Here’s something light for Sunday: one of the most well-written yet bizarre articles I have come across on the crypto scene.
This was written nearly three years ago, right after the big bitcoin crash of early 2018. But a lot of what the writer describes is what you see on the crypto scene today, so perhaps she’s captured the essence of things, super-entertaining yet sobering.
This person in Austria ingeniously cools his cryptocurrency mining hardware with cold air sucked in from outside his house. And uses part of his cryptocurrency earnings to pay for his entire house’s electricity bill!
Here’s his commentary:
Some crypto currencies… are generated by thousands of people who run dedicated hardware to basically calculate random numbers until one cryptographically correct one is found.
Never mind how it works on a technical level, the main takeaway is that you can put some device in your house that uses electricity and produces heat. In exchange you get shares of that crypto currency coins like Ethereum or Bitcoin
Each of these cards are running at about 80°C (176°F). I can just harvest this heat and send it to my heatpump so it would need less energy warming the outside air. Since I’m only running the miner when it’s cold outside (and the price is high enough) I can use the cold, dry outside air to cool the miners and also recycling the warm air they produce to feed into the heat pump.
Success! I was able to lower my heat pump’s electricity needs by ~50% and half of the costs are also paid for by the mining earnings (My mining rig will stay profitable until the ETH price is at ~900$. Below that it’ll no longer match its own electricity bill. )
Bill Gates is not bullish on cryptocurrency
In an interview with Bloomberg TV, Bill Gates expressed his skepticism about the prospects of cryptocurrency.
When asked about Elon Musk’s full-throated enthusiasm for bitcoin,
Well look. Elon has tons of money and he’s very sophisticated. So you know I don’t worry that his bitcoin will sort of randomly go up or down. I do think people get bought into these manias who may not have as much money to spare. So I’m not bullish on Bitcoin. My general thought would be that you know if you have less money than Elon you should probably watch out…
He goes on to list what he doesn’t like about bitcoin
Look there are things we invest in in society that produce output. Bitcoin happens to use a lot of energy. It happens to promote anonymous transactions. They’re not reversible transactions.
Gates is right about the first part. Elon Musk is wealthy not because he made wise, early investments in bitcoin (which he may well have), but because of his ownership of very valuable companies, most notably Tesla. However large Musk’s bitcoin holdings may be, their rise and fall don’t make a difference to his quality of life. That isn’t true for most of the rest of us – Gates is warning us to not bet all our investments on bitcoin in the hope of striking it rich.
About the second part, well. One argument people make is that many of us hold US dollars to mitigate the impact of the devaluation of our country’s currency – say the Indian rupee – against the US dollar. They argue that Bitcoin is no different. Against the rupee, its value happens to have risen a lot more than the dollar.
Things aren’t looking great for people in India to invest in Bitcoin and other cryptocurrency. There’s a bill due to be tabled in this current session of Parliament that seeks to simply ban “all private cryptocurrencies” – which means everything other than Indian-government-issued tokens. This is the description of the bill on the Lok Sabha agenda (see item 12)
Just yesterday, the RBI governor said, in an interview with CNBC TV18: “…on crypto, we have major concerns from the financial stability angle. We have shared it with the government and government will consider and take a call.”
Now. In 2018, the RBI had forbidden banks from dealing with crypto-linked entities. That made it very difficult for people in India to convert INR to bitcoin/other crypto and back. It put a freeze on the entire industry. Then in 2020, the IAMAI association and a few other litigants successfully argued in the Supreme Court to overturn this ban:
But as the Economic Times reported last week, banks are regardless cracking down accounts that transfer money to/from crypto exchanges. A notice from HDFC bank says: “We have observed probable virtual currency transactions reflected in your account, kindly clarify the nature of these transactions by visiting the nearest branch within 30 days.” Ominous.
On the other side, India’s nascent crypto industry, mostly cryptocurrency exchanges, are doing what they can to mobilize public opinion. The founder of one of the country’s biggest exchanges wrote in a Financial Express column that
Banning [cryptocurrency] would be like banning the Internet in the 1990s and will set India back by years while the rest of the world moves forward.
and said that over 1 crore Indians have held crypto at some point.
I guess it’s not great being in the crypto industry in India. There is massive demand and curiosity among young investors in crypto and other alternative assets. But there’s been regulatory uncertainty since at least early 2018, which is a long, long time in an industry as fast-moving as crypto.
So this happened earlier today (last evening US time). There are (relatively) few companies parking some of their cash in Bitcoin today, at least publicly.
But given how conservatively corporate treasury is usually managed, it’s a window into these few companies’ confidence in the trajectory of Bitcoin/crypto)
Remember the cricket, football and WWF stat cards from the 90s? Non-fungible tokens or NFTs are kind of the twenty-first century’s version of those, but on the public blockchain. And they’ve become pretty highly priced investments. The New York Times has a great long read on them:
On Thursday, he put a one-of-a-kind version of [an animated flying card] up for sale on Foundation, a website for buying and selling digital goods. In the final hour of the auction, there was a bidding war. Nyan Cat was sold to a user identified only by a cryptocurrency wallet number. The price? Roughly $580,000.
_Other digital tokens recently sold include a clip of LeBron James blocking a shot in a Lakers basketball game that went for $100,000 in January… _
Lindsay Lohan sold an image of her face for over $17,000 and, in a nod to cryptocurrencies like Bitcoin, declared, “I believe in a world which is financially decentralized.” It was quickly resold for $57,000
Justin Blau, a D.J. who goes by 3LAU, [has] sold more than $1.1 million worth of digital art and music… Last week, he announced plans to offer a full album as an NFT
The article explains NFTs like this:
The buyers are usually not acquiring copyrights, trademarks or even the sole ownership of whatever it is they purchase. They’re buying bragging rights and the knowledge that their copy is the “authentic” one.
For me, the best way to understand the concept of NFTs is in terms of the Mona Lisa. We’ve all seen a picture of it. We’ve seen mockups, mashups, memes, animations and all kinds of variations of it. We can hang a print of it in our living room the exact dimensions as the original.
But there’s only one ‘real’ painting, and we all take the Louvre’s word that it’s the authentic one. In the case of something that is a non-fungible token, it’s the public blockchain that sets in stone the authenticity of one instance of it. In the case of Nyan Cat, the animated ‘cat-with-pop-tart-body-zooming-leaving-a-rainbow-trail’, I have a GIF of it in my camera roll, but only one person owns the Nyan Cat animation.
Again, the Times:
In an NFT sale, all the computers hooked into a cryptocurrency network record the transaction on a shared ledger, a blockchain, making it part of a permanent public record and serving as a sort of certification of authenticity that cannot be altered or erased.
It’s hard to grok anything digital being an authentic copy because we’ve all become used to copying (pirating?). But the analogy to paintings, or any other ‘real’ artwork, still holds. And therefore,
[Buyers] are trying to make a quick buck as cryptocurrency prices surge. Many see it as a form of entertainment that mixes gambling, sports card collecting, investing and day trading.
The market for NFTs began to pick up last year, with more than 222,000 people participating in $250 million worth of sales, quadrupling the volume in 2019, according to Nonfungible.com
Bonus: read the New York Times’ coverage of really the first breakout NFT hit, Crypto Kitties in 2017.
It was huge back then, so big that it slowed down all transactions on the public Ethereum blockchain for several days. These two paragraphs explain the wild stuff that digitisation and the blockchain makes possible:
Each kitty has a core “DNA” on the blockchain, and the game is basically to mate them (the illustrators do not go deep into specifics) and see what kitty results. The progeny tend to have their parents’ traits (an expensive cat will have an expensive kitten) but might surprise or disappoint with more or less valuable traits than either of its parents.
There’s a limited number of highly desirably first-generation kitties and four billion possible combinations of cats based on traits the on-staff artists have created (whisker aesthetic, background color, fur type). The company gets a 3.75 percent cut of the breeding and selling auctions.
China’s e-yuan – the Financial Times takes a look at how the Chinese Government is pushing adoption of the natively-digital currency, not just to advance payments and investments, but also to exert even greater control over its population.
(article may be paywalled; consider supporting good journalism.)
China is intent on becoming the first large economy to introduce a digital currency, showcasing its position as the global leader in payments technology to the world at next year’s Winter Olympics.
Cryptocurrencies are often decentralised; they are not issued or backed by governments. The “e-yuan”, by contrast, is part of China’s top-down design… the digital currency project is tied up in the Communist party’s drive to maintain control over society and the economy. The technology is partly designed to reinforce its surveillance state.
Its digital format enables the central bank to track all transactions at the individual level in real time. “we will give those people who demand it [paper money and coins] anonymity in their transactions… but at the same time, we will keep the balance between the ‘controllable anonymity’ and anti-money laundering, CTF [counter-terrorist financing], and also tax issues, online gambling and any electronic criminal activities”
If current statements by the government are any measure, it’s a pretty big blow to privacy:
The e-yuan is also seen
as a means to reassert state control over its fintech industry and a vast e-payments market that is dominated by two huge private companies, Ant Group and Tencent… the digital renminbi is distributed directly to the e-wallets of users by state-owned banks, thus setting up payments channels that circumvent Alipay and WeChat Pay.
Good morning, folks. The world’s first two bitcoin ETFs have listed, both in the last week. Of all places, in Canada 🇨🇦 , on the Toronto Stock Exchange.
The first one, Purpose Bitcoin ETF, trades under the ticket BTCC, and had over USD 400 million in asset as of the weekend.
The second one, Evolve Bitcoin ETF, just began trading as EBIT and has assets of just over a million USD.
Both have management fees of 1%, which pretty high is as far as ETFs go.
In general, this means that the institutional infrastructure required to support an ETF is up and ready and running for the bitcoin world: a custodian to actually invest the money into bitcoin and hold that bitcoin securely, a reference price that the regulator is confident enough to sign off on, and so on.
I think it’s very interesting to see new jurisdictions like Canada open up to innovation like this. The USA SEC has been wary of bitcoin ETFs for years now, having shot down many applications from asset managers to launch one. There have been new applications in 2021, and the Canadian green light may help persuade the SEC to follow suit.
Earlier in February, the central bank of Nigeria banned its banks and financial institutions from servicing cryptocurrency exchanges. Nigerians now have little to no options to convert their local currency to bitcoin and cryptocurrency – which I suppose was the objective.
A few things in this context are notable:
~ This sounds identical to the 2018 ban by Reserve Bank of India.
~ Bitcoin is now trading at nearly a 50% premium in Nigeria: see http://www.bitcoinpricemap.com
~ Since there are no online exchanges, this is probably on local P2P markets like https://localbitcoins.com . This is as transparent a signal as you can get for how desirable cryptocurrency is there. Bitcoin in Malaysia, Indonesia, India, Turkey, and most South American countries is also trading at significant premiums – although Nigeria is off the charts.
~ Late last year, there was press coverage internationally on how anti-police-brutality protestors were using bitcoin (and potentially other tokens) to raise funds:
~ Throughout 2019 and 2020, Nigeria topped Google trends for searches around bitcoin. One reason could be simply because Nigeria’s currency really hasn’t done well versus the dollar, or simply because Nigeria is a very young country and there’s curiosity about crypto:
This article in this week’s issue of The Economist is a decent overview of central bank digital currencies, or governments issuing their own cryptocurrency.
According to the article, the main difference between these and the cashless payment systems we already use is “money held on a CBDC app or website will be equivalent to a deposit at the central bank”. Similarly, the article predicts, money held in private payment/wallet apps will still be equivalent to being held at the bank, not on the payment providers’ balance sheet.
I was disappointed that the article made only one passing reference to the programmable nature of digital currency, something that is widely done in crypto projects today’s using “smart contracts”, often the most innovative part of such projects. Back in September 2020, I had explored this topic myself in more detail:
