November 7, 2017

If you were only to read one thing…

Vice – Motherboard: One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week – Christopher Malmo 11/1

  • “Bitcoin’s incredible price run to break over $7,000 this year has sent its overall electricity consumption soaring, as people worldwide bring more energy-hungry computers online to mine the digital currency.”
  • “An index from cryptocurrency analyst Alex de Vries, aka Digiconomist, estimates that with prices the way they are now, it would be profitable for Bitcoin miners to burn through over 24 terawatt-hours of electricity annually as they compete to solve increasingly difficult cryptographic puzzles to ‘mine’ more Bitcoins. That’s about as much as Nigeria, a country of 186 million people, uses in a year.”
  • “This averages out to a shocking 215 kilowatt-hours (KWh) of juice used by miners for each Bitcoin transaction (there are currently about 300,000 transactions per day). Since the average American household consumes 901 KWh per month, each Bitcoin transfer represents enough energy to run a comfortable house, and everything in it, for nearly a week. On a larger scale, De Vries’ index shows that bitcoin miners worldwide could be using enough electricity to at any given time to power about 2.26 million American homes.”
  • “It’s worth asking ourselves hard questions about Bitcoin’s environmental footprint.”
  • “Since 2015, Bitcoin’s electricity consumption has been very high compared to conventional digital payment methods. This is because the dollar price of Bitcoin is directly proportional to the amount of electricity that can profitably be used to mine it. As the price rises, miners add more computing power to chase new Bitcoins and transaction fees.”
  • “…at a minimum, worldwide Bitcoin mining could power the daily needs of 821,940 average American homes.”
  • “Put another way, global Bitcoin mining represents a minimum of 77KWh of energy consumed per Bitcoin transaction.”
  • “Digiconomist’s less optimistic estimate for per-transaction energy costs now sits at around 215 KWh of electricity. That’s more than enough to fill two Tesla batteries, run an efficient fridge/freezer for a full year, or boil 1872 litres of water in a kettle.”
  • “…it’s quite clear that even at the minimum level of 77 KWh per transaction, we have a problem. At 215 KWh, we have an even bigger problem.”
  • “That problem is carbon emissions. De Vries has come up with some estimates by diving into data made available on a coal-powered Bitcoin mine in Mongolia. He concluded that this single mine is responsible for 8,000 to 13,000 kg CO2 emissions per Bitcoin it mines, and 24,000 – 40,000 kg of CO2 per hour.”
  • “As Twitter user Matthias Bartosik noted in some similar estimates, the average European car emits 0.1181 kg of CO2 per kilometer driven. So for every hour the Mongolian Bitcoin mine operates, it’s responsible for (at least) the CO2 equivalent of over 203,000 car kilometers travelled.”
  • “As goes the Bitcoin price, so goes its electricity consumption, and therefore its overall carbon emissions. I asked de Vries whether it was possible for Bitcoin to scale its way out of this problem.”
  • ‘Blockchain is inefficient tech by design, as we create trust by building a system based on distrust. If you only trust yourself and a set of rules (the software), then you have to validate everything that happens against these rules yourself. That is the life of a blockchain node,’ he said via direct message.”
  • “This gets to the heart of Bitcoin’s core innovation, and also its core compromise. In order to achieve a functional, trustworthy decentralized payment system, Bitcoin imposes some very costly inefficiencies on participants, for example voracious electricity consumption and low transaction capacity. Proposed improvements, like SegWit2x, do promise to increase the number of transactions Bitcoin can handle by at least double, and decrease network congestion. But since Bitcoin is thousands of times less efficient per transaction than a credit card network, it will need to get thousands of times better.”
  • “In the context of climate change, raging wildfires, and record-breaking hurricanes, it’s worth asking ourselves hard questions about Bitcoin’s environmental footprint, and what we want to use it for. Do most transactions actually need to bypass trusted third parties like banks and credit card companies, which can operate much more efficiently than Bitcoin’s decentralized network? Imperfect as these financial institutions are, for most of us, the answer is very likely no.”

Perspective

Visual Capitalist – Visualizing Household Income Distribution in the U.S. by State – Jeff Desjardins 11/6

Worthy Insights / Opinion Pieces / Advice

FT – Why we need to regulate the tech platforms – Rana Foroohar 11/5

  • “Companies should be made to open up the black box of their algorithms.”

Markets / Economy

NYT – A Bull Market Should Make Investors Happy. This One Isn’t. – Landon Thomas Jr. 11/5

  • “Rarely has a bull market been so unloved. Since March 2009, the Standard & Poor’s 500 stock index has nearly quadrupled in value. This year, not only is the index up 15 percent, but it also seems to have stopped going down at all: October was the 12th straight month that the S.&P. has logged a positive return, the first time that has happened since 1935.”
  • “Yet in most conversations about the ever-rising stock market, brokers and investment advisers say, are dominated by the question of when it will all come to an end.”
  • “These days, each successive stock market record seems to spur more hand-wringing than cheerleading. There is anxiety about overhyped shares, about the possibility of central banks withdrawing their support for global economies, even about markets simply being worryingly quiescent, as evidenced by the historically low readings of the volatility index known as the VIX.”
  • “In fact, many analysts say that this so-called wall of worry is a positive sign. Investors may be piling into stocks and bonds, the thinking goes, but they are doing it with a measure of hesitation, which prevents some of the excesses that preceded previous market corrections.”

Environment / Science

FT – HSBC promises $100bn to fight climate change – Andrew Ward 11/5

  • “Bank to support projects aimed at reducing carbon emissions.”

China

WSJ – Downgrades Shadow Moody’s S&P’s Push Into China – Shen Hong, Manju Dalal, and Gunjan Banerji 11/6

  • “As ratings firms plot entry into long-coveted market, questions remain as to China’s openness to international raters.”

Middle East

NYT – Saudi Crown Prince’s Mass Purge Upends a Longstanding System – David D. Kirkpatrick 11/5

  • “A midnight blitz of arrests ordered by the crown prince of Saudi Arabia over the weekend has ensnared dozens of its most influential figures, including 11 of his royal cousins, in what by Sunday appeared to be the most sweeping transformation in the kingdom’s governance for more than eight decades.”
  • “The arrests, ordered by Crown Prince Mohammed bin Salman without formal charges or any legal process, were presented as a crackdown on corruption. They caught both the kingdom’s richest investor, Prince Alwaleed bin Talal, and the most potent remaining rival to the crown prince’s power: Prince Mutaib bin Abdullah, a favored son of the late King Abdullah.”
  • “All members of the royal family were barred from leaving the country, American officials tracking the developments said on Sunday.”
  • “With the new detentions, Crown Prince Mohammed, King Salman’s favored son and key adviser, now appears to have established control over all three Saudi security services — the military, internal security services and national guard.”
  • “’It is the coup de grâce of the old system,’ said Chas W. Freeman, a former United States ambassador. ‘Gone. All power has now been concentrated in the hands of Mohammed bin Salman.’”
  • “Crown Prince Mohammed’s haste, however, may now come at a price, because the lack of transparency or due process surrounding the anticorruption crackdown is sure to unnerve the same private investors he hopes to attract — including through a planned stock offering of the huge state oil company, Aramco.”
  • “Saudi Arabian businessmen and royals anxious about the crown prince’s plans were quietly moving assets out of the country even before the arrests.”
  • “The Saudi Arabian news media, however, celebrated the arrests as a long-awaited cleanup, appealing to populist resentment of self-enrichment enjoyed by the sprawling royal family and its closest allies.”
  • “Almost everyone in the capital, Riyadh, and other big cities like Jidda has heard stories about princes absconding with vast sums that had been allocated for a public project.”
  • “The arrests are ‘a frontal assault on some members of the royal family and the impunity with which they have operated in the past,’ said Bernard Haykel, a professor at Princeton University who studies Saudi Arabia.”
  • “’It was something that had to be done,’ he said, even though the absence of a judicial process ‘sends a chill down the spine of foreign investors.’”

South America

WSJ – Daily Shot: Venezuela 10yr Government Bond Yield 11/3

  • Markets reacting to news that Venezuela wants to restructure its debt (finally…)

WSJ – Daily Shot: Venezuela 5yr Sovereign CDS Spread (bps) 11/3

WSJ – Daily Shot: Venezuela Econ – Black Market Exchange Rate – Bolivar to USD 11/6

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