of a cryptocurrency get updated, every miner has to decide whether or not to adopt those new rules. In practice, miners almost always choose to adopt, in part because if you fail to adopt the latest code, the latest rules, you effectively lose access to the ability to mine Bitcoin.

But if enough people, let's say 50% of miners, refuse a change while the other 50% adopt it, we now have what is known as a hard fork. What this means is that, at one point in history, both halves agreed on the rules as well as the history of all transactions, but since the fork, the two halves have been in complete disagreement.

With this split the entire database cloned, which means every Bitcoin user account is cloned. The cloning of every account results in twice as much Bitcoin, since the cloning of accounts means the cloning of account balances. Twice as much Bitcoin means every Bitcoin is worth half of its pre-split value on any exchange, assuming both copies can be traded on an exchange. This example is by no means hypothetical; BitcoinCash, BitcoinSV, and BitcoinGold are all hard forks off of the original Bitcoin.

It’s worth noting that if a fork ever dies, if miners ever stop maintaining the variant cryptocurrency, any money invested in that cryptocurrency dies with it. Why? Without miners, transactions can’t happen. When people buy your Bitcoin for USD, they are transferring Bitcoin from your account to their account and paying you USD for the transaction. But without the ability for transactions to be logged on the Bitcoin database, this exchange cannot happen and your money lies dead in your account.

Completely replacing a country’s currency is not a common event but, given the significant scope of such a change, it is worth focusing on it as an example of how governments handle such an event as well as the effects on the consumer.

When the Euro was created, countries in the EU didn’t start using the new currency overnight. How could they, with the different countries’ citizens all holding and using different currencies? Instead, a time limit was set to stop using separate currencies and switch to the Euro, with central banks providing the means of exchange.

This transition wasn’t flawless. Many companies took advantage of the transition by pushing up prices far beyond normal, to the point where many Germans referred to the Euro as the “Teuro” in reference to the German word “teuer” which translates to “expensive''.

Furthermore, in the experiments leading up to the Euro, the UK in 1992 famously failed to maintain their exchange rate with other European countries, leading to the UK government losing billions of pounds almost overnight.

At the same time, because the exchange is backed by the government, civilian protections exist in some countries to make sure that change isn’t crippling. In Germany, for example, the Deutschmark can still be exchanged for Euros at a fixed rate, despite being out of circulation for almost 20 years. That being said, countries like Belgium and France offer no such indefinite exchanges and you can no longer exchange their old currencies for Euros.

A core part of consumer trust is a sense of security - security of the secondary institutions that manage the storage and usage of currencies. With fiat currency, most people don’t hold all of their money in raw cash, but rather store their money in bank accounts. Similarly, with Bitcoin, a large number of  users don’t maintain their own Bitcoin Wallets, but rather hold their Bitcoin in some third party account. Trusting the currency requires trusting that one’s currency is safe in these institutions.

Coinbase, one of the most popular crypto platforms, has insurance for 2% of its customers’ cryptocurrencies that it uses to buy and sell on behalf of customers. So if Coinbase were hacked, that 2% would be paid back. Everything else is lost. And if your personal account ever were to get hacked, you lose 100%.

Is there any reason that Coinbase couldn’t have insurance for personal accounts or more than 2% of its assets? In theory, no. But given the risk of cryptocurrencies becoming worthless as well as lack of ability for the insurers to create more of the currency (as is the case with fiat), you can imagine that insurance premiums could be prohibitively expensive.

Also, we mentioned before that if a fork of Bitcoin stops getting maintained, any money invested in that fork vanishes. That’s also true for any of the more than 2000 different cryptocurrencies currently in existence. For reference, there are comparatively 180 currencies in the world that aren’t cryptocurrencies, so it wouldn’t be unreasonable to assume that many of the cryptocurrencies that have been created may end up dead.

A government, being the printer of fiat currency as well as the one setting its rules, is able to provide consumer protections that only such an institution uniquely can.

Protections like FDIC insurance, wherein money held in US bank accounts, are insured by the government up to a limit of $250,000. This insurance is funded by fees paid by the banks, but backed by the ability of the FDIC to borrow from the US Treasury and the Federal Financing Bank.

Similarly, if you hold stocks or bonds at a brokerage protected by the SIPC, up to $500,000 of your assets are insured in the case of a brokerage going bankrupt. Similar to the FDIC, the SIPC is funded by brokerage fees and can also borrow from the US Treasury.

Government protection isn’t just limited to storage of money and assets, though. With the Fair Credit Billing Act, if somebody steals your credit card and makes an unauthorized charge, the most you can be forced to pay is $50 as long as you dispute the charge. In this way the law set by the government protects not just how consumers store money, but also how they use their money.

Needless to say, both cryptocurrencies and fiat currencies struggle with consumer trust issues. Neither come out spotless beneath a blacklight, and replacing one with another is by no means a clear-cut decision. However, there’s no need these two systems need to be at odds.

If implemented strategically, the places where one system struggles with trust could be covered, at least in part, by the other system. Fiat could gain the transparency of cryptocurrency, while cryptocurrency could gain the protections of fiat. Even outside of the issue of trust, serial entrepreneur Balaji Srinivasan provides a detailed argument of 10 reasons why India should adopt this type of hybrid system.

Trust is crucial to the viability of any currency. Separately, both cryptocurrency and fiat have noted flaws regarding trust, but the two combined may be able to achieve a more optimal financial system.

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Meme cryptocurrency dogecoin (DOGE) has soared in January 2021, demonstrating the power of investor sentiment in financial markets.

2021 has been a year full of surprises for the world of finance. Between GameStop soaring 1,400% in January and bitcoin (BTC) reaching new all-time highs, dogecoin is now seeing increased participation from retail investors.

Over the past month or so, the cryptocurrency has witnessed stellar price growth outperforming nearly every other asset in the market.

At the end of December 2020, dogecoin was trading for a mere $0.004. Only a month later, each token is trading for around $0.08. That represents a nearly 2,000% appreciation, which is pretty much unheard of even in volatile crypto markets.

Dogecoin’s buying pressure has become too big to ignore, with daily trading volumes routinely peaking above $10 billion as well.

So how did dogecoin go from being a meme currency to dominating the news cycle alongside bitcoin and ethereum (ETH)? Will this particular cryptocurrency continue to see skyrocketing valuations throughout 2021?

Launched in 2013, dogecoin got its name from the then-popular “doge” meme involving images of a Shiba Inu. This is also why the official mascot and logo of the digital currency prominently feature the Japanese dog.

The biggest criticism of dogecoin has always been that it follows an inflationary policy. Traditional cryptocurrencies such as bitcoin have a fixed supply preventing inflation commonly seen in fiat currencies. For context, the supply of dogecoin is infinite, while there will only ever be 21 million BTC in total.

Dogecoin already has approximately 128 billion coins in circulation, with more expected to flow in over time. This is also why the cryptocurrency’s market capitalization is in the billions despite its low, sub-$1 price point.

Dogecoin’s recent price movements aside, its community has gone a long way towards making the token usable as a currency.

Back when bitcoin was released in 2009, crypto enthusiasts envisioned a future where money would be decentralized. By decoupling wealth from the state apparatus, Satoshi Nakamoto hoped to steer the world away from yet another economic crisis.

Over a decade later, and bitcoin has strayed away from its founding goal of serving as a peer-to-peer (P2P) transfer of value. These days, the asset is mostly regarded as an excellent store of value. The institutions that bitcoin sought to overthrow are now investing in it — as a hedge against fiat currencies such as the United States dollar.

Dogecoin, on the other hand, is still an asset that can be used to complete user and merchant transactions. Even better, dogecoin can do that for cheap, while cryptocurrencies such as BTC and ETH now have exorbitant fees.

In other words, DOGE has gone from being a satirical take on finance to an actual, usable cryptocurrency.

According to Cryptwerk, over a thousand merchants already accept payments in dogecoin for various goods and services. In contrast, around 6,000 merchants are known to accept payments in bitcoin. Still, dogecoin’s rise from a meme currency to one of utility is proof that anything is possible with a coordinated community.

Most of dogecoin’s recent success comes at the behest of individual investors. This is unlike more mainstream cryptocurrencies, which have attracted significant investments from Wall Street traders and institutions. Bitcoin and ethereum, for instance, have seen inflows worth billions of dollars from entities such as Grayscale and Galaxy Digital.

Indeed, retail investors banding together is a phenomenon that appears to be increasingly commonplace. In January 2021, share prices of video game retailer GameStop surged by 400% amidst calls for a short squeeze.

The GameStop situation was a unique scenario wherein large hedge funds had shorted the stock to oblivion. By betting against the company, these funds expected to make money as share prices fell.

Once Reddit’s r/WallStreetBets (WSB) community got wind of the situation, its users began aggressively buying up all available shares. This pushed GameStop’s stock price upwards, forcing hedge funds and traditional finance firms to swallow an unprecedented loss.

The WSB community caught the attention (and ire) of almost every entity operating on Wall Street. Mainstream media was rife with stories about how a bunch of Reddit investors were beating billionaires at their own game. Slowly but steadily, the community’s sentiment managed to propel GameStop’s stock to an all-time high price of $483.

Over the course of a single month, r/WallStreetBets gained six million readers, totaling a staggering eight million.

Even though dogecoin does not carry significant short interest capital, many retail investors are hoping for a similar success story as GameStop. Armed with nothing more than positive sentiment, the dogecoin community claims it is ready to shed the “meme coin” moniker.

r/SatoshiStreetBets, a subreddit pitched as the crypto equivalent of r/WallStreetBets, has amassed over 300,000 subscribers. Throughout January 2021, the vast majority of discussions within that community involved dogecoin in one way or another. For proof of their conviction and loyalty to dogecoin, look no further than some of the most popular content on the subreddit.

One user loudly proclaimed:

“It [Doge] will become the currency of the internet.”

The post continued:

“You need to understand that DOGE coin is not a joke anymore, and it has a great future and is currently backed by the biggest influencers. If bitcoin becomes an alternative for gold as a way to store money, DOGE could become the internet currency by excellence!”

The post went on to garner over 1,300 upvotes, at the time of writing.

While WallStreetBets exploded in popularity only recently, dogecoin has been steadily gaining momentum for several months, if not years. With DOGE, users have an established platform that can be used for good and create an economy free of central banks and hedge funds. Even though WSB has attracted millions, the community does not have the tools necessary to create a decentralized economy.

Creating a cryptocurrency is no tall ordeal — after all, there are now over 8,000 of them on the market. Maintaining one and generating enough hype to be a top ten digital currency by market cap, on the other hand, is a feat only dogecoin has achieved. Starting from scratch is not an option for WSB, which is perhaps why many have chosen DOGE as their preferred asset.

Whether or not dogecoin enables wider crypto adoption, it has already succeeded in bringing public attention to the cryptocurrency market. In fact, the community has managed to hold its own for several years now.

In 2014, for instance, a Reddit user successfully managed to convince the dogecoin community to sponsor a NASCAR race car. Through a Reddit-wide fundraiser amounting to over $50,000, racer #98 at Talladega in Alabama was eventually sponsored by Dogecoin. Over 65 million dogecoins were donated within the first week of the fundraiser — equivalent to around $4.2 million, at the time of writing.

Another time, the dogecoin community organized a fundraiser aimed at providing service dogs to special needs children. This Doge4Kids campaign reached its 20 million DOGE goal by September 2015.

In yet another instance of community service, the Dogecoin Foundation raised $50,000 to build two wells in Kenya. The African country was suffering from a severe drought and multi-year water crisis, at the time.

Thanks to its highly approachable premise and philanthropic efforts, dogecoin has grown in popularity as a people’s cryptocurrency. Indeed, the cryptocurrency community has always pushed for democratization of wealth. What remains to be seen, however, is if dogecoin can fulfill the condition of sound money.

So far this year, dogecoin has experienced far greater volatility than any other cryptocurrency. Even then, most long-term DOGE holders are looking at a net gain as long as their entry point was in 2020 or prior.

An important factor to consider is the fact that dogecoin’s recent price action was not motivated by a singular Reddit group alone. Elon Musk, of Tesla and SpaceX fame, has taken a newfound interest in dogecoin.

Musk’s barrage of dogecoin-related tweets began in late 2020. On Dec. 20, 2020, he simply tweeted, “One word: Doge.” These three words were enough to spark a 40% price bump for the cryptocurrency.

In a later statement on Jan. 31, Musk acknowledged that some of his past dogecoin comments were made in jest. Nevertheless, he continued:

“The most entertaining outcome and the most ironic outcome would be that dogecoin becomes the currency of Earth in the future.”

By Feb. 6, 2021, Musk was back at it. He encouraged his Twitter followers to vote for “The future currency of Earth.” The only two options were “Dogecoin to the Moooonn” and “All other crypto combined.”

Musk is not the only high profile billionaire that has spoken favorably about dogecoin of late. Mark Cuban, famed tech entrepreneur, said that he would pick dogecoin over a lottery ticket.

Then, on Feb. 7, rap artist Snoop Dogg tweeted out an image of dogecoin’s mascot with the caption “Snoop Doge.” The rapper also tagged Musk, reaching millions of Twitter users between the two accounts. This event was enough stimulus to pump dogecoin to a new all-time high of $0.0872.

Snoop Dogg’s tweet was also enough to propel dogecoin to the list of the top ten cryptocurrencies by market capitalization. With a valuation of over $10 billion, the token briefly became more valuable than litecoin (LTC) and bitcoin cash (BCH).

CoinMarketCap, a cryptocurrency price aggregation platform, also joined in on the dogecoin humor. The website now prominently features dogecoin’s price and recent movements at the top instead of a more typical market-wide summary.

Then, Tesla revealed that it had been silently scooping up bitcoin throughout January 2021. With a portfolio amounting to a whooping $1.5 billion, Tesla’s stake in the world’s largest cryptocurrency sparked a new rally for the entire market. Bitcoin’s price rose by 22% over 12 hours, peaking at $47,500 — a new all-time high.

Unfortunately for dogecoin investors though, Tesla did not purchase any cryptocurrency other than bitcoin. Nevertheless, news of the company embracing the asset class sent dogecoin prices soaring as well — allowing it to breach the $0.085 price point again. A few hours later, Musk was back on Twitter — this time, to post an “instructional video” on dogecoin.

On Feb. 10, however, Musk confirmed his DOGE purchase, though how much he has bought remains unclear.

With support for dogecoin pouring in from all facets of the world, it appears to be only a matter of time before the community realizes its target of $0.1 per DOGE. Still, for many within the dogecoin community, this will not be a victory. To them, the cryptocurrency is worth much more than its price alone.

On Feb. 8, dogecoin creator Billy Markus, published an open letter on Reddit denouncing the recent mania surrounding the coin. He stated:

“People are talking about dogecoin going to $1 — that would make the ‘market cap’ larger than actual companies that provide services to millions, such as Boeing, Starbucks, American Express, IBM. Does dogecoin deserve that? That is not something I can comprehend, let alone answer,”.

Two years after creating dogecoin, Markus quit working on the project in 2015. He claims to have liquidated his entire dogecoin holdings at the time, which was only enough to “buy a used Honda Civic.”

Markus somberly concluded:

“Joy, kindness, learning, giving, empathy, fun, community, inspiration, creativity, generosity, silliness, absurdity. These types of things are what makes dogecoin worthwhile to me. If the community embodies these things, that’s True Value,”

Rahul Nambiampurath is an India-based Digital Marketer who got attracted to Bitcoin and the blockchain in 2014. Ever since, he's been an active member of the community. He has a Masters degree in Finance. <a href="mailto:editorinchief@beincrypto.com">Email me!</a>

The U.S. dollar supply has been marching northward ever since the epidemic began. The Federal Reserve is committed to continue bond purchases, and short-term borrowing rates remained anchored near zero in January. Markets believe that as long as the Fed maintains its current stance, it is safe to continue investing. As a result, global asset prices have benefitted from the generous money supply. 

With vaccinations on the rise, the U.S. economy is likely to end up with a V-shaped recovery. A precursor to such a recovery was the U.S. Dollar Index posting a counter-trend rally in January, up 0.7%. While the dollar rally had pressured risky assets in January, a subsequent stimulus package by the Biden administration is likely to limit the dollar's upside.

Meanwhile, the treasury yield has grown to 1.10%, levels not seen since the crash last March. The steepening curve is a signal that investors expect higher inflation in the coming years. This inflation expectation and the overly abundant capital in the market has set a great stage for Bitcoin. 

Moreover, the Wall Street Bets movement brought general instability to the market at the end of January, with stocks falling and the Volatility Index pumping 60% on Jan. 27. Gamestop and AMC pulled back by the end of January, though, and it seems that the WSB saga is coming to an end.

Historically, Bitcoin performs better during periods of declining market volatility. However, the popularity of the anti-establishment narrative on social media is driving more attention to Bitcoin and decentralized finance.

From a yield perspective, Bitcoin outperformed global assets in January with a monthly return of 14.2%, as per the OKEx BTC spot price. The TWI crude oil spot price jumped 7.5% amid the economic recovery, ranking second. Gold spot suffered a sell-off due to increased market risk appetite, falling 2.7% on the month.

The stock market saw a divergent performance in January, with the S&P 500 Index ending 1% lower due to blue chips falling amid the WSB saga while emerging market equities posted positive returns. Strong returns from Greater China contributed to the outstanding 4.1% monthly return of the MSCI Asia ex-Japan Index, meanwhile, the MSCI Emerging Markets Index rose 3.1%. 

Institutional interest in Bitcoin continues to grow as the digital currency sets new records. MicroStrategy once again made a major investment into the foremost cryptocurrency and brought the firm's total BTC investment up to more than 70,000 coins. Crypto miner Marathon Patent Group bought $150 million in Bitcoin during the price dip in the middle of January and there is an evident trend of companies building Bitcoin treasuries. 

Even Ray Dalio, the founder of Bridgewater Associates, changed his attitude toward cryptocurrency and said Bitcoin is "one hell of an invention." He's also considering cryptocurrencies as investments to protect clients against fiat currency debasement. 

It is also worth noting that Bitcoin's 90-day correlation with the S&P 500 Index rebounded in January, rising from 0.1 levels to as high as 0.21. On multiple trading days, Bitcoin saw synchronized moves with the stock market around the U.S. stock market open time. 

Bitcoin's correlation with gold, on the other hand, decreased from 0.07 to -0.07. This suggests that, at this stage, Bitcoin is seen more as an alternative risk asset than a safe-haven asset.

In the first half of January, as Bitcoin's price jumped from $30,000 to over $40,000, the market sentiment became overheated. The premium on quarterly futures climbed from 3% to 6%, and eight-hour funding rates on perpetual swaps repeatedly spiked to as high as 0.15% on OKEx. 

Bitcoin experienced two major retracements within the first half of January. The 21% retracement on Jan. 3 was quickly picked up by frenzied buying power, and the price continued its upward move, setting a new all-time high near $42,000. The second retracement around Jan. 11 was in tandem with the decline in other risk assets due to rising yields in treasury notes and the dollar index. This drop saw Bitcoin losing 28% of its value across three days, and market participants were wondering if a bear market had arrived. 

The second retracement also contributed to the overall subdued market sentiment in the second half of January. Quarterly futures premium fell back below 2%; meanwhile, both the long/short ratio and open interest dropped quickly. 

Just as the market was turning pessimistic, Elon Musk updated his Twitter bio with the word #Bitcoin on Jan. 29. The leading cryptocurrency immediately pulled up 20% in response. This also served as the last highlight in January before Bitcoin gave back most of the "Elon rally" gains. 

A market filled with new highs and sharp retracements allowed the trading volume to reach record levels in January. OKEx generated $717 billion in total volume, with futures accounting for 55% of it. Additionally, the most traded instrument on OKEx, the coin-margined BTC quarterly future, set the highest single-day volume in history, at $7.2 billion on Jan. 11. Other instruments also saw volume spikes on the same day. Moreover, BTC open interest on OKEx set a new all-time high of $2.42 billion on Jan. 19 before sharply falling back to below $2 billion levels, as bulls began closing their positions for profit-taking. 

The altcoin-season index provided by Blockchain Center surged from 14 to 57. This shows that by the end of January, 57% of the top 50 cryptocurrencies performed better than Bitcoin compared to the last 90 days.

An important phenomenon in January was an outburst of anti-establishment sentiment — led by Wall Street Bets — that shook the cryptocurrency market. Dogecoin (DOGE) jumped more than 1,000% in just over a day after the WSB crowd supposedly pumped the meme coin. The coin continued trending as Elon Musk also mentioned it a couple of times on Twitter, and that took it to the top spot among the nine most traded cryptocurrencies by OKEx spot volume.

XRP and Stellar's Lumen (XLM) were also favored by the Redditors. The WSB-led pump enabled XRP to reap a 122% gain in January. Before this, XRP was facing high selling pressure due to a lawsuit filed against it by the U.S. SEC. Meanwhile, XLM surged 148%. 

Polkadot (DOT) saw a rapid price jump in the second half of January due to the upcoming slots auctions. These events clearly boosted demand for DOT in the short term, and it ended the month with a 93% return. 

Given the impact of external factors, DOGE price detached from Bitcoin in January, with a correlation factor of less than 0.25. Similarly, XRP and XLM did not have a correlation of more than 0.5 with any other cryptocurrencies listed above. 

Three years after the ICO boom, Ether once again hit a new all-time high above $1,400 in January, realizing a 78% monthly return. Ether's volatility has historically been higher than Bitcoin's, and this did not change in January. Both market leaders saw volatility rise to mid-April highs. However, in January, Ether retraced much less than Bitcoin, and its rally was more sustainable. This was reflected in the fact that ETH's 30-day return on investment did not drop too much by the end of the month. 

As of Jan. 31, the total value locked in the Ethereum network reached $28 billion, up 80% compared to the previous month, as per data by DeFi Pulse. As the DeFi market continues to boom, the demand for Ether increases in tandem. 

The key metric for measuring the use of cryptocurrencies are total transaction fees, which reflect real demand from paying users. While Bitcoin's total transaction fees (30-day rolling average) were five times higher than Ether's in January 2018, this situation was completely reversed in January this year, with Ether's total transaction fees of $10.7 million being three times higher than Bitcoin's.

The only concern, however, is that Ether's active address count did not rise as fast as Bitcoin's in January, which may be a result of high gas fees deterring retail investors with small funds.

Many leading DeFi tokens hit their highest prices during January, as the market repriced them with higher valuations based on solid fundamentals. Another reason behind this rally was that the U.S. Office of the Comptroller of the Currency published an article discussing "self-driving banks" built on DeFi protocols. 

According to Dune Analytics, Uniswap topped the decentralized exchanges with a monthly trading volume of $25.9 billion, followed by SushiSwap at $12.2 billion. Curve ranked third with a volume of $6.3 billion. 

The growth curve of total DeFi users continued to be steep, growing from 1.18 million to 1.32 million over the month. Permissionless and trustless DeFi protocols may see accelerated adoption since platforms like Robinhood repeatedly stopped normal trading activities in January. In fact, a paradigm shift in the financial industry may already be underway.

Data shows that February has historically been a strong month for Bitcoin, with the second-highest median of 21% and an average of 17% monthly returns. News of Tesla's purchase of $1.5 billion worth of Bitcoin had set the market on fire in early February, and the price had entered uncharted territory. Traders, however, need to keep an eye on whether profit-taking could cause a decline, as it did at the end of January. That being said, the long-term positive sentiments around Bitcoin are likely to remain intact. 

A couple of rapid pullbacks in January caused weak hands to dump their coins, while investors who are long-term bullish continued to buy. This is reflected by the growing number of addresses with balances over 1,000 BTC, despite the retracements. According to Glassnode's data, 201 new whales have appeared on the chart over the month, a sign that institutions and big firms may be starting to accumulate coins. The purchase made by Tesla could have a signaling effect, and its rumored cost of around $33,000 per coin will likely create a price floor. 

Miners were dumping their holdings in January. The Miners' Position Index (MPI) started off around 1.256, and it spiked to a historical high of 12.666 on Jan. 17. By the end of January, this index was back to 2.79. Since miners have unlocked such a big amount of coins in January, the supply could be drained in the short term. 

In addition, institutional exposure has opened up with the launch of ETH futures on CME in early February. A recent report from CoinShares shows that capital inflows to ETH have been highly concentrated over the past weeks. Notably, the Federal Reserve Bank of St. Louis published a DeFi research report, exploring smart contract-based financial markets. All of these lead us to believe that the market sentiment is optimistic about ETH. 

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With Bitcoin trading around $40,000 many readers are asking, “Am I in time to invest in Bitcoin, is it worth investing with Bitcoin at this price?” .

The quick answer to this question is: Yes, you are on time. We don’t think you’ll be late to the party. 

According to analysts at JP Morgan the price of Bitcoin will soar in the medium term to reach an  estimated $146. 0001 , while the same investment firm believes it will reach $650,000 by the end of 20222 . 

If we look at the mathematical models that aim to — and succeed in — forecasting the price of Bitcoin , the Stock to Flow (S2F, hereafter) model stands out. Said mathematical model was created by a Dutch institutional investor, whose identity has not transcended, with a background in the field of quantitative finance3. So far the S2F model has managed to forecast with astonishing accuracy all Bitcoin movements, and claims that its price will reach $288,0004 in the current growth cycle (Reaching $1 million in 2024). In a few paragraphs we will tell you all the ins and outs of this surprising predictive mathematical model, which so far has been accurate as clockwork. 

In short and by way of summary: If you have not yet invested in Bitcoin you have in front of you the opportunity to achieve potential returns of between 265% and 1,525% in the medium term, according to the estimates of financial analysts and mathematical models mentioned.

Throughout this article we will explain everything you need to know to discover the real impact that Bitcoin has on the economy by proposing a paradigm shift, as well as everything you need to become an educated investor, able to take advantage of an opportunity that, perhaps, will never be presented to us again in our lives.

By now you probably have a fairly formed idea about what Bitcoin is and what its function is. By way of summary, Bitcoin was created by a mathematician (or group of experts in mathematics and cryptography) self-named Satoshi Nakamoto. Although the actual identity of this person or group of people is unknown, it is believed that Bitcoin was created to:

As we see what Bitcoin proposes is a paradigm shift: until now we have relied on governments and central banks to manage, support and manipulate the global monetary system; Bitcoin dispossesses these actors of such power. 

What gives Bitcoin its value?

To answer this question we first have to ask ourselves what gives value to the dollar. Until not so long ago the coins and bills that were in circulation were notes of exchange that could be exchanged for spot gold. Dollar bills included, in small print, “Ten Dollars: In gold coin payable to the bearer of this bill.” 

In effect, in those days we could show up at the US Federal Reserve and ask to have our bill exchanged for its gold equivalent. All banknotes in circulation were backed by gold, held by the central bank of each country. 

However, some time later governments began to spend the gold they stored in their central banks. They realized that they could spend that gold and in parallel print more banknotes (not backed by gold) to generate unlimited wealth. Apparently nothing happened and the citizens did not complain. 

At that moment the world monetary system left aside the “gold standard”, and we went on to have a currency backed, solely and exclusively, by government imposition, with no real intrinsic value.  

This monetary system, called fiat or fiduciary, only has value because governments have forced it to be so by decree. 

And, of course, because we citizens have decided to obey. 

It only has value because we all obey and believe it should have value. Its value is based, solely and exclusively, on popular belief. 

However, the traditional or fiat monetary system has a terrible problem: It gives absolute power to central banks to print banknotes in an uncontrolled manner. 

When banknotes are printed uncontrollably, inflation is created. Printing banknotes does not mean creating wealth, quite the opposite: printing banknotes means stealing wealth from citizens, diluting existing wealth. 

Let’s look at it with an example: Let’s say that there are currently 1 billion euros in circulation in Spain, and that a loaf of bread costs 1€. To get out of the coronavirus crisis, the European Central Bank decides to put an additional 1 billion euros into circulation, doubling the amount of money in circulation. Is Spain now twice as rich? Not at all, the wealth of the country will remain the same, only the value of money has been diluted: The loaf of bread that used to cost €1 will now be worth twice as much. The citizen who had €1,000 saved in the bank has just seen the value of his money decrease by half. The State has just robbed him of half of his savings. 

Money printing dilutes the value of money in circulation. Money printing is nothing more than a strategy of central banks to steal wealth from the citizen, to impoverish him even more. One need only look at the cases of Venezuela and Argentina. 

At this point, any reader will understand the inevitable need for an alternative monetary system, which is not under the clutches of states and governments, which is not manipulable and which does not leave citizens disempowered.

As a counterpoint to the monetary scenario we have presented, Bitcoin appeared. However, it is quite possible that before investing in Bitcoin you are still asking yourself: but what really gives Bitcoin value ?

In recent years the mainstream media have repeated ad nauseam that Bitcoin was nothing more than a bubble, equating it, without any basis whatsoever, to the tulip bubble and other great bubbles in history. 

In fact, according to Bitcoin Obituaries5, the media have “killed” Bitcoin a total of 397 times, sentencing that it was pure speculation, a bubble, a fad… Articles and opinions that have certainly not aged well at all and that were written by someone who had no idea what he was dealing with.

What many today have not come to understand is that Bitcoin, like many other markets and financial assets, has a cyclical behavior. Its natural and healthy growth consists of sharp rises followed by not-so-sharp falls.

Most financial assets have a cyclical behavior, including large technology companies, gold or silver, or even commodities such as coffee.

The natural growth cycle of Bitcoin has its own peculiarities and idiosyncrasies, but fortunately our has already been studied enough today and we can draw on it to find out if right now is a good time to invest in Bitcoin.

As of the writing of this article, Bitcoin has gone through three complete growth cycles, and we are on the verge of the fourth. In each cycle the Bitcoin price grows exponentially. In fact to represent such cycles of Bitcoin a logarithmic scale is required, because with a linear standard one they cannot be properly appreciated. 

In the following graph you can see the Bitcoin growth cycles, which consist of months of strong rise in the price followed by slight declines (called corrections):

Something of great interest that we draw from analyzing the Bitcoin growth cycles with perspective is that the current moment we are in (marked with the red marker in the image above) is an exceptionally good time to invest in Bitcoin. 

At this point, and before investing in Bitcoin, you will probably want to dig further into the predictive models that project the Bitcoin price to the levels we discussed a few paragraphs above. 

As we mentioned in the introduction, the best known and most respected model for the accuracy it has demonstrated is the Stock to Flow (S2F, hereafter). It is an adaptation of pre-existing models used to predict the price of commodities such as gold, silver or palladium, all of them–including Bitcoin–with a peculiarity in common: they have a limited amount of supply. 

As you may recall, the maximum number of Bitcoins that can be mined is 21 million, and currently 18.5 million of that total have already been “released”. Clearly, if demand continues to increase as it has so far, supply will not be enough to meet it. By law of supply and demand the only solution to that equation is for the price to grow to the levels posited by the S2F6 model. 

The S2F model is far more complex than what we have described here7, as it takes into account other intrinsic variables in Bitcoin, such as the halvings, the Bitcoins that have been lost, the cryptocurrencies that are available in circulation, the Bitcoin phase changes and clusters… However, it is too complex a mathematical model to deal with in detail in this article. 

Since the anonymous institutional investor known as PlanB published this mathematical model a couple of years ago the price of Bitcoin has continued to grow following the proposed pattern with astonishing accuracy. In fact, due to the accuracy of this model, S2F is considered to be the most accurate predictive model we have for predicting the price of Bitcoin.  The most relevant aspect of this model is that it considers that in the fifth Bitcoin growth cycle it will reach an estimated price of $288,000, while in the medium term (in 2026, approximately) it could surpass $1,000,000. 

The S2F model might not have much relevance in isolation were it not for the fact that analysts from large investment funds agree, in whole or in part, in their predictions for the price of Bitcoin. 

The renowned investment bank JP Morgan published this past January its estimates on the price of Bitcoin, placing it in the medium term above $146,000, “because Bitcoin already competes with gold”8. 

The same financial analysts at the American firm were saying a few days later that, as soon as Bitcoin manages to breach the $40,000 barrier, “it is very unlikely to go back below those levels”9. 

In the same vein in late 2020 an internal document from Wall Street giant Citibank was leaked, in which its analysts estimated that Bitcoin could reach $300,000 by the end of 202110, and called the dominant cryptocurrency “the gold of the 21st century”. 

Chamath Palihapitiya, the well-known billionaire investor, has no hesitation in placing the Bitcoin price at $200,000 in the medium term. “How long will it take? I don’t know, maybe 5 or 10 years, but it will get to that price,” he explains11.

Max Keiser, a financial analyst and Wall Street veteran who has managed to predict the price of Bitcoin with great accuracy, estimates that Bitcoin will reach $220,000 later this year: “With the hashrate reaching new highs, the 2021 target is $220,000.”12. 

In these paragraphs we have synthesized some of the most popular and relevant forecasts for anyone who wants to invest in Bitcoin. However, we could go on listing many more. The important thing in this regard is to understand that in the financial world there is consensus on one aspect: Bitcoin will continue to grow by leaps and bounds and exponentially; this has only just begun.  

A few years ago there was much talk that when institutions (large banks, corporations, businesses and government entities) adopt Bitcoin there will be a point of no return in their growth. 

That distant horizon is today. 

While we were writing this article the news that Tesla had bought $1.5 billion in Bitcoin and that Elon Musk’s company was going to allow its customers to pay with this dominant cryptocurrency13 was made public. This news has propelled the price of Bitcoin to $48,000, a tipping point that will most likely mean we will never see Bitcoin below $40,000 again.

What does it mean that Elon Musk, the richest man in the world, has decided to put a part of Tesla’s treasury in Bitcoin? That many more companies are going to follow this path. 

Tesla has not been the first, other companies such as Microstrategy, Square or Paypal have been buying Bitcoins massively for months and trying not to make much noise. 

Big investment funds and institutional investors such as Grayscale, Morgan Stanley, ARK Investments or Rothschild Investment own Bitcoin, directly or indirectly. As reported by Bloomberg a year ago, almost 40% of US and European banking institutions already own Bitcoin or derivative products14. (Today it is very likely that this percentage has already surpassed 50%). In the US even retirement funds are starting to invest in Bitcoin15. 

All the Bitcoin buyers we’ve listed (and many others we haven’t mentioned) have been buying Bitcoin in excess of the available supply for months. There is no Bitcoin for everyone, and the market’s way of regulating supply shortage and excess demand is to continuously and steadily increase prices.  

The massive irruption of institutional investors brings innumerable benefits to the Bitcoin ecosystem. First of all, it acts by stabilizing the system, taking away volatility (sudden changes in price), while fostering continuous growth in the price of the dominant cryptocurrency. 

In short, the institutional breakthrough in Bitcoin has caused the market to mature by leaps and bounds. Gone are those days when Bitcoin could drop 40% in hours due to the weakness of a market primarily made up of retail investors. Institutional investors are “strong hands”, buy to hold and are not driven by cycles or one-off news. 

Institutional irruption is synonymous with stability, growth and maturity. 

At this point of the article you are probably already aware that we are living a paradigm shift, a historical moment. We have no doubt that in the not too distant future society will be divided between those who own Bitcoin and those who do not have such a privilege. 

By way of summary, we would like to summarize the advantages that investing in Bitcoin can offer us in the middle of 2021:

According to the mathematical models and forecasts we have seen in this article the price of Bitcoin will in the short term be above six figures, while in the medium term we can expect it to exceed a quarter of a million dollars. 

We are talking about potential medium-term returns located between 150% and 500%. What other asset or investment can give such high potential returns? .

And we are not talking about “optimistic” forecasts. 

We are talking about history: Bitcoin has been, most probably, the most profitable investment we have ever had at our disposal for years. In the last 2 years it has given a return of +1,187%. In the last 5, of +10,536% (yes, ten thousand percent). In the month and a half so far in 2021 Bitcoin has already given a return of over +60%. 

Those who right now believe that it is already too late to invest in Bitcoin imagine what they will think when its price exceeds a quarter of a million dollars. 

In recent months we have witnessed the US Federal Reserve and the European Central Bank moving towards experimental monetary policies based on quantitative easing .

The Western central banks that control the euro and the dollar have decided that the solution to get out of the economic crisis caused by COVID-19 is to print more money to inject into the economies.

As is evident and we have already seen in this article, wealth cannot be created out of thin air. Printing money is not a solution to move the economy forward, quite the contrary: it only devalues currencies and steals purchasing power from citizens.

This experimental and historically unprecedented solution – widely criticized by large sectors of society – has begun to devalue the price of the dollar and the euro and is putting economies at risk of hyperinflation.

In the US, 35% of all dollars in circulation have been printed in the last 10 months16. The Federal Reserve printed more bills in a single month than in 2 entire centuries17.  

In the face of this unprecedented manipulation by Western governments and central banks investing in Bitcoin is not a possibility; it is imperative to protect our purchasing power and grow our wealth.

No government or entity in the world will be able to “print” more Bitcoins or manipulate their value. Bitcoin is, let us remember, an unmanipulable and deflationary currency: it was designed to increase in value with each passing day.

For many investing in Bitcoin has a clear ideological component. Investing in Bitcoin means embracing the paradigm shift we are living, it means repudiating the current monetary system manipulated and controlled by the powerful to evolve towards a fairer, more equitable, unmanipulable and decentralized monetary and store of value system. 

Investing in Bitcoin today also represents being part of a minority of early adopters. Although it may seem that Bitcoin has already intensely penetrated society we are still at a relatively early stage; it may seem to be late, but a look with perspective shows us otherwise. 

And as has happened in the past with other advances, early adopters usually benefit from being pioneers in embracing a new technology. As of this writing, it is estimated that 100 million people own Bitcoin18, representing just 1.32% of humanity. It is estimated that only 0.01% of humanity owns more than 1 BTC19.

It seems plausible to think that in the not too distant future society will be divided between two types of individuals: those who have been able to accumulate considerable amounts of Bitcoin, and those who have not.

Bitcoin may represent an unparalleled wealth redistribution opportunity: but only for those willing to pay attention to it and determined to undertake the movement. Elon Musk, one of today’s most privileged and visionary minds, seems to have realized just in time.  

Investing in Bitcoin, although relatively simple nowadays, is not a risk-free activity. For now we still can not go to our traditional bank to make the management, and there are many scams that aim to trap the unwary. 

Similarly, we find a multitude of exchanges located in tax havens, China or in places that do not require any type of regulation and do not offer any guarantee to the customer. 

One of the few reliable alternatives we found is the broker eToro.com , one of the most well-known and widely used exchanges worldwide. Based in London and authorized by the CySEC, the FCA (the UK Financial Authority) and the CNMV, it is the favorite choice of more than 20 million investors worldwide. It’s fast, it’s easy and it has the guarantees required by the European Union.

eToro.com, with all the European regulations and guarantees required, is the only exchange we can recommend to our readers without reservation. In addition eToro.com allows you to add funds instantly via Paypal, credit card or SEPA bank transfer, among others. 

Creating an account at eToro.com takes no more than 5 minutes and is completely free:

For your convenience, you can log in with your Facebook account. Once we have entered our data, we will arrive at the following screen:

In the bottom left corner, we click on the “Deposit funds” button. It will take us to the next screen:

We enter the amount we want to deposit. In our case we start with a deposit of £10.000. eToro works with US Dollars ($), so the deposit we make in $ will be automatically converted to US Dollars. We recommend starting with small amounts, in the order of £500 or £1,000. There is always time to invest more money.

In this screen we will have to select the payment method. We can choose between depositing funds by credit card, bank transfer, Paypal… In our case we choose Paypal as it is a very safe payment method that offers protection to the buyer.

With the deposit made, we click on the left menu “Instruments”. In the next screen we will find several cryptocurrencies to invest in:

In our case, to buy Bitcoins, we search for the symbol BTC and click on “Buy”. The following window will open:

We enter the amount we want to buy at this very moment ($1.000 in our case) and click on “Open Trade”. And at that very moment, We are already the proud buyers of a portion of Bitcoin equivalent to $1.000!

It should be added that, of course, eToro also offers us the option to sell the Bitcoins when we decide that the time has come to liquidate our investment and take the potential profits. At that moment our cryptocurrencies will be sold at the market price and the dollars from closing the transaction will appear in our account. And not only that, but eToro also offers the possibility of “betting” down through orders known as short sell: These orders allow us to profit from an asset that is in decline.

Generally speaking there is no minimum amount to invest in Bitcoin. Most investment platforms allow us to buy fractions of Bitcoin, which allows small investors to trade with ease. In the case of eToro the minimum to invest in Bitcoin is $25 (or the equivalent in euros or pounds).

Years ago eToro.com did not offer real cryptocurrencies to its customers. Instead, it offered CFD (Contracts for Difference, a derivative product) on cryptocurrencies. However, they have long offered real cryptocurrencies .

Of course not, you can buy fractions of bitcoin. Just as the euro has smaller units (cents), the Bitcoin also has smaller parts: the so-called satoshis. Each Bitcoin contains 100 million satoshis, so at the time of writing this article 1,000 satoshis is equivalent to about €0.38. 

Any investment, whatever the product, carries risks. And Bitcoin, like any other investment, is not without risk. However, if we decide to invest in this dominant cryptocurrency through a regulated broker registered with the National Securities Market Commission, we will be able to reduce the potential risks of the operation. On the other hand, we believe that Bitcoin has entered a period of maturation, with lower volatility and fewer sharp drops, creating a more favorable scenario for investors seeking greater stability.

.  

An entire network of overclocked 2080’s would consist of 10.2 million GPUs.  These would consume about 21 TWh per year.  This is about as much as Azerbaijan or Ecuador uses annually.  

In the summer of 2018 it was estimated there were around 10 million GPUs churning hashes for the Ethereum network.  For instance, JPR Research estimated that 3 million GPUs were sold to cryptocurrency miners in 2017.  During those heady days, mining farms such as Genesis Mining, rented 747s to fly large batches of GPUs to its mining farms.

Because of the mix of older, less efficient GPUs (such as the RTX 10 series) or first generation ASICs that have been switched back on, it is likely that the network hashrate is closer to the upper bound of Ecuador than mid-range of Bolivia or Panama.  This would put Ethereum around the 70th largest country by energy consumption.

Unlike many Bitcoin promoters, most Ethereum developers – and even some miners – believe that this energy footprint is temporary, pointing to an ongoing transition to proof-of-stake which started with the Beacon chain (Phase 0) launched last December.  Obviously the work-in-progress towards PoS has been known since before mainnet was even launched, yet it has been a slow slog.  

Despite the desire of developers to quickly sunset proof-of-work, last month we contacted Vitalik Buterin who pointed out that there is currently no EIP to switch over from PoW to PoS.  Based on the roadmap at least one EIP is expected to be crafted during the year.

It also bears mentioning that Buterin – unlike Bitcoin promoters – recognizes the large aggregates of energy consumption that PoW chains account for.  In an interview three years ago he explained:

“I would personally feel very unhappy if my main contribution to the world was adding Cyprus’s worth of electricity consumption to global warming.”

While “DeFi” usage and total-value-locked (TVL) has soared since the previous two articles on this topic were published, this would be an ends-justify-the-means argument.  Not a fallacy per se, but also not a frequently used argument, because greenwashing is not part and parcel to the Ethereum ecosystem.

(5) Other large PoW chains

(5a) Litecoin

The fact that Litecoin is still a “Top 10” coin in 2021 should indicate how ridiculous proof-of-work coins are for society.  No one really uses it for anything.  Except one guy who invested more than he could afford to.

In fact, the hashrate is roughly the same today as it was two-and-a-half years ago because — as pointed out many times — hashrate follows coin price.  Its most recent surges were due to PayPal adding it as an option users could buy or sell with, and an adult website (PornHub) that announced it would accept it as a form of payment.

Despite having launched several years ago, Bitmain’s Antminer L3+ is still basically the top ASIC mining unit that is used today.  It generates ~500 MH/s with ~800 watts. A slightly more powerful L3++ is on the market as well.

At around 300 TH/s, there are the equivalent of about 600,000 L3+ machines generating hashes for Litecoin.  In aggregate, these machines would consume 4.2 TWh per year.  It would be placed around 130th, between Namibia and Cyprus.

The Antminer L3++ specifications are similar:

If only L3++’s were used, the outcome would be about the same. 9

This consumption is pretty absurd once we factor in things like how there are only a couple of active developers who basically just merge changes from Bitcoin into Litecoin.  In other words, one of the largest PoW networks has very few users or developers, yet consumes the same amount of energy as Cyprus.  

How is that a socially useful innovation?

(5b) Bitcoin Cash

Unlike Bitcoin, Bitcoin Cash has seen a dramatic decline in hashrate since it briefly peaked at over 5 million TH/s in 2018.   In fact, it is now oscillating around 1.3 million TH/s, or half of what it was 15 months ago.

The calculations for Bitcoin Cash are very straightforward since it is just a modified version of Bitcoin.

Recall from above that a single S19 Pro generates a maximum hashrate of 110TH/s or terahashes per second with a power consumption of 3250W.

A network consisting of just Bitmain S19 Pro systems would comprise about 12,000 systems.

In a given year these would use about 336 GWh, this will serve as our lower bound.

Not counting e-waste, that would put the energy usage of Bitcoin Cash somewhere around 174th or about the same as Burundi. Despite the fact that BCH has almost doubled in value since the last article, the hashrate decline is likely due to more efficient hardware now available.  

This presents a problem for potential malicious forks as an attacker could rent hardware (via NiceHash) or purchase older discarded hardware previously used for Bitcoin mining.  There are disagreements as to how to prevent this but most of them involve some kind of centralized group of developers manually inserting themselves into the validation process (via block signing).

For an upper bound, let us use an S9i for approximation.  Recall it churns out 14 TH/s and consumes 1320 watts.  That would involve about 93,000 systems consuming 1,073 GWh placing it somewhere between Fiji and Benin at 160th place.

Unlike last update, there is relatively little economic activity beyond speculators moving coins from one intermediary to another.  In fact, an economist with Chainalysis noted that Bitcoin Cash saw less merchant processor volume, about $12 million in 2020.10

Clearly on-chain payments is not the use case, even though the infrastructure exists to do so.

(5c) Monero

Unlike the previous article, it appears that the decision makers behind Monero stopped trying to fork it every six months to prevent involvement from ASICs.  

At the time of this writing Monero’s hashrate is hovering near its all-time high, likely due to the fact that XMR’s price has also risen, reaching a two-and-a-half year high.11

Compared with the previous article, the hashrate has increased nearly six fold to about 2 GH/s. And it is believed that most of this hashrate is still generated by GPUs and CPUs.

There are lots of how-to guides for building a CPU-focused Monero mining system, and NiceHash even has an easy-to-use profitability calculator.  

In the previous article we looked at a Vega-based GPU build, which could still work, but again, CPU mining is still typically used for Monero.  Currently the top performing CPU system on Monero Benchmarks is a modified 3990X Threadripper which generates 64,000 hashes/s and sips 600 watts.  Note: these are self-reported, user-submitted numbers.

If the entire network were composed of just this type of machine, there would be 31,250 systems running.  They would consume 164 GWh annually.  This would place it around 195th, between American Samoa and Saint Kitts and Nevis.  This would be the lower bound.

For comparison, a slightly more common Ryzen 3600 generates 7,400 hashes/sec and consumes 100 watts.  A network would consist of around 271,000 systems.  They would consume about 237 GWh annually.  This would place it around 190th between Chad and Sierra Leone.

In terms of GPUs, a RTX 3090 generates 2053 hashes/sec and consumes 350 watts.  A network of these would involve 974,184 systems.  Altogether they would consume about 2,987 GWh per year.  This would place it around 136th, between Montenegro and Jamaica.  This is not the upper bound.

As you can see, just like ASICs in sections above each older or slightly less energy efficient CPU or GPU system will incrementally increase the aggregate energy consumed.

For instance, in the previous article we looked at a 12-card Vega build, the user was able to generate 28,100 hashes/sec and consume 1920 watts. That’s about 2341 hashes per card.

That’s about 854,335 GPUs each sipping 160 watts. Altogether these consume 1,197 GWh annually.  This is still not the upper bound.

What is the upper bound then?

A few months ago a manufacturer, ASICLine, claimed to be shipping a mining system that can generate hashes for Bitcoin, Litecoin, Ethereum, and Monero.  Because of how inflexible ASICs are, it is unlikely that their claim is true.  While we would like to be able to say for certain how much energy Monero is consuming, there is a possibility that someone has built a custom ASIC (or FPGA) which could throw off our estimate.  

Based on the same electricity consumption chart as the others, we can guesstimate that Monero drinks around 1 GWh a year and would be placed somewhere definitely above Chad and probably below Montenegro. 

(5d) BSV and ZEC and DOGE

There are hundreds, if not thousands, of dead PoW coins.  Three proof-of-work coins that have remained in the “Top 50 as measured by USD” over the past few years are Bitcoin SV (BSV) and Zcash (ZEC) and Dogecoin (DOGE).

BSV was created (forked) by Craig Wright, an Australian who claims – without sufficient evidence – to be Satoshi Nakamoto.

Due to a lack of interest beyond a core group of his followers, BSV — as measured in USD — has declined relative to its cousins BTC and BCH.  As a result, its hashrate has also declined.  At the time of this writing it is just over 600 PH/s, which is a two-and-half-year low.  This makes it relatively inexpensive to successfully double-spend or reorg the chain.12

If the BSV network was composed only of S19 Pro’s there would be around 5,454 systems consuming 155 GWh per year.  That is about as much as America Samoa at around 200th place.  This is the lower bound.  An upper bound is unknown but if we re-use the S9i there would be about 43,400 of these systems consuming 502 GWh.  That would put it around Andora or South Sudan, around 170th place.

There are a number of gambling-related apps that have been built around BSV, but no substantive economic analysis beyond the regular speculation that dominates in other chains.

Zcash received a lot of attention when it first launched for its privacy and confidentiality (opt-in) properties.  For one reason or another, it has not seen as much market interest as Monero (despite arguably having stronger technical capabilities).

Either way, at the time of this writing Zcash’s current hashrate (6.79 GH/s) is hovering near its all-time high.  That may sound like a relatively small number compared to Bitcoin or Ethereum, but it uses a hashing algorithm called Equihash, which is more difficult to generate hashes.  Unlike Monero, it is primarily mined via GPUs instead of CPUs.  There are a variety of online calculators and guides comparing different setups.  

There are also multiple ASIC miners for ZEC available including the Antminer Z15.  The Z15 churns out 420 KH/s and consumes 1,510 watts.  If the entire network were comprised of these ASIC machines there would be about 1,620 of them. Altogether they would consume 21.4 GWh each year.  It would rank around 215th, near the Falkland Islands and Kiribati.  This would be the lower bound.

One of the slightly dated comparisons involved tweaking a Nvidia 1080 Ti. One user was able to achieve around 641 H/s at 300 watts.  A network of these GPUs would comprise 1.06 million GPUs.  These would consume about 2,783 GWh.  That would place it around 140th, between New Caladonia and Mauritius.  While there may be older GPUs and even some CPUs mining, this is probably closer to the upper bound.

What about Dogecoin?

We wrote a bit about Dogecoin in 2014 but stopped because it merge mined with Litecoin in September of that year.  While it is no longer independent — as it piggybacks off of Litecoin mining — people still mine it with the same L3+ machines mentioned above (both Litecoin and Dogecoin use the same hash generating algorithm called ‘scrypt’).  Despite new record highs in prices, Dogecoin’s hashrate is about 30% less than its all-time high.  In fact, it is nearly identical to Litecoin’s hashrate because it uses the same farms and pools.  While some have suggested that this is an efficient usage of resources (two-chains-for-the-price-of-one) it creates a top-heavy situation that in theory, makes them both less secure.

(6) Status check

With all of these numbers and calculation spread around, let us briefly collate them in an easy to view section.

If the entire Bitcoin network were solely comprised of:

If the entire Ethereum network were solely comprised of:

If the entire Litecoin network were solely comprised of:

If the entire Bitcoin Cash network were solely comprised of:

If the entire Monero network were solely comprised of:

If the entire BSV network were solely comprised of:

If the entire ZEC network were solely comprised of:

As mentioned above (and in numerous previous articles) there are hundreds if not thousands of dead or dying PoW chains.

If we took the most efficient energy consumption assumptions above (the lower bounds), these seven PoW chains consume 59.3 TWh per year.  Roughly the footprint of Kuwait, around 46th place.  But in most cases – such as with Bitcoin itself – the lower bound is not realistic because the necessary amount of efficient hashing equipment (miners) have not been manufactured.

In contrast, if we took a less conservative assumption and used the upper bound these same PoW chains consume 180.1 TWh per year.  Roughly the footprint of Poland or Thailand, around 25th place.  The upper bound scenario is likely unrealistic for coins that have seen their value (measured in USD) decline or stay the same.  For those that have seen rapid appreciation (such as Bitcoin), it is possible that older equipment temporarily comes back online until newer replacements are installed.

And yet, in either scenario, these PoW networks are not also adding the equivalent GDP output of similar sized countries.  Society is in effect, at a net loss.

As we have mentioned in this article and others, historically, as a country industrializes, its growth is often limited by access to energy which throttles its energy consumption.  Simultaneously, as it grows and develops, it becomes more efficient per wattage of input. 

For example, according to the Energy Information Agency:

In the United States, energy intensity has been declining steadily since the early 1970s and continues to decline in EIA’s long-term projection. A country’s energy intensity is usually defined as energy consumption per unit of gross domestic product (GDP). Greater efficiency and structural changes in the economy have reduced energy intensity.

Despite dozens of RTGS systems being deployed across the world, in no instance do any of them consume the footprint of a small or medium sized country to operate.

The next section will look at some of the coin promoters and how they try to whitewash this issue away.

Only two nuclear reactors have been built in the U.S. in the past 25 years.  One of the reasons why others may not be built in the future: the shale boom.

Interested in hearing the twenty-first century equivalent of “smoking is good for you”?

On with the show!

No, Bitcoin is not a battery.

Contrary to the musings of venture capitalists with a heavy stake in coins (and coin mining), mining PoW chains is not the same as a battery.  It should be obvious that energy used in mining is not reusable, it is turned into heat as it enters the environment.  When miners pay bills they convert some of their holdings into actual money, energy is not released in this process because no energy was stored to begin with.

It is hard to know where to start with this batch of Bitcoin promoters, nearly all of whom work for prominent cryptocurrency intermediaries.

Fun fact: despite continual claims that Bitcoin will spur development of Thorium-based nuclear power plants, to date, there have been zero Thorium plants built let alone funded by Bitcoin personalities.

What about stranded energy?

In practice “stranded energy” means there is some kind of inefficiency in storage and/or the transportation grid.  In some cases capital could be used to increase efficiencies (e.g., new pipelines) which could reduce the price of energy extraction or transmission.  Yet because it is stranded, it centralizes PoW mining in that specific area.13

But what about renewables?

Hitchen’s Razor: That which can be asserted without evidence, can be dismissed without evidence.

In terms of cyclical generation, even in the summer, when hydroelectric dams are at their peak output in the northern hemisphere, Cambridge BCIE estimates that more than half of energy generation still relies on non-renewables such as coal or gas.  

Many miners themselves do not provide any reason to believe this. Cambridge surveys miners, and they indicated that while a majority has renewables in the energy mix, only 39% of mining is done with renewables (as it can be a small part of the energy mix).

The location data above is from Cambridge, sourced from mining pools rather than a survey.  If you look at where miners are situated most of the time, you also see that while they use some renewables during the summer (wet season) in China, they are using fossil fuels the rest of the year.

According to Stoll et al., the carbon intensity of the energy used for mining Bitcoin was 480-500g CO2 per kWh in 2019 and went up to more than 550g CO2 per kWh recently due to increasing popularity of Iran and Kazakhstan.  8% of miners are now using sanctioned Iranian oil-based energy to mine.

There is also a steady stream of on-the-ground local stories providing anecdotes to the rush for relatively cheap energy.  For instance, clandestine Bitcoin mining in Iran is believed to be one of the reasons for a rash of blackouts (and smog).

Lastly, even if Bitcoin miners were mostly run on renewables (which is not occurring) Bitcoin mining could not be considered environmentally friendly.  Why?  Because of the regular cycle of e-waste that is created as next generation ASICs are introduced.

(8) Whataboutisms

Whataboutery is commonplace and normalized in the cryptocurrency world.  

Tired of policy makers pointing out that illicit activity is attracted to KYC-less chains?  Whatabout HSBC!  Dislike the moans from hospitals impacted by Bitcoin-funded ransomware operations?  Whatabout nuclear warfare!

This fallacy rears its head in the discussion of energy consumption: ignore this category of waste because there is also a category of waste there!

This is not a contest to waste as much energy as possible.  Aircraft carriers, submarines, and airborne infantry divisions do not protect RTGS systems. All wasteful activities – such as nuclear warhead production – can clearly be categorized as bad and undesirable.  It is also unclear from that thread how Bitcoin can end war or reduce military spending.

Speaking of poor analogies:

If we are going to play along with this game above: we actually know who participates in Federal Reserve decision making processes.  Whereas we still do not have a regularly updated list of who funds those with merge control in the Bitcoin Core github repo.

At the time of this writing about 70 RGTS systems are live across the world.  But only a small handful of countries with an RTGS also have nuclear weapons and/or aircraft carriers.  And only six have both. 15 This illustrates that you can have one – a secure large value transfer system – without the other.

Held’s argument is a Whataboutism.  Why?  Because this is not a contest over who wastes more (or less).

As Galloway correctly points out in that thread: no one is trying to run a PoW-based payment system with Christmas lights.  Christmas light operators are not incentivized to string up more lights as the aggregate market capitalization of light manufacturers increases.16

No one is trying to run a PoW-based payment system with smartphones.  Furthermore, telecoms do not need to consume oodles of more energy per extra unit of phone added to their networks.  PoW chains empirically and theoretically will consume energy in direct proportion to the value of the coin price.  That is why we continue to see ever larger amounts of ASIC machinery sold by Bitmain and MicroBT to miners, not less.  Yet PoW chains do not have a monopoly on securing permissionless payment systems.

Proof-of-stake (PoS) chains require some electricity too.  If this was a comparison of say Polkadot or Avalanche (both of which are PoS-based), they would consume several orders less than Bitcoin does today.  

And if these were compared to running full nodes (since there is no hash generation needed)? 

For instance, according to Bitnodes there are approximately 9,415 nodes relaying transactions on the Bitcoin network (including the 25 or so mining pools).  

Virtually every sentence is incorrect.  And this is all Whataboutery.  Bitcoin mining usage could boil the ocean?  But what about banks!

The bar should be: how can a value transfer system reduce its energy consumption and externalities, not to distractingly point fingers at other entities that also waste.  

Speaking of which, in her examples above, it is also a different type and magnitude of waste.  Banks do not generate more revenue if they leave their computers on 24/7 whereas PoW miners have to be left on around the clock to generate hashes in order to compete for block rewards.  

Furthermore, banks as a whole provide many more services (and products) beyond just processing payments.  In contrast, Bitcoin has very limited functionality, including the inability to do any on-chain lending.

That is not an accurate description of boiling gold (alchemy?) or what proof-of-work is as described by the original creators (Dwork and Naor).  Neither its supply schedule nor energy consumption is what creates value for PoW coins, external demand is.  

Claiming that PoW imbues a cryptocurrency with value because it requires real effort to produce it is a variation of the Labor Theory of Value.  And saying PoW can promote energy efficiency is like saying paying people to dig holes and fill them up again helps the economy. 19

In his accompanying article for this image Held states that: “The pressure to find cheap electricity sources will accelerate the effort to build fusion reactors.”

But that basically saying if you leave your car running it is good because it incentivizes finding alternate power sources.

Speaking of which:

Due to the demand shock from COVID-19, depending on geography, the cheapest sources of energy today might actually be oil and gas.  Perhaps the near-future of mining are cars parked outside of refineries in Houston, churning up hashes for PoW networks.

And last but not least:

According to modeling from the Resources for the Future, a think tank, Miami will become the most vulnerable major coastal city in the world with “100-year floods” occuring every few years rather than once a century in many locations.  A quarter of all homes at risk from flooding due to climate change reside in Miami-Dade county.  If the mayor wanted to stave off this crisis the last thing he should be encouraging is direct investments in proof-of-work based cryptocurrencies.

(9) Competing for scarce resources

Due to the rapid rise in some cryptocurrency prices, foundries that churn out semiconductors have months of backlogs due to GPU and ASIC demand.  Why?  Because there are only a small handful of foundries capable of manufacturing state-of-the-art chips and as a result there is a limited capacity irrespective of what the ultimate destination may be.

This has led to a shortage of chips used in automobiles to the point where large manufacturers such as Ford or General Motors (GM) have announced plant shutdowns.  In its most recent earnings announcement, GM estimated that:

The semiconductor shortage will shave $1.5 billion to $2 billion off adjusted earnings before interest and taxes this year.

How much semiconductor output capacity is being squeezed because of PoW miners?  

History repeats itself: in November 2017, Chen Min (a chip designer at Avalon Mining) gave a presentation which noted that 5% of all transistors in the entire semiconductor industry were used for mining and that was driving up DRAM prices.  Last cycle this negatively impacted a variety of ancillary set of actors, such as astronomers who rely on GPUs to chug through cosmic signals.  

The current surge in demand for GPUs for mining has led some participants to acquire hundreds of gaming laptops en masse, crowding out, again, anyone who needs a high performance GPU.  The image (above) comes from a Weibo account tracking various China-based miners who are showing off their GPU farms consisting of high-end laptops.  

“Laptop mining” has pushed new buyers down the performance curve, to hardware that is two generations old.

Below are three publicly listed companies that have announced large purchases of mining equipment in the past several months:

A few days ago UK-listed Argo Blockchain announced it would build a 200 MW mining facility in West Texas.  

Private companies have also announced large purchases of coin miners.  For instance, last month Blockstream announced that it had purchased $25 million worth of equipment from MicroBT and that this would be part of its 300 MW of mining capacity.  

And an anonymous buyer in Russia, recently acquired 20,000 mining systems that consume 70 MW for a new farm in Bratsk, Siberia.

And this is just the tip of the iceberg.

A GPU farm of 78 GeForce 3080s was photographed (above) churning up hashes for Ethereum last month.  

An entire paper or two could be written on large bulk purchases of ASICs or GPUs which crowd out other industries that need the same resources for actual productive activities.

(10) Undead countries are an ESG nightmare

Is it a stretch to call Bitcoin a ‘smoldering Chernobyl sitting at the heart of Silicon Valley’?  

In May 2014 we briefly discussed a hypothetical “million dollar” bitcoin.  At the time, Bitcoin’s price had dropped below $500 and we were already able to empirically discern that hashrate grows (or declines) directly proportional to coin value.

In the previous articles we found that, despite the introduction of increasingly energy efficient hardware, a PoW network like Bitcoin consumes ever larger amounts of energy.  That is because of the Red Queen’s Race: miners do not downsize farms in aggregate, they simply replace aging hardware with newer ones; they must run faster in order to stay in the same place.

That is why anyone that has access to a hashrate chart can project with decent certainty what the likely outcome of a “million dollar” bitcoin will be in the future.

If a $40,000 bitcoin has already led miners to consume the energy equivalent of the Netherlands or Egypt, a million dollar bitcoin would be about 25 times as much.

What does that mean in actual numbers?

Critical to any analysis of energy usage is economic output.  In a million dollar bitcoin world, society would be bearing the externalities of mining activity that does not produce a proportional amount of GDP.  For instance, much of the coin mining industry is reliant and dependent on taxpayer funded utility companies and grids.  As a result, we would see the equivalent of an additional U.S.-sized energy usage without seeing anywhere near the economic output, this would be a huge net loss.

This also does not take into account e-waste that is created via discarded single-use ASICs.  And it does not take into account other PoW networks such as Litecoin which are basically ghost towns yet consume country-sized energy units too. 

Miners will surely lead to greener sources of energy production, right?

This is a red herring.

Through the usage of either permissioned systems (like an RTGS) or a proof-of-stake chain, the energy consumed by PoW chains did not need to take place at all.  In fact, PoS chains can provide the same types of utility that PoW chains do, but without the negative environmental externalities.  PoW chains are the equivalent of adding an undead country – a zombie chain – to the power grid: one that consumes energy and produces little more than emissions.  

Because of disputes among its undead participants these zombie chains must utilize the judicial and legal resources of third party countries. The chains also have a parasitic relationship to other government-run services that they continue to rely on such as taxpayer-financed energy grids.

(11) Call to Action

What can be done?

For starters, do not patronize coin lobbying organizations that weaponize misinformation.  They are not dedicated to protecting consumers or the environment.  Their mission is to convince legislators around the world to take a hands-off approach to regulations, including potential taxes on miners.

Nearly three years ago, the executive director of Coin Center, Jerry Brito, solicited names to hire to whitewash easy-to-prove energy consumption numbers.  

Why?  Because it is bad for business. Some Bitcoin promoters like to present themselves as being part of the cutting-edge future, one disassociated with the ancien régime.  But as we have seen repeatedly in this paper, PoW miners compete for the same scarce resources and capacity that society relies on to generate real goods and services.

This is not true.  Agrawal, who works with Brito at Coin Center, attempts to limit the available options when there are a wide range of other possibilities.

For instance, according to The New Republic:

In 2020, Tesla sold about $1.58 billion worth of these [carbon] credits—almost exactly the value of the Bitcoin purchased.

Tesla is going to account for its Bitcoin holdings as intangible assets (goodwill) which is not how this line item was intended for.  This is clearly shrewd opportunism (and accounting), not some re-imagination of resource consumption.

According to Digiconomist: 

If 12 million people used Bitcoin to buy a Tesla, it would be enough to completely offset the combined total of CO2 saved by these EVs (by Tesla’s own account).

Elon Musk says he is now a fan of Bitcoin but PoW miners are directly cannibalizing the chip production capacity required to produce Tesla vehicles, a point that Tesla’s latest 10-K filing indirectly touches on.

What can you do?

Most developed and developing countries levy taxes on polluters or “sin” activities. ((Another consideration that funds with an ESG mandate should consider is not just the environmental impact of PoW mining but also the human rights that may be violated in the production of said coins.)) Clearly proof-of-work mining falls into both categories.

Contact your local Public Utility Company and explain the socialized losses and privatized gains that are possibly accruing to miners.  In addition to levying a tax on coin mining activity, perhaps introducing a tax on PoW-based holdings at intermediaries could be discussed since they directly benefit from miners providing the underlying blockchain infrastructure.

And if you are a user of a cryptocurrency, publicly advocate for switching to proof-of-stake (PoS) chains or accelerating such transitions if they are already underway.  You can still enjoy decentralized finance in a way that does not dramatically contribute to climate change.24

Acknowledgements

Thanks to the following people for their helpful feedback: CK, JG, VB, RG, KR, JH, MW, and >

This paper looks at the energy consumption of seven proof-of-work-based anarchic (public) blockchains such as Bitcoin and Ethereum.  By using a hashrate division method – similar to the Cambridge Bitcoin Electricity Consumption Index – a lower bound and upper bound of mining hardware are provided.  Based on this method we are able to show that proof-of-work chains continue to consume resources in direct proportion to the underlying coin value.  Due to the rapid increase in coin value, proof-of-work-related activities – such as semiconductor manufacturing – are once again squeezing supply chains and retail channels, crowding out socially productive goods and services from entering the marketplace.

The model identified a bounded range for energy consumption.  If we took the most efficient energy consumption assumptions (the lower bounds), these seven proof-of-work chains in aggregate consume 59.3 TWh per year, or roughly the footprint of Kuwait.  In most cases – such as with Bitcoin itself – the lower bound is not realistic because the necessary amount of hashing equipment (miners) for that degree of efficiency has not been manufactured.  In contrast, if we took a less conservative assumption and used the upper bound these same proof-of-work chains in aggregate consume 180.1 TWh per year, or roughly the footprint of Poland or Thailand.  The upper bound scenario is likely unrealistic for coins that have seen their value (measured in USD) decline or stay the same (such as Litecoin).  For those that have seen rapid appreciation (such as Bitcoin), it is possible that older equipment has temporarily been reconnected.

The paper is organized into several sections.  Sections 1-4 provide a foundation for understanding how traditional financial market infrastructure, such as a real-time gross settlement (RTGS) system, operates, and uses Bitcoin and Ethereum as examples of how proof-of-work-based systems inherently result in socialized losses and e-waste.  Section 5 contains calculations of smaller proof-of-work networks.  Section 6 is a summary of the calculations found in the preceding sections.  Sections 7 and 8 briefly look at misinformation spread as memes on social media.  Sections 9 and 10 look at news reports covering several large ASIC and GPU mining operations.  Section 11 provides several recommendations framed as a Call to Action.

(1) Background

This paper is a sequel to our occasional series on the energy consumption of proof-of-work (PoW) cryptocurrencies such as Bitcoin.

We will get to resource consumption in the next section, but let us start in reverse order this time.   

Many Bitcoin promoters conjure a future world in which the future of finance clears and/or settles on the Bitcoin blockchain, and in which that the demand for PoW generating equipment (miners) will simultaneously usher in a greener world.

Fedwire is categorized as systemically important financial market infrastructure due to the enormous amount of value it transfers and secures.

According to (Bilger 2020):

In 2018, Fedwire executed 158 million transfers with an aggregate value of $716 trillion (Federal Reserve, 2019). While many of the fund transfers executed by Fedwire were of small value, the average value per transfer in 2018 was $4.5 million.

Bureau of Economic Analysis (2019) estimated that 2018 total gross domestic product (GDP) was $20.5 trillion (para. 12). Fedwire may be viewed as a kind of force multiplier for the American economy by processing annual banking payments at 35 times the country’s GDP. Further evidence of Fedwire’s role promoting the efficiency of American financial markets can be seen by considering Fedwire payments against the aggregate value of all deposits at U.S. lending institutions – $12.6 trillion in March of 2019 (Federal Reserve Bank of St. Louis, 2019). Fedwire payments for the previous year were 57 times this figure.

We have discussed these types of large aggregates before in the past.  For instance, a December 2015 paper from the Federal Reserve Board pointed out that, in the aggregate, U.S. payment, clearing and settlement systems process approximately 600 million transactions per day, valued at over $12.6 trillion.

When we mention these large, socially significant aggregates in conversations and debates at cryptocurrency-related conferences and events, many promoters are at a loss for words because they are unaware of these post-trade processes.  

Another group – typically self-deputized coinfluencers – will proclaim that Bitcoin can move and secure the same value if not more, via metaphors.

The container ship fetish is a sleight-of-hand trick because Bitcoin versus a RTGS is not even a false dichotomy.

A tangentially related argument is that Bitcoin transactions are structured to move blocks of data that can include additional information beyond bitcoin itself: even if a single coin is a ‘container ship,’ Bitcoin structurally has more capacity or flexibility than traditional networks. 

The problem with this argument is that it is entirely possible to do that with a non-proof-of-work system as well.  In fact, a blockchain may not be necessary at all.  The fact the U.S., or international co-ops like SWIFT, set up its payments system to move around specific types of (messaging) data was a generational choice but not a permanent design constraint.  In other words, a PoW-based network architecture does not have an exclusive monopoly on richer or broader forms of data.  That is a red herring when comparing the two systems.

What about “stablecoins” piggybacking on top of Bitcoin?

The ongoing growth of parasitic stablecoins (such as Tether) rely on reliable banking access, specifically dollars cleared by the New York Federal Reserve.  Not to mention all the new traditional-style institutions and intermediaries hooking into Bitcoin for custody and trading.  Don’t like old, monocle-wearing trusted third parties?  Here are newer, hoodie-wearing trusted third parties to hold your coins!

More to the point, the majority of Bitcoin transactions today are simply bitcoins moving from one known intermediary to another, typically between coin exchanges for speculative purposes.  If most of the endpoints and miners are self-doxxed then there is no longer a Sybil attack problem, removing the raison d’etre for proof-of-work.

How can we visualize this?

Despite oodles of free marketing that bitcoin has received, payment-related activity is still lower than during the 2017 bubble.  By some measures it is a zombie chain because Bitcoin users do not spend volatile chainletter earnings.  Or more precisely, merchant processors handled less than $4 billion of bitcoin last year.

What is another key difference between an RTGS and proof-of-work chain such as Bitcoin?

Settlement finality.4

We have discussed this multiple times but it bears repeating: proof-of-work chains – by design – allow mining participants to fork or reorganize the chain.  Block making is permissionless.  Now in practice, this does not frequently happen because the cost to acquire hash-generating equipment needed to successfully double-spend or reorg a chain is often quite prohibitive.

Either way, all a proof-of-work chain can guarantee is probabilistic finality that some type of confirmation has occurred but that there is a possibility that a well-funded attacker could reverse or reorganize the chain.  For example, in August 2020, Ethereum Classic was hit by three separate 51% attacks, one that was more than 7000 blocks deep.

In practice, the way some financial institutions involved in the cryptocurrency world (such as trading desks) mitigate the risk of a double-spend or reorg is requiring a certain amount of blocks confirmed (often 3-6 confirmations) before allowing users to have access to recently transferred funds. 

Fedwire transfers are one-way, which means banks can wire funds out, but cannot debit other banks and wire funds in. Fedwire is a payment system and does not perform the traditional banking functions of managing deposits and withdrawals. It simply transfers funds between accounts within the Federal Reserve System. Once Fedwire transactions are complete, they are irrevocable.

What about the actual network infrastructure?  Surely Fedwire needs millions of hash-generating machines to secure all of those transactions each day!

According to (Bilger 2020) Fedwire has around 6600 nodes, 25 which are considered “core” which also have backups in case of disruption.  Critically: none of the nodes in Fedwire is purposefully consuming oodles of extra energy to generate hashes.  

Because there is no Sybil attack problem in Fedwire, there are no nyms.  Anarchic chains such as Bitcoin – by design – allow pseudonyms to participate in block making.  To make it expensive to double-spend or conduct a block reorganization, proof-of-work was purposefully integrated in Bitcoin so that the attacker has to expend real economic resources to succeed.  

This entire kludge is negated in Fedwire because all participants are known: it is permissioned.

What does this image (above) represent?   

A single day of Fedwire transactions in 2004.  According to (Bilger 2020), a group of researchers isolated links and the nodes that connect them, that team was able to determine that just 66 nodes and 181 links comprised 75% of the value of daily payments. These core nodes and links are illustrated above.  And as mentioned a moment ago, the inner ring of approximately 25 densely connected financial institutions is also evident.

What does this all mean?

The participating computing infrastructure for Fedwire involves between ten and twenty thousand computers, none of which need to generate SHA256 hashes.  Its participants securely transfer trillions of dollars in real value each day.  And most importantly: Fedwire does not take the energy footprint of Egypt or the Netherlands to do so.

As we will see below, the more than 2 million machines used in Bitcoin mining alone consume as much energy as Egypt or the Netherlands consumes each year.  And they do so while simultaneously only securing a relatively small amount of payments less than $4 billion last year.  

This oxymoronic phenomenon — a resource intensive permissioned-on-permissionless infrastructure — has led to Ray Dillinger – one of the first Bitcoin users – to declare Bitcoin a disaster:

Bitcoin mining has encouraged corruption (Because it’s often done using electricity which is effectively stolen from taxpayers with the help of government officials), wasted enormous resources of energy, fostered botnets, centralized mining activity in a country where centralization means it’s effectively owned by exactly the kind of government most people thought they *DIDN’T* want looking up their butts and where the people who that government allows to “own” this whole business work together as a cartel.  

There’s a pretense of monitoring the network to guard against a 51% attack, but to me it seems pretty clear that what they’re guarding against is merely the mistake of the cartel failing to give the latest warehouse full of miners a distinct network identity.  The whole idea of proof-of-work mining is broken the instant hardware comes out which is  specialized for mining and useless for general computation because at that point the need to have compute power for other purposes is absolutely irrelevant in having any effect on mining, and there ceases to be any force that causes mining to be distributed around the world. It becomes a “race to the bottom” to find where people can get the cheapest electricity, and then mining anywhere else – anywhere the government tries to make sure ordinary people actually get the benefit from electricity bought for tax money, for example – becomes first pointless, then a net loss.

We interviewed Dillinger a couple of years ago.  Be sure to check it out.

Nornickel is a Russian mining and smelting corporation.  Last year a series of news articles described how BitCluster, a Russian cryptocurrency mining company, was building a mining farm above the Arctic Circle in Norilsk.  It chose this location in part because of the natural ambient cooling and in part to re-use land from a closed nickel smelting plant.  The farm will utilize a local coal power plant to generate 11.2 MWh to power bitcoin miners. 

The next several sections will dive into the energy consumption of the largest proof-of-work chains, including Bitcoin.  As we will show, PoW chains are the equivalent of adding an undead country – a zombie chain – to the power grid: one that consumes energy and produces little beyond emissions.

If you are an asset manager considering whether or not to include proof-of-work coins in your portfolio – and have an ESG mandate – or a policymaker considering whether or not to encourage the proliferation of these types of coins in your jurisdiction, it is pretty clear that PoW coins such as Bitcoin are an ESG nightmare and not a suitable fit.  If and when some (or all) of these coins transition to proof-of-stake is beyond the scope of this article.

(2) Bitcoin

There are multiple ways to estimate how much energy and how many resources (mining equipment, physical plant) are used generating hashes for a PoW chain.

One involves surveying miners and mining pools, and hoping they provide accurate self-reported information.  Another method involves a bit of detective work, physically visiting locations or obtaining purchase order documents from mining manufacturers.  However, this makes it hard to ascertain how much second hand equipment is being re-used.

For example, Bitcoin has a carbon footprint comparable to that of New Zealand, producing 36.95 megatons of CO2 annually, according to Digiconomist’s Bitcoin Energy Consumption Index (BECI).  According to this tool, Bitcoin consumes as much power as Chile — around 77.82 TWh.

The Cambridge Bitcoin Electricity Consumption Index (BECI), a separate tool from researchers at Cambridge University, shows a much larger figure of 121.88 TWh — more than the entire annual energy consumption of the Netherlands.

There is one more simple method that everyone can do at home on their own computer.  One that can create lower and upper bounds with a high degree of confidence.  This is the hashrate division method which we have used multiple times in the past.

The way this works is by taking the publicly known hashrate of a network and dividing it by common hashing (mining) equipment metrics.

For example, on December 30, 2020, the Bitcoin network hashrate momentarily spiked to a record high 178.6 EH/s.  That is exahashes per second (an exahash is one million terahashes).

How can we derive aggregate energy usage from this singular number?

Last May, Bitmain began shipping its Antminer S19 Pro.  There is a bit of public information on how much each of these hashing units consumes and performs.

On paper a single S19 Pro generates a maximum hashrate of 110TH/s or terahashes per second with a power consumption of 3250 watts.

If the entire Bitcoin network were solely comprised of S19 Pro’s (which it is not), it would consist of around 1.624 million hashing machines consuming 46.2 TWh in a year.  According to estimates from the EIA, that is about as much as Portugal or Singapore consumes each year.  This is a likely lower bound for how much energy is being used.

But wait, where does the Egypt number come from?

Recall that the S19 Pro is basically the most efficient, mass produced machine available today.  Due to variance (the inhomogeneous Poisson process), the network hashrate varies day to day.  In the process of writing this article it has gone from as low as 140 EH/s to the spike mentioned above.

Due to the rapid increase in Bitcoin’s price over the last few months — because hashrate follows coin value — over the next several months it is likely that the hashrate will continue to grow as purchase orders are fulfilled and hit 200 EH/s by the end of this summer.  This is why manufacturers like Bitmain are crushing it, with $327 million in cash holdings as of last month.

In practice, the network is not comprised of 1.6 million S19 Pro’s because Bitmain has not even produced half a million of them.

To get a more accurate figure we must look at older, but more common systems that are still running.

For instance, the Antminer S17e system can churn out 64TH/s running at around 2880 watts.  If the entire network was comprised of S17e systems there would be about 2.8 million machines involved.

That’s about 70.4 TWh in a year.  Which is about as much energy as Colombia or Bangladesh use.

But that is still not the upper bound.

Enter the older, but reliable Antminer S9i first released in May 2018 which can churn out 14 TH/s and consumes 1320 watts.

If the whole network was using S9i’s, then there would be about 12.8 million of these machines churning out hashes.

In a year these would consume 147.5 TWh or roughly the same amount of energy that Malaysia or Egypt use each year (this is larger than either Chile or the Netherlands).

While there are probably botnets trying to use CPUs or GPUs to mine bitcoin, the amount of hashrate generated by them is likely marginal.  Thus the S9i approximation is probably the upper bound.

Manufacturers such as Bitmain, MicroBT, or Canaan will eventually reveal how many systems they have sold which will give us some better refinement on the lower bound, the minimum amount of machines being used.

But it is clear that the spectrum is at a bare minimum Portugal and likely closer to Malaysia or Egypt, especially with so many people and companies trying to bring on older systems right now.  This would put Bitcoin around the 27th largest ‘country’ by energy consumption.

Is the hashrate division method a better estimate than the Cambridge or Digiconomist BECI models?

They both have their tradeoffs.  The Digiconomist model is inherently more conservative because it is based on miners’ income, whereas the Cambridge model uses a similar framework as the hashrate division method, starting with mining hardware that is available.

In any case, it is clear that while the energy consumption is somewhere between the Netherlands and Egypt, there is not an equivalent economic gain to the same degree.  

Another way to say this is that: historically as a country develops it produces more economic output per unit of energy input, getting more output with less input.  For example, U.S. energy consumption has been relatively flat since 2000 yet its GDP has more than doubled over the same period.  Likewise following reunification, Germany’s GDP growth rapidly outpaced energy consumption.

As a result, PoW is clearly not something a fund with an ESG mandate should want to be involved in.

(3) Socialized losses and e-waste

Speaking of older systems, because these hash generating systems are single use ASICs (i.e., they can only do one specific thing: generate SHA256 hashes), they are often discarded in a time frame of 18-24 months.  Some parts are salvaged and reused – such as the power supplies – and sometimes a new buyer is willing to acquire used machines second hand (as in the case of North Korean coin miners).  

One estimate is that around half of all data center energy usage is now tied to Bitcoin mining.  In fact, the energy consumption of Bitcoin is more than the combined energy use of Amazon, Google, Microsoft, Facebook, and Apple.  And the e-waste that is generated annually from discarded mining equipment is roughly equivalent to what Luxembourg throws in the trash each year. 

This also does not include the socialized costs – and privatized gains – that miners place on specific geographies due to the type of energy used in generating the hashes.

Below are several recent examples:

Beginning with the 2017 “crypto boom,” Rosseti started noticing abnormal jumps in electricity consumption in numerous Russian regions. The firm identified unauthorized cryptocurrency mining farms and estimated the damage to be over 718 million rubles—about $9.5 million—a significant part of which has already recovered through court procedures.

The “black” miners are known to do more than just tap into power lines. Illegal Bitcoin operations actually build their own transformer stations.

This is by no means an exhaustive set of sources on the topic.  The examples serve to reinforce how PoW mining can be a one-way wealth extraction (privatizing gains) whilst externalizing environmental costs.

(4) Ethereum

Like Bitcoin, the past month has seen Ethereum (ETH) hit several new record prices.  Unsurprisingly this has also led to a new record in hashrate, at over 360,000 GH/s.

In December 2020, a mining manufacturer in China, Linzhi, revealed an early demonstration of its new Phoenix mining machine via F2Pool.  According to the demo, the Phoenix could generate 2,600 MH/s and consume 3,000 watts.  It has not shipped any to the retail market and it is unclear when it might.

In contrast, the most efficient ASIC mining system on the market today (for Ethash) is the InnoSilicon A10+ Pro.  A single A10+ Pro can generate 500 MH/s and consume 1,300 watts.  This is just slightly faster than the A10 which the previous article used as a baseline.

The Ethereum network hovers at over 360,000,000 MH/s per day.  That is equivalent to 720,000 A10+ Pro’s.

Annually these machines would consume 8.2 TWh.  That’s about as much as the Congo (DRC) or Trinidad and Tobago consume.  This would probably be the lower bound.

As mentioned in the previous article, there are many mining farms that still use GPUs to mine Ethereum.  So much so that it has led to a massive, publicly reported on shortage of high end cards from Nvidia and AMD.

Without any modifications, the top-of-the-line GeForce RTX 3090 can churn out 122 MH/s and consumes 350 watts. ((With some tweaking this can reportedly be increased to 150 MH/s.)) This makes it about 50% faster compared with the 3080.

A network entirely composed of 3090’s would involve 2.95 million GPUs.  Altogether they would consume about 9.1 TWh per year.  This is about as much as Bolivia or Panama consume annually.

As you can see, as these GPUs have closed in on the previous generation of ASIC, this has led to some speculation that GPU manufacturers such as Nvidia may once again roll out GPUs just for cryptocurrency mining (again).  The last time was a major dud as Nvidia had to write-off over $57 million in hardware due to a glut in 2018.

What is an upper bound for Ethereum mining?

This is a bit harder to guesstimate compared with the upper bound for Bitcoin or Bitcoin Cash, because of the unknown factor: how many GPUs are being used.  Anecdotally it appears that a lot of less efficient GPUs and older ASICs are likely being used due to the run-up in ETH.

For example, an overclocked RTX 2080 can generate 35.3 MH/s and consume 235 watts

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Cryptocurrency sports’ betting has changed online gambling by offering enormous advantages for both the punter and the bookmaker. It is an easy way to bet and allows you to enjoy anonymity, higher bet limits, quick deposit, and withdrawals, and lower fees besides other benefits. Step 3: prepare documents for withdrawal – before you can make a withdrawal, betting sites will generally ask for proof of identification as part of their kyc protocol. This will usually involve sending a photo of your id and the front and back of your credit card. Io features more than 20 sports, and we endeavour to give you a fair chance of having a betting win by offering competitive odds for each sport. Our sports betting platform offers an in-play option if you want to get in amongst the action or place a smart bet as the game happens. Bitcoin sports betting sites. Every sportsbook is created equal and those who sign up with bitcoin sports betting sites will soon realize why. Not only are the promotions and bonuses expanded with the use of the cryptocurrency, but the transaction times between depositing and withdrawing are almost nonexistent. Once a withdrawal is processed successfully, bettors will receive their funds within one week. Read our full review of mybookie. 4 reasons why using safe bitcoin betting sites is important. If you don’t do your research when choosing from the various bitcoin betting sites, you run the risk of sending money to bad actors. Litecoin sports betting deposits come with the same enhanced bonuses and same-day payouts you get when betting with bitcoin at legal online sportsbooks. Note: if you need to know how to buy bitcoin with prepaid card options or gift card options branded by visa, the process is the same as using your regular visa credit or debit card. The proliferation of online sports betting became too much for u. Regulators to ignore, even though the businesses were operating offshore, not on u. Still, they were accepting bets from u. Residents, drawing the ire of the feds. The uigea which passed in 2006 signaled a clampdown in future years when it came to online sports betting. Bet with bitcoin, ethereum, bitcoin cash, usdt or your favourite cryptocurrency. Offering secure bitcoin betting since 2013 as one of the first operators to offer bitcoin betting, cloudbet has a well-deserved reputation as a trusted bitcoin sportsbook, serving more than 100,000 satisfied customers worldwide. The first step is to choose a cryptocurrency exchange company and proceed to open an account, sportsbetting recommends coinbase. Com, but there are a number of different options to choose from. Next, you need to get a wallet, this is a place to keep your cryptocurrency until you are ready to spend it, and some options are coinomi or mycelium        Bitcoin bookmaker, American FootballLast week winners: BetOnline Table Tennis – 529.1eth   

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Experts say building custody solutions is tricky, but will become crucially important as crypto grows more valuable. Deutsche Bank To Offer Bitcoin Custody Services

As multiple banks prepare crypto custody services, holders now have to flip an old Bitcoin saying on its head: are the banks prepared to be their own (and others’) bank?

Related:

Ultimate Resource On Crypto Custody (#GotBitcoin?)

Last week BNY Mellon, the oldest bank in the United States, announced they would be providing custody solutions, ceding to pressure from institutional investors.

Likewise, documents from December indicate that Deutsche Bank is also planning a custody solution, along with trading and token issuance services.

However, while both banks are well-established and have experience handling a wide range of assets, that doesn’t necessarily mean they’re prepared for crypto custody.

“Digital assets are totally different than traditional assets like bonds, stocks, and treasury bills. Digital assets are decentralized by design and their ownership is therefore relying on a totally different model that cannot reuse the existing centralized infrastructure of the traditional banking world.

To custody crypto assets you need a brand new infrastructure in place,” said Jean-Michel Pailhon, the vice president of business solutions at Ledger in an interview with Cointelegraph.

Even for institutions that are crypto-native, custody is extremely complex. Just last year the crypto exchange KuCoin suffered from a hack that netted the attacker over $200 million. Having custody over large sums creates an attractive honeypot for would-be attackers, and according to experts not even many major crypto exchanges approach custody security properly.

“Only a few crypto exchanges like Kraken, Gemini and Binance are investing a lot of money to prove proper internal controls over their personal private keys management protocols,” Dyma Budorin, co-founder and CEO of Hacken told Cointelegraph last year.

If the big banks want to approach security right, they effectively have three options, said Pailhon.

“They can contract with an existing regulated custodian, they can build their own custody infrastructure and get it regulated, or they can buy a custody technology from a vendor and use it and get it regulated.”

Particularly if the banks opt to build their own solutions, the expenses and time can pile up quickly. The banks will have to hire dedicated developers, “allocating large investments for infrastructure” including data centers and servers, and run the regulatory gamut — a process that alone can take “6-12 months.”

“The level of efforts and investments required to provide an institution with an enterprise-ready self custody solution is substantially higher than for an individual. It requires slightly different technologies and governance processes to secure billions of dollars in digital assets,” he added.

Regardless of the route the banks take, Pailhon says that it’s a sign of crypto’s growing legitimacy that banks like BNY Mellon want to provide custody solutions. Additionally, as crypto’s total marketcap grows and the value of assets for institutions and even some individuals soars, secure custody solutions will become increasingly important.

“You can’t protect 5, 10, or 50 billion dollars in bitcoin with a garage-based server or an air-gapped computer located in a bunker in the Appalachian mountains. You have to put in place a fully redundant, resilient, secure, certifiable, and auditable custody infrastructure that can scale and empower millions of users and support hundreds of thousands of digital asset transactions in a month.

The future success and adoption of digital assets and of the digital asset management industry will depend on this.”

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SEC And DOJ Charges Lobbying

Inc., the payments platform headed by famous Twitter CEO , has announced on October 8 that they had invested 1% of their total assets in. This sizable investment of around $50 million, about 4,709 Bitcoins, made a lot of noise both with the crypto sphere and with the general public. Any investment of such a sum could probably be explained in great details through series of articles about the strength of Bitcoin’s fundamentals, the state of the global , Square’s interest as a payment company in arguably the most discussed innovation in the financial sector this century, and many other factors. There is one word though that represents more than anything why Square invested in Bitcoin: decentralization. Square’s CFO Amrita Ahuja explained in the official press release that "we believe that bitcoin has the potential to be a more ubiquitous currency in the future”. Square’s CEO had already said back in 2018 that “Bitcoin, for us, is not stopping at buying and selling. We do believe that this is a transformational for our industry and we want to learn as quickly as possible.”. The timing of this purchase is important though. As detailed in the whitepaper Square released to show other companies interested in making similar investments how it should be done, Square is interested in Bitcoin in the long run due to its fundamental nature as a decentralized asset. Related: Why Small Businesses Should Consider Bitcoin There is another very important word, not only in Bitcoin but also particularly in today’s global economy, a word we’ve heard from investors, politicians and journalists alike perhaps at no time more so than after Federal Reserve Chair’s Jerome Powell speech which announced the new directions for the American economy following the coronavirus crisis: . Any centralized currency is subject to inflationary policies by its. If a central bank chooses to print enormous amounts of currency to fund the state, the overall value of the currency falls. This is even deadlier in smaller or more fragile economies, as is shown in countries such as Brazil, Argentina, Venezuela, Pakistan, Angola, Zambia, or Pakistan where Bitcoin stands at its all-time-high value compared to the local currency due to the high amount of inflation that has plagued these countries in the last few years (impressive considering a Bitcoin is worth around $13,000 at the time of writing while the all-time-high in the American dollar is just above $20,000). But the risks of inflation for even the most well-established economies in the world are now very real. The current crisis has driven debt and public spending through the roof for most well-established economies and some very inflationary policies are discussed for the near future both by the Federal Reserve and the European Central Bank. While Jerome Powell has already said the Fed would consider negative interest rates on government bonds as a tool, these have already been in use in several big economies such as Denmark, Japan, and Switzerland. In the United States, these rates are currently at 0.25%, which means that even with a generously low estimate of 1% inflation per year, an American buying $100 worth of government bonds stands to lose. And there is simply nothing we can do about it. Related: Should You Invest in Bitcoin and Cryptocurrencies? Experts Share Best Practices in a Volatile (Yet Maturing) Market. In these circumstances, many investors will certainly look for what we call a “hedge” to inflation. As long as an asset is centralized, it is subject to manipulation by whoever is in charge of issuing it. The Fed is well within its rights to decide to increase money printing to fund government spending, especially during difficult times such as a global pandemic. But as an investor, you would be foolish not to look for investments that will produce returns or at the very least keep the value of your hard-earned money. As debt inexorably rises, Bitcoin offers something new to the game. As a decentralized asset, no one is in charge of it and no one can issue more of it. There are a bit more than 18 million Bitcoins right now and there will never be more than 21 million. Once the last Bitcoin is “mined”, there will always be a fixed, limited supply of Bitcoin and if you have one Bitcoin, you will always have a fixed 1/21.000.000 of the total market capitalization. Bitcoin has had a reputation of a volatile asset, a dangerous bet. But I believe that the fundamentals of the asset are everything but that. The decentralized architecture relying on blockchain technology is all that is necessary to ensure that the asset will never be debased or that some central authority dependent on error-prone humans will make decisions about inflationary or deflationary measures. More and more companies are realizing this and adapting their approach to Bitcoin. JPMorgan, whose CEO was well known for criticizing Bitcoin in 2017, has recently declared that the long term potential of the asset was considerable and that while similar to gold as a “safe haven investment”, it had more ease of use and procurement than its yellow competitor. Microstrategy CEO Michael Saylor also announce on September 14 that his company had bought an additional $175 million worth of Bitcoin (bringing the company up to $425 million worth of Bitcoin). As trust in central banks is eroding in the context of the current economic crisis, investing 1% of total assets in Bitcoin is a smarter bet than most realize, easier to do than most realize and the last few months have seen the asset fare very well as it is now up to its highest level since 2017. For more information, read Square’s whitepaper on their own investment. Related: How to Buy, Sell and Keep Track of Bitcoin

Litecoin is now the fourth biggest crypto by market value, standing at $10.425 Billion

XRP is obviously in troubled waters as it recently got displaced by Litecoin as the fourth-largest crypto, with lawsuits piling up against Ripple.

As at press time, Litecoin traded at $157.38 with a daily trading volume of about $10 billion. Litecoin is up 0.38% in the last 24 hours. It is now the fourth biggest crypto by market value, standing at $10.425 billion.

READ: XRP in deep crisis, drops 21%

On the other hand, falling crypto asset, XRP at press time traded at $0.226762 with a daily trading volume of $5.4 billion. XRP is down 4.37% for the day, with a market value of $10.3 billion.

READ: KuCoin recovers 84% of Cryptos stolen by hackers

Leading crypto exchanges including, OKCoin, Coinbase, Bittrex, Bitstamp, OSL, CrossTower, and Beaxy are now staying far from XRP, thereby dampening market liquidity in the XRP market as those crypto exchanges listed above recently announced they would suspend trading for XRP, while others will delist XRP entirely.

READ: Ethereum defying law of gravity surges past $1,050

Also compounding hard on Ripple are reports revealing that Tetragon, one of the lead investors in a $200 million Series C funding round for Ripple some years ago, has recently filed a complaint against the firm in court to “enforce its contractual right to require Ripple to redeem” Series C preferred stock held by Tetragon.

READ: Bitcoin’s market value now $468 billion, bigger than GDP of Africa’s largest economy

What you should know: Litecoin is a P2P crypto that allows instant, near-zero cost fee to anyone around the globe. It is open-source in principle, as its global payment network is fully decentralized without any central authority.

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Follow Olumide on Twitter @tokunboadesina or email [email protected] He is a Member of the Chartered Financial Analyst Society.

The Office of the Comptroller of the Currency (OCC) has provided conditional approval to Anchorage Digital Bank.

The Office of the Comptroller of the Currency (OCC) has provided conditional approval to Anchorage Digital Bank National Association, the first federally chartered digital asset bank in history.

This development was revealed by the federally chartered crypto bank via its Twitter handle.

It tweeted, “Crypto deserves a bank, and we are immensely proud of being approved as the one to set the standard.”

Read the full announcement 👇👇https://t.co/0bvQHtCbCj

— Anchorage (@Anchorage) January 13, 2021

Having such a license places Anchorage Digital Bank firmly on the same regulatory footing as other American national banks in the country.

That said, the Crypto bank will be apple to offer unique services such as sub-custody services within reach for any traditional financial bank that wishes to offer customers access to Crypto assets.

Such a banking charter is the first seen in modern history, as the new Crypto bank continued that saying the banking charter will hinge upon unique requirements:

“As an enforceable condition of approval, the company entered into an operating agreement which sets forth, among other things, capital and liquidity requirements and the OCC’s risk management expectations.”

Ripple announced via a Job listing site it was looking to hire three central bank technical partner managers.

Ripple, a leading crypto fintech company, is going forward to bring the XRP Ledger to central banks.

Recently, Ripple announced via a job listing site that it was looking to hire three central bank technical partner managers – one for each of its offices in London, San Francisco, and New York.

Whoever fills those highly ranked positions will be mandated to design and deploy central bank digital currency (CBDC) projects.

READ: This is how Cryptocurrency works

Ripple also acknowledged that leading US banks could issue stablecoins on the XRP Ledger:

READ: Ripple’s XRP on a grand slam win, gains 20%

Recall that a powerful financial regulator, through the Comptroller of the Currency (OCC),  clarified details on American national banks’ and federal savings associations’ authority in taking part in using stablecoins to conduct payment activities and other bank-permissible functions.

What you should know: Stablecoins are cryptocurrencies created to minimize the price swings that occur in a crypto asset. They are usually pegged to fiat currencies and often exchange-traded commodities.

READ: Crypto owners robbed of 1,150,000 XRP

Stablecoins give owners a sense of security as users can store their assets whenever there is high volatility in the crypto-verse or other financial markets.

In terms of Bitcoin’s level of interest, Nigeria has been adjudged the highest performing nation worldwide.

Nigeria, Africa’s largest economy and home to over 200 million people, has the highest interest in Bitcoin globally.

According to a recent report released by Google, Nigeria emerged the first amongst other countries around the world in Bitcoin searches on Google.

READ: Africa’s internet economy has the potential to reach 5.2% of the continent’s GDP by 2025 – Goggle/IFC

READ: Computers might steal Satoshi Nakamoto’s Bitcoin fortune

READ: List of Cryptos outperforming Bitcoin, with weekly gains of over 100%

READ: Ethereum Miners earn a staggering $1 million in 1 hour

Unsurprisingly, a significant number of young Nigerians have started utilizing cryptos, in a bid to avoid the numerous challenges faced with the traditional money transfer services, such as high costs and slow speed, amongst others.

In an explanatory note to Nairametrics, Ekene Ojieh,  Head of Public Relations and Corporate Strategy at Buffalo Chase – a crypto analytic firm, gave key insights on how some Nigerians use cryptocurrency for wealth preservation.

READ: World Bank set to invest over $5 billion in drylands across 11 African countries

“Nigerians use bitcoin not just as a store of value but also as an investment. Its accessibility enables anyone to send and receive bitcoin from any part of the world, unlike getting US dollars for international transactions.

“It is worthy to note that bitcoin is still a volatile asset. The upside of this is that one can make a significant amount of profit in a short time frame,” said Ojieh.

READ: Why intelligent investors are secretly buying Bitcoin

Then, it becomes unsurprising to see leading crypto brands like Binance, FTX, Paxful, Crypto.com, printing their labels in Nigeria, as it is apparently one of the fastest-growing crypto markets in the ever-changing world.

Home » Great Stuff » Blockchains That Bind: Beyond McMeat Belief Blockchains That Bind: Beyond McMeat Belief Posted by | Nov 10, 2020 | Great Stuff 11 minute, 21 second read Are you exhausted by the breakneck Biden rally? Just kidding. We all know Wall Street rallied on vaccine hopes and end-of-pandemic dreams. Still, the markets took a breather today to digest the roughly 9% rally since Election Day. Well … the small-cap-laden Russell 2000 didn’t rest much, gaining nearly 2% while the Dow, S&P 500 and Nasdaq all took naps. (Great Stuff Tip: This small-cap outperformance is likely to continue. Click here to get in on the gains!) Since the election, we’ve seen Wall Street pundits push their views on everything from green energy to cannabis to health care. A Biden presidency supposedly favors all of these markets. But there’s one major investment idea that Wall Street’s talking heads missed: cryptocurrency and the blockchain technology that drives it. Bitcoin (BTC) investors certainly didn’t miss the recent upswing in the crypto market. BTC has gained nearly 100% in 2020 and jumped more than 12% since Election Day. Why would bitcoin rally on a Biden win? Two factors. First, the Federal Reserve is already floating “digital dollar” ideas that could move U.S. currency toward digital over physical. The pandemic helped speed this up, as coins and dollars are potential COVID-19 transmission vectors. Second, many economists on Joe Biden’s short list of potential advisors are very pro-cryptocurrency. Specifically, current U.S. Federal Reserve Governor Lael Brainard is regarded as the leading contender for Biden’s Treasury Secretary. Brainard explored blockchain technology for the Fed five years ago and has been the central bank’s de facto spokesperson on “all things digital currency, blockchain, stablecoins, and central bank digital currencies” ever since. There are several others, including Gary Gensler (a former Commodity Futures Trading Commission Chairman), but I won’t bore you with the details. Suffice it to say that the Biden White House should be very favorable to cryptocurrencies and blockchain technology. The problem for investors is, well … how do we invest best in this digital currency movement? You could just buy bitcoin and ride the ups and downs. We’re certainly seeing a lot of ups right now, but BTC has a volatile history. If you really want the skinny on BTC, I highly suggest you check out Ian King’s latest video on the leading cryptocurrency: The 3 Big Narratives Driving Bitcoin. On the other hand, you could go the safer route and check out the cryptocurrency-oriented ETF my colleague Annie Stevenson, Managing Editor of American Investor Today, talked about on Friday. Click here for the lowdown on this crypto exchange-traded fund. Why not just tell us the ETF? I can’t do all the work for you … It’s just a click. Sheesh … it’s not even an ad link. (That’s coming in just a bit…) If you’re anything like me, however, cryptos and ETFs just aren’t your style. Directly investing in cryptos is a bit scary, and I have plenty of ETFs in my 401(k). Boooooring. Here’s your way in: the top tech players in the blockchain market. Remember, blockchain is the driving technology behind cryptocurrencies, the electronic ledger that makes crypto secure to begin with. The list of blockchain tech companies includes such illustrious names as Nvidia Corp. (Nasdaq: NVDA), Square Inc. (NYSE: SQ) and PayPal Inc. (Nasdaq: PYPL). But … have you seen the Nasdaq lately? It’s down 2% today, and Wall Street pundits are talking about a shift away from tech and into “return to normalcy” stocks. Certainly, there’s some vaccine overreaction here to account for, and recent declines in NVDA, SQ and PYPL make them attractive in the long run. I sense another “but” coming… And you’re right. But … what if you combined that rising strength in the small-cap market with blockchain enthusiasm? Why you’d have two great tastes that taste great together! Your own Reese’s Peanut Butter Cup of the investing world … if you will. Banyan Hill’s own Paul Mampilly has uncovered a tiny tech company, with stock trading for less than $15, that is poised to lead the blockchain revolution. According to Paul: “If you only ever own one stock, make sure it’s this one!” Click here now to learn more. With Nikola Corp. (Nasdaq: NKLA), no news is often bad news. Heck, even good-ish news is often bad news if you go by market reactions. And just like the other stocks we touch on today, actual sales figures are but a tiny variable in the grand earnings equation. Nikola disappointed on the sales and earnings fronts — no surprise here. The company lost $0.31 per share, where Wall Street wanted a per-share loss of $0.20. Nikola can’t win for losing, but the 10-cent miss is a moot point to what the Street actually cares about: those elusive and continuing talks with General Motors Co. (NYSE: GM). Revenue? Revenue? Don’t even mention revenue … since the company’s still only taking vehicle preorders. Nikola ended the quarter with roughly $900 million in cash after spending $45 million this quarter, namely crafting a manufacturing facility in Arizona and a battery-powered vehicle to be built in Germany. New CEO Mark Russell gave an update on what Nikola’s up to these post-Milton days: “We delivered on our commitment to assemble the first Nikola Tre BEV prototypes and are continuing to work with customers on the prospective and previously announced BEV truck orders.” On the face of it, this is decent if not piecemeal progress as the company builds out its capabilities. You don’t just get to gigafactory factory status overnight, right? “Not good enough!” the NKLA investors cried, and the stock is down about 13% so far this week even as the broader market breaks on through. The next needle-moving news item will undoubtedly be a GM-partnership update — for better or worse. In light of yesterday’s Pfizer surprise-r, it’s the best of times and the worst of times to be in biotech. Well … biotech is always hit or miss, but the pandemic amped things up a notch. Regardless, fellow vax-contender Inovio Pharmaceuticals Inc. (Nasdaq: INO) picked a bad day to report earnings, with the market jumping to joyous conclusions on vaccine hopes. How do you follow Pfizer’s 90% efficacy report? You don’t, really — it’s like if Slayer opened for Suzanne Vega. Inovio dropped over 21% after the Pfizer news came out, but it recouped almost all of the plunge today after its earnings announcement. For the quarter, Inovio made $0.11 per share on $200,000 in revenue. Analysts expected a per-share loss of $0.19 on sales of $3 million. You win some, you lose some, but it’s never about the nitty-gritty numbers with biotech. (Great Stuff log: A pharma stock this tiny had a profitable quarter? What the flux?! Ah, I see: Inovio sold off some equity in another biotech company. Whatever floats your goat, I guess … carry on.) The meat of the matter: Remember Inovio’s vaccine candidate from waaaay back — err, just two months ago? The FDA put trials for INO-4800 on “partial clinical hold” back in late September, with the biotech left just twiddling its thumbs in the meantime while other vax-makers toiled. Now, Inovio’s report also noted that it expects a response from the FDA sometime this month detailing whether or not its “Phase 2/3” vax trial may proceed. If it does, expect more green to follow Ino’s rebound today. And if not? It’s another one for the vaccine scrap heap. October hit Beyond Meat Inc. (Nasdaq: BYND) as hard as the Pixie Stix sugar crash that ended it. Going into earnings, the stock was 25% off its highs, and yesterday’s announcement from McDonald’s Corp. (NYSE: MCD) hit Beyond like a ton of plant-based bricks. But, much like you can sum up an Applebee’s date (no, I won’t let this go), the burger was only the beginning of a night most abominable. Beyond’s earnings paled in the face of, well, everyone’s expectations. The numbers: It gets better — or worse, depending on your involvement in the meatless wonder. Since March, Beyond tried to pivot to in-store sales with most of the restaurant scene on ice for the foreseeable future. Considering half of Beyond’s sales came from restaurants at the start of the year, it was the company’s only option, really. But Beyond’s best-laid plans were foiled. Earnings made it clear that the food stockpiling and panic-buying that boosted the patty peddler to the great beyond earlier this year is no more. BYND sank over 23% today, and not even a Hail Mary team-up with Pizza Hut could save the rout. Here’s the thing with stock market fickleness: Bad earnings won’t always impact a stock … but confusion will. And investors are not thrilled with the McPlant supply chain uncertainty. Is this a Beyond Meat meets Golden Arches collab? Or is Macca going solo? McDonald’s Corp. (NYSE: MCD) CEO Chris Kempczinski gave a hard pass on clearing up the he-said-she-said. He notes: “We have a relationship with Beyond Meat, where they supported us in our Canadian test market. We haven’t made a decision yet about … which suppliers are supporting our global rollout, so I don’t want to comment on that.” Ooh ooh, then what’d Beyond say? CEO Ethan Brown touted his Twain: “Reports of my death have been greatly exaggerated. Our relationship with McDonald’s is fine.” Which is exactly what you’d say if you walked into class late only to see your group presenting the PowerPoint you made … and they completely cold shoulder you. We’ll just see who has vegan egg substitute on their face when the McPlants start growing. The strong results from the Pfizer vaccine were better than most expected and means we could be opening back up sooner than expected. Coupled with an economy that continues to surprise to the upside and the stock market is now pricing in the prospects of a much better economy in ’21. — Ryan Detrick, Chief Market Strategist at LPL Financial In Great Stuff’s Quote of the Week, Ryan Detrick hits the nail on the head. Yesterday’s rally was a bit about President-elect Joe Biden … just a bit. But mostly, Monday’s massive gains were tied to Pfizer Inc.’s (NYSE: PFE) rising vaccine star. If you want more proof of that, just look at the chart below detailing yesterday’s biggest winners and losers: That’s right, you’re getting a twofer — a Quote of the Week and a second Chart of the Week. As you can see, Wall Street fled work-from-home stocks with abandon and loaded up on post-pandemic stocks like Exxon Mobil, American Airlines and banking shares. And why not? We have a vaccine. The pandemic is over! Everything can go back to normal now, right? Not so fast. There are a few provisos … a couple quid pro quos to deal with first, starting with the FDA. The FDA needs to grant “emergency use” status to Pfizer’s vaccine before this ball can really get rolling. Next comes distribution… And that’s when we’re all vaccinated right? What are you worried about Mr. Great Stuff? Wrong. It’s true that Pfizer has ramped up vaccine production in anticipation of approval, but those early doses will go to first responders, doctors, nurses and anyone else working on the COVID-19 front lines. And we’re talking worldwide here, not just the U.S. Those vaccinations will likely burn through all of Pfizer’s pre-approval production. The rest of us will have to wait until more is produced and distributed. We’re looking at months before the general public has access to the COVID-19 vaccine. In the meantime, the virus will continue to spread. It will continue to affect the U.S. and global economy. It will remain a thorn in Wall Street’s side for some time to come. In other words, the only way the U.S. economy is “opening back up sooner than expected” is if Wall Street originally eyed late 2022 or early 2023. As far as a “much better economy in ‘21” goes, that depends just as much on preventing COVID-19’s spread and economic relief from Washington, D.C. as it does on Pfizer’s vaccine. And that’s if all goes well with the vaccine. In short, don’t bail on work-from-home stocks just yet. And certainly don’t go all-in on old-world energy stocks and travel stocks at this point. So, what’s the deal with Reader Feedback? It’s simple, really: You write us a message. We dig it (or not) and gather the cream of the discussion crop for you … weekly! We’re just two days away from this week’s edition of Reader Feedback, and you have more than enough time to hit us with your market rants, questions or, you know, feedback. GreatStuffToday@BanyanHill.com. Send us your best, your worst and everything in between. We’ll catch you tomorrow! You can always follow us on social media too: Facebook, Instagram and Twitter. Until next time, stay Great! Joseph Hargett Editor, Great Stuff Editor’s Note: I, along with a few esteemed colleagues, publish our insight in our e-letters American Investor Today, Smart Profits Daily, Bold Profits Daily, Great Stuff & Bauman Daily. Every day, we send you our very best ideas to help protect and grow your wealth. Sign up below for free. I started your system in December … I am ahead $29,000 … I put total faith in you and your system and it has worked for me very nicely. Thanks again I sure like your humble approach about this whole thing - Dale Leiffer I have made a little over $4,000 while being cautious. - Chuck Goss

Tether is presently the third most valuable crypto with a market value of $23.5 billion.

Tether is the most valuable stablecoin by market value. It is a leading household name in the fast-changing crypto market.

The latest development is that Tether treasury minted a whopping 400 million USDT, as seen on Whale Alert, an advanced blockchain tracker and analytic firm.

READ: Cassava Fintech new COO projects an 80% online usage for its company´s payment platform

Tx: https://t.co/ZZ2Hyi3box

— Whale Alert (@whale_alert) January 7, 2021

READ: No retreat, no surrender, XRP jumps by 21%

What you should know

At the time of writing this report, the stablecoin traded at $1.00 USD with a daily trading volume of $133.4 billion. Tether is down 0.16% for the day. It is presently the third most valuable crypto with a market value of $23.5 billion.

READ: Ethereum investors have gained 51% in 2021 alone

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Follow Olumide on Twitter @tokunboadesina or email [email protected] He is a Member of the Chartered Financial Analyst Society.

The Office of the Comptroller of the Currency (OCC) has provided conditional approval to Anchorage Digital Bank.

The Office of the Comptroller of the Currency (OCC) has provided conditional approval to Anchorage Digital Bank National Association, the first federally chartered digital asset bank in history.

This development was revealed by the federally chartered crypto bank via its Twitter handle.

It tweeted, “Crypto deserves a bank, and we are immensely proud of being approved as the one to set the standard.”

Read the full announcement 👇👇https://t.co/0bvQHtCbCj

— Anchorage (@Anchorage) January 13, 2021

Having such a license places Anchorage Digital Bank firmly on the same regulatory footing as other American national banks in the country.

That said, the Crypto bank will be apple to offer unique services such as sub-custody services within reach for any traditional financial bank that wishes to offer customers access to Crypto assets.

Such a banking charter is the first seen in modern history, as the new Crypto bank continued that saying the banking charter will hinge upon unique requirements:

“As an enforceable condition of approval, the company entered into an operating agreement which sets forth, among other things, capital and liquidity requirements and the OCC’s risk management expectations.”

Ripple announced via a Job listing site it was looking to hire three central bank technical partner managers.

Ripple, a leading crypto fintech company, is going forward to bring the XRP Ledger to central banks.

Recently, Ripple announced via a job listing site that it was looking to hire three central bank technical partner managers – one for each of its offices in London, San Francisco, and New York.

Whoever fills those highly ranked positions will be mandated to design and deploy central bank digital currency (CBDC) projects.

READ: This is how Cryptocurrency works

Ripple also acknowledged that leading US banks could issue stablecoins on the XRP Ledger:

READ: Ripple’s XRP on a grand slam win, gains 20%

Recall that a powerful financial regulator, through the Comptroller of the Currency (OCC),  clarified details on American national banks’ and federal savings associations’ authority in taking part in using stablecoins to conduct payment activities and other bank-permissible functions.

What you should know: Stablecoins are cryptocurrencies created to minimize the price swings that occur in a crypto asset. They are usually pegged to fiat currencies and often exchange-traded commodities.

READ: Crypto owners robbed of 1,150,000 XRP

Stablecoins give owners a sense of security as users can store their assets whenever there is high volatility in the crypto-verse or other financial markets.

In terms of Bitcoin’s level of interest, Nigeria has been adjudged the highest performing nation worldwide.

Nigeria, Africa’s largest economy and home to over 200 million people, has the highest interest in Bitcoin globally.

According to a recent report released by Google, Nigeria emerged the first amongst other countries around the world in Bitcoin searches on Google.

READ: Africa’s internet economy has the potential to reach 5.2% of the continent’s GDP by 2025 – Goggle/IFC

READ: Computers might steal Satoshi Nakamoto’s Bitcoin fortune

READ: List of Cryptos outperforming Bitcoin, with weekly gains of over 100%

READ: Ethereum Miners earn a staggering $1 million in 1 hour

Unsurprisingly, a significant number of young Nigerians have started utilizing cryptos, in a bid to avoid the numerous challenges faced with the traditional money transfer services, such as high costs and slow speed, amongst others.

In an explanatory note to Nairametrics, Ekene Ojieh,  Head of Public Relations and Corporate Strategy at Buffalo Chase – a crypto analytic firm, gave key insights on how some Nigerians use cryptocurrency for wealth preservation.

READ: World Bank set to invest over $5 billion in drylands across 11 African countries

“Nigerians use bitcoin not just as a store of value but also as an investment. Its accessibility enables anyone to send and receive bitcoin from any part of the world, unlike getting US dollars for international transactions.

“It is worthy to note that bitcoin is still a volatile asset. The upside of this is that one can make a significant amount of profit in a short time frame,” said Ojieh.

READ: Why intelligent investors are secretly buying Bitcoin

Then, it becomes unsurprising to see leading crypto brands like Binance, FTX, Paxful, Crypto.com, printing their labels in Nigeria, as it is apparently one of the fastest-growing crypto markets in the ever-changing world.