Energy & Crypto
What the energy crisis and crypto has in common
Hello!
You might not think the ongoing energy crisis and crypto have much in common, but I think there’s a case to be made that energy can find its way into anything.
First, we’ll talk about the big news in Crypto and what everyone is talking about with “The Merge” (I was bound to visit this topic eventually) and the link between the energy crisis we see before us.
Also, I was sent this article on Starbucks’ blockchain-based loyalty programme by one of the LiB readers (h/t Hew!) - not long after writing about Starbucks’ potential NFT strategy a few weeks ago!
Let’s get to it!
The Merge & the Energy Crisis
So to start with, The Merge:
Goal of The Merge: Shift from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
What this means:
The main Ethereum blockchain is merging with something called ‘Beacon Chain’. This basically means the Ethereum Blockchain will become more scalable, sustainable and secure.
What’s ‘Proof-of-Work’ again?: Miners compete to solve cryptographic problems in order to earn the right to add a new block to the blockchain & are awarded with tokens - in this case, ether (which they can exchange for $$).
And….’Proof-of-Stake’?: Users ‘stake’ tokens to earn the right to become a validator of the blockchain and are chosen to become validators based on some factors like how many tokens you’ve staked and for how long.
So, how does this relate to energy?
Proof-of-Stake will use 99.95% less energy than PoW. This is a big deal, especially when there are charts like this out there:
There are additional factors that I’d hate to miss out on e.g. the value that Bitcoin & digital assets bring, as well as a comparison to other innovations (aviation, marine transport, air conditioners and more) - they all omit A LOT more emissions - if you wanna dig in, The World Economic Forum published a good piece in March about this exact narrative.
There’s also an argument that Proof-of-Stake will allow Ethereum to become even more decentralized.
Decentralization of…everything/many things is an important goal for crypto community.
On a Proof-of-Work blockchain, the longer time goes on, the faster that key players with more computing power can solve cryptographic problems.
Proof-of-Stake allows anyone to become validators, either by spinning up their own Ethereum node or by using a service like Lido or Rocket Pool and ‘pooling’ your ETH with other people - they take care of all the hassle for you.
So, how does this relate to the Energy crisis?
European energy policy focuses on renewable energy - which means there’s no stable energy supply and therefore Europe needs to rely on Russia to supply the energy resources it requires.
Russia being Russia - isn’t playing nice and is causing a bottleneck to force Europe to play ball with them.
The climate in Europe isn’t helping either - in France for example, there wasn’t enough wind & there were droughts, so no hydropower. The UK had the joint hottest summer on record.
This exacerbated the issue of needing a stable source of energy supply aka Russia.
This level of ‘energy centralization’ has obviously come at a cost for Europe - the UK government in particular are freezing energy prices to influence supply and demand.
So, going back to Crypto?
Everything is intertwined.
While the energy crisis is showing the real effects of mass centralization (energy pipelines being supplied by Russia), the impact of centralization in crypto leads to a widening gap of inequality.
While both industries are making substantial moves to change this and move to a decentralized model of operating, this takes time. We must invest time in figuring out why decentralization is important in our lives and the impact of not moving towards this.
Additional reading:
Kyla Scanlon’s post on The Ethereum Merge & Energy Markets was the inspiration behind today’s piece.
📚 Interesting Links Of The Week
🚴♀️ A Bicycle of Inequality
Short piece by Dror Poleg on the role of Personal Computing and the introduction of Bicycles to make people more productive, earn more and build comfortable lives.
👑 Queen Elizabeth II Ethereum NFT Tribute
QueenE, an Ethereum-based NFT project, is holding its final Gen1 artwork auction - one of the pieces:
♣️ What I Learned at Clubhouse
Great lessons for early-stage lessons - lesson #6 (Talk to users (even if you don’t think you need to)) and lesson #13 (Strategy is not doing everything) resonated with me.
Until next time
I hope you enjoyed this week’s edition - I'd love it if you shared it with a friend or two.
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Fahim