Weekend Bonus: Crypto IRL, Episode 4 with Tim and Katie

This is episode four of Crypto I r L. If you want the full video experience, head over to Bloomberg dot com, slash qt or check it out on YouTube. I know you said you didn't want to talk about energy even for one episode, but I have bad news. What's up? We're doing two episodes when it comes to energy and Christmas can't stop talking about it. Should I do my merge joke about merging the two episodes together? Is that the joke? That the whole joke? All? Right?

That was terrible? But do you think we should do a catch up for people who theoretically didn't watch the first episode? Yeah? How about this? Okay? But seriously, I think it's important to go to Texas figuratively speaking get the other side of the argument. Talked to a traditional proof of work, bitcoin minor in air quotes dirty minor, and see what they're all about. We're talking Texas, We're

talking to energy usage. It's almost like if the classic TV show Dallas were around in this day and age, it would be about bitcoin mine. That's cute. Kind of makes me think that we should have some sort of different intro for the showy it was, I just tell

us when you do at our Justice Sure. We are a national organization UM, and we work with clients and partners across the country to advocate UM for measures to fight the climate crisis, for more sustainable food and farming practices UM, to keep toxics out of our homes and in our water bodies UM, and to protect a public health.

So we started to get concerned about cryptocurrency mining in New York because New York actually has a landmark climate law on the books called the Climate Leadership and Commune Protection Act. It's one of the country's strongest climate laws. So we have been watch talking to make sure the state can meet those mandates, and we learned about the energy consumption of cryptocurrency mining. Were concerned about what that would meet for New York's ability to meet our mandates.

So a lot of stuff that we do on our phones and online uses a lot of energy. And I guess my biggest question for you is our selfies more important than bitcoin? I hate this photo. I hate this photo, but go on, we had to take this. I this is very cute. It looks like you guys polaroid. I wanted it bigger. Actually you wanted it was ninety to

make it bigger though, and we're told that was too much. Yeah. Yeah, but you're you raised an important question, right, Like, there are so many things that we use these days that use a lot of energy. But there's a couple of points to respond to that. One is with cryptocurrency, we don't have to there are other ways to validate cryptocurrencies that don't consume as much energy. Um yeah, yeah, yeah, So you're speaking our languages. Okay, good, So I'm amongst

my people because it's quite nerdy. Most people don't mining. What's she's a nerd? So you're good, see you? Uh yeah, So proof of work versus proof of steak, But it's not even just about proof of steak. There's also proof of burn proof authentication. I've never heard a proof of burn. You had this and then when you said proof of burn, we're just checked out. Good thing the show is recorded. It means we can just stop and add things like this and just drop them right into the conversation. So

proof of burn. Proof of burn is another way through which participants in a blockchain network reach the consensus that's needed to approve trans actions. It uses less energy than proof of work because it doesn't involve minors solving cryptographic puzzles. Instead, network participants gain the power to verify transactions by sending a portion of their tokens to a wallet where the coins will be burned. This essentially means that those tokens

will be permanently removed from the circulating supply. Miners will then get rewarded for their work by receiving native tokens of that blockchain. I'm glad we cleared that up. Yeah, so there's actually validation methods beyond proof of work, improof of steake. I think those are the validation methods that are talked about the most, but there's others, and we

don't particularly care about proof of steak per se. What we do care about the energy consumption, and with proof of work, that validation method does come with huge energy consumption. So energy use for bitcoin is often compared to traditional banking, right. Digital banking does use a lot of energy, but when you talk about the consumers, it's very different. And also at this point, energy consumption of crypto is already half of what traditional banking is, so it's almost it's getting closer.

What you're saying is that the energy consumption taken up by the traditional financial institutions around the world is a lot of energy and a lot of you know, crypto advocates would point to that as being a reason why it's you know, okay to do crypto, because existing financial systems use a lot of energy. But you're saying that serves a lot more people, so it's in a sense it's justified more. We have to cut energy consumption everywhere. Right, So this is certainly not to say that the energy

consumption of traditional banking is a good thing. There's definitely a ratio difference here, but ultimately we need to be looking to make everything more energy efficient, and with cryptocurrency, we know that there are methodologies that are extremely less energy consumption and proof of work, so proof steak is what most people are familiar with. There was a big merge with ethereum where they're switched. They've switched now from

proof of work to proof of steak. Um. That means their energy consumption has gone down over I mean, this is a huge way to cut down emissions and being more climate forward. So how how would you design a low to rein that in? I mean, would you ban crypto mining? Would you ban currencies that use proof of work? So some of the ways that are currently being explored

or um So I'll give an example. UM. The federal government came out with report a couple of weeks ago looking at the energy environmental impacts of proof of work, and what they've recommended is different agencies to come up with various standards that would rotch it down energy consumption over time. So that could be one way to do it. Um. But that being said, the report also notes that if those things don't work, the federal government should look into

limiting what types of validation methods get used for cryptocurrencies. UM. So that might not necessarily be the first step that's taken in terms of eliminating proof of work, but it's clear that given the environmental and energy impacts, even our federal government is thinking that might be a route we have to take. Well, Tim and I have asked the question to a few people at this point, why can't

the bitcoin blockchain also transition to proof of stake? And the answer we get is that you sacrifice security, you sacrifice other things and basically the entire ecosystem has to agree, and they probably won't agree. And when you think about that, I mean, how do you respond to that? How do you go about campaigning that actually this is the whitefle word. Yeah, I won't disagree with Like, it would be complicated for the bitcoin network to make a switch from proof of

work to proof of steak um. A lot of the arguments roof of work through steak regarding like security and things like that. Not an expert in these areas, but I found a lot of them to be more philosophical and not actually based on the technology itself. I want to step back from the facts and talk about emotions.

Because I've said this to Tim before, I tend not to like talking about energy uses and bitcoin because it feels like there's so much emotion on both sides, like it quickly devolves these discussions into people just talking back and forth. And I mean, from your stance at Earth Justice, how do you navigate that and deal with again, very hot emotions it can turn into on both sides. It

is really tough emotions. I do have to say, in the realm environmental advocate advocacy, it's not unusual, right, I do work around building electrification for example, when people love their gas stoes. So there are a lot of emotions at play here. UM. We try to keep things very based on the facts, you know, and when it comes to the climate crisis, there's just such an urgency there. So that's why we're looking at this. We try our best to make it clear that we're not opposed to

crypto UM. You know. I think some of that sensitivity comes in is feeling like they're tapped right like, because there are people who are very anti crypto UM. And I think the perception is, oh, environmentals are saying this is not a good use of energy, and it's not really that. It's pointing out this is very energy intensive their ways to do it that aren't and we need to be doing this across the board when it comes to raining and energy consumption, right, white fixtures, their energy

standards for light fixtures, their energy standards for appliances. So that's the type of thing we need to look at for the cryptocurrency mining universe as well. Okay, as painful as it was another problem, you have no idea what it's not a photo of me? Okay, as painful as it was for us to go and buy this a single use plastic water bottle. It's ridiculous. Uh. I have to ask where on the spectrum something like this falls versus crypto I mean we're talking the entire spectrum here.

You also have like a private jet. Well, the private jet would not fit in the room. Yeah, I tried to get one, but it was not approved. So which angle do you mean, like in terms of carbon impact, in terms of like importance and addressing. I mean, I do you think if we look at it like in a holistic way, right, the use of the use of a single use plastic bottle versus in the production that goes into it, then what happens to it after it gets recycled, if it can get recycled, and that versus

cryptocurrency industry in general, like which one is worse? Which one is more useful, which one has more utility. It's hard to weigh things in that manner because both have serious impacts that we're seeking government to act on. Right, So that single use water bottle looks delicious, so it actually has government regulations UM that deal with the waste impact here right, UM, certainly not enough. We're advocating for

more UM. But for example, we're in New York. In New York, uh, that has a five cent deposit on it. So that water bottle is much more likely to become another water bottle than a water bottle in like I don't know, I'm going to name maybe like trash. Some other states they don't have a deposit law, right, like the five cent fee, the ideas like oh that incentivizes consumer and recycling. Right, so we have some kind of

environmental standards for that water bottle. We want to do the same with cryptocurrency mining right now, that really doesn't exist. It's a new industry that we're looking at, so we have to play catch up. So as we're going to speak to the CEO of Riot Blockchain, which of course operates in Texas, to set a lot of issues with energy uses in general, but also with crypto mining. What would you say him? So, Texas has been dealing with a number of issues related to their grid where there

have been major power outages. Um. Crypto companies have contracts

to turn off UM when there's high energy demand. UM. So something I would ask is, you know what could be done to reduce energy consumption and make sure that they're powered by renewal energy off the grid to make sure there aren't strains on the grid and that consumers utility bills don't go up, because that has been happening in places across the country where you have these high energy users leading to so much energy consumption that everyday

homeowners are paying more on their bills. So I'd be really curious to hear what are his thoughts on that, Like, as a business hopefully looking to do good in his community, how does he want to work with regulators to address that?

Is that a line of messaging that you've thought about in terms of communicating to the general public, Like, you know, I don't want to call it an attack ad necessarily, but couldn't if it's indeed the case, couldn't you come out and say crypto mining is leading to higher energy bills? For the normal everyday person, like, is that actually happening. Yeah, So this is something that we do talk about um very often. We don't need to point it out when

it happens these communities, people notice. Um So, Plattsburgh, New York, ended up addressing cryptocurrency mining their community because they had like um like shipping containers of crypto mining industry that came into town. They get a lot of hydro that's what keeps energy really cheap in Plattsburgh. And what happened was energy bill started going up because the crypto mining company was using so much energy. They're kind of using the reserve of hydro powers. They were having to supplement

their grid with more expensive energy, which is fossil fuels. Um. So they're grid a dirtier and the bills went up because they had to supplement with more energy. Uh So it kind of triggered an outrage right away. So in some ways you don't even need to talk about when it happened to people notice. But it is something that we do talk about with the public that when miners are plugging directly into the grid, it can be to

utility bill hikes. This brand thanks a lot for hanging out with us I r L. Yeah, thanks for having me I r L this special audio only episode of Crypto. I r L will be right back with more from Katie Greifeld and Tim Stanovic. If you want the full video experience, head to Bloomberg dot com slash q T. Yeah, isn't good to see you. Good to see you as well.

I feel like we can't have this conversation about energy rate at this moment without talking about proof of work versus proof of steak because Ethereum, that blockchain, has got a lot of press about the fact that it did switch to proof of steak and the number we keep hearing is that that cut its energy usage by nine percent. And We've asked this question in a few different ways to a few different people, But I'd love to hear your thoughts on why bitcoin can't just switch from proof

of work to proof of steak. Yeah, A couple of thoughts come to mind on that topic. You know. First, Yeah, I've I've seen the same statistic that Ethereum has reduced with energy consumption by switching a proof of steak. But the fact is is that energy energy consumption is still there. You know, Ethereum might not be using it in the form of its consensus system. But all the GPUs out there that we're mining for ethereum now are just going

to do something else. They're gonna mind another coin, they're gonna be sold the GAMER, They're going to be used for AI machine learning. The price of these things didn't go to zero, so the energy consumption net net hasn't changed whatsoever. Proof of work drive security for something so important as money. Proof of steak maybe works for other applications, but Bitcoin will never change from proof of work to proof of steak um. If anyone wanted to make that change.

The development of bitcoin is completely open. Someone could propose that code and they could see the consensus that it reaches. I'm optimistic it won't get much. So let's just put that on the record. Bitcoin never gonna go to proof. Say we've established that, all right, interview, interview over done? Done? No, not done, We're not done. So are there are those stats about crypto using more energy each year than the

entire country of Argentina or one bitcoin transaction? Uh, the power that it takes to do one of those powering more than fifty one home for fifty days. One American home for fifty days. Are those stats just bunk Transactions do not have an energy p load. Bitcoin mining is separate from transaction verification process at, etcetera. In bitcoin mining, we are simply putting work behind each new block we

add to the blockchain. Within that block our new transactions, but those are verified through note software that I can use, you can use, anyone can use that. It's helped driving that peer to peer network. So the number of the amount of energy that bitcoin mining uses is not related to transactions in any ways. It's all consensus system driven. Okay, so maybe maybe somebody who would criticize what you're doing would say something, you know, something along the lines of, Okay,

we need AI, we need a traditional financial system. Uh, it's nice to be able to have gaming. Uh. Those are all justifiable in the sense of energy consumption. But they might say, I don't necessarily agree with the concept of creating this alternative money, the idea that the world needs this. What would you say to people like that,

I'd say, that's an interesting take. In the environment that we're in, where our wealth is inflated away entirely outside of our control, our ability to transact with each other is controlled by third parties, whether it's businesses, governments, some collection of governments, what have you. I think a number of recent events have made the use case for bitcoin

more than ever. Money is the number one way that we communicate with each other, you know, Tim and Katie, I could say something to you, you could say something to me, but we are only truly honest with how we spend our dollars. People ultimately vote with their pocketbook, they ultimately vote with their feet, and bitcoin enables humans globally to communicate that way in commerce and what have

you without third parties controlling that. That is very important to human freedom, and that is very important to the advancement of humans globally. So it is a very important and noble use of energy that bitcoin has. It is giving freedom globally to everyone, giving the individual sovereign control over their money. Jason, I'm wondering if the bet gets harder to to justify though, in an environment where we're seeing the worst energy crisis that we've seen in decades.

You're in California, but a lot of your operation is in Texas. I mean, what do we hear from California just recently? Don't charge your cars because the grid can't handle it, even the Texas grid asking some bitcoin miners to go offline when it got hot so that people would be able to use their air conditioners and the load on the grid would be limited. Does it get harder to justify this in an in an environment like this, it actually gets easier when you look at these energy markets.

It's something a lot of people don't understand necessarily, is how their energy grid works. People think maybe there's energy being produced somewhere and we're just all buying it as we need it. But in a transition to more renewable generation sources, that supply of energy is very um volatile. Wind is only wind. Wind generation is only generating wind

power when the wind is blowing. Solar generation is only generating solar power when um the sun is shining, So those are not necessarily always correlated to when the demand for energy is. So bitcoin miners play a very important role by what's known as valley filling, by being a constant demand for power that does not impact the peak demand because, as you noted, Tim, we are shutting off when either the grid is calling on demand response or

the economics are simply invoking that response. Itself. By being by valley filling and being this constant demand, we help give renewable generation sources greater visibility and their financing, and we help make all generation more effective and UM cost effective and efficient. We're eliminating the volatility and power demand, which makes great stronger. So that's why you know UM Bitcoin miners are becoming ur COT's most trusted demand resource.

And it was even the Urcott Interim CEO himself who said earlier this year that bitcoin miners are helping Orcott keep renewable generation operational because a lot of that power is often curtailed because there's not an off taker for it. An interesting stat for you, there was about seven point four terawatt hours in West Texas where a lot of wind and solar generation is that was curtailed over there was no one to buy it and there was no

way to transmit it. So there's a lot of inefficiencies in the power markets out there when you have a lot of renewable generation that is intermittent and not always match with demand. Bitcoin miners helped level out that demand, keep the grid and the right frequency, and we do not impact the peek because we are participating in demand response and shutting off on. We were talking about just the whole concept of this program today, and we were thinking, Okay,

if we're talking Texas, we're talking energy. We're talking mining here and extracting, you know, some sort of resource. We thought of the TV show Dallas from the eighties, thought of it. I have not heard of it, And I'm wondering if you can sider yourself like if Dallas were made today, would you be the JR of I'm not familiar. That makes two of us. Jason. Good to see you, Thanks for joining us. Good to see you. Thank you, Tim and Katie. Are we an energy show? Now? Are

we really done with the energy discussions? We are done. I can guarantee you that our next show is not a bad energy Okay, I'm gonna show up just to find out what we're going to talk about. Good, I'll be here. Took M. Want to see these episodes of Crypto I R L in video. Check them out on Bloomberg Quicktake at Bloomberg dot com, slash qt, or find Katie and Tim over on YouTube on the next episode

of Bloomberg Crypto. September might have a reputation for being cruel to the Bitcoin faithful, but are they also in for a scare in October. This is Bloomberg Crypto, a daily podcast from Bloomberg and I Heart Radio. For more shows from I Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Send us your comments, questions, or suggestions for the show to Crypto at Bloomberg dot net or find us on Twitter. We're

at Crypto. The supervising producer of Bloomberg Crypto is Vicky Vergolina. Our senior producer is Janet Babin. Our producers are Mohammed Faruk and Sharon Barriro. Our associate producers are Ty Butler and Moses on Them. Dast to wonder At is our engineer. Original music by Leo Sidron. I'm Stacy, Marie Ishmael. Have a great weekend.