Darren Kleine

First Republic Bank’s shares recently <a href="https://blockworks.co/news/crypto-related-stocks-soar">fell to a new low</a> following their latest quarterly earnings report. It certainly didn’t appear to help share prices when the US government stated they would not step in to help out the ailing bank. But it may have helped the price of bitcoin.



What was once the country’s 14th largest bank now faces the threat of collapse, another in a <a href="https://blockworks.co/news/who-will-bank-crypto">series of recent failures</a>.&nbsp;



Coincidentally or not, bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) experienced a brief upswing of nearly 10% immediately following the news before crashing back to previous levels.&nbsp;



The apparent correlation led Nic Carter, general partner at Castle Island Ventures and board chair at Coin Metrics, to <a href="https://twitter.com/nic__carter/status/1651603830314860544?s=20">tweet</a>, “The fact that bitcoin almost mechanically rallies on news of bank failures is one of the most validating phenomena I’ve experienced in a decade of doing this.”



“I don’t want banks to fail and I’m dismayed at how Fed policy has zombified the sector which will surely retard growth. But having bitcoin act in this manner is remarkable nevertheless.”



On a recent <a href="https://www.youtube.com/watch?v=r4We4gvN2DQ">Empire podcast</a>, co-hosts Jason Yanowitz and Santiago Roel Santos discussed the relationship between bank failures and bitcoin’s volatility.



It was “pretty crazy price action,” Yanowitz observes, “Can’t remember a day like that in a while.”



Many market observers were correlating the First Republic fall with a rise in bitcoin buying activity, Yanowitz explains, but a rapid reversal points to what he calls a “fake alert.”



<h2 class="wp-block-heading">Liquidity has dried up</h2>



“This is more a side effect of a low liquidity market.”



Santos comments that with the current low-<a href="https://blockworks.co/tag/liquidity">liquidity</a> conditions of the crypto market, it takes relatively little trading action to cause significant price swings. “That&#8217;s just a testament [that] liquidity has really dried up over the last six months.”



This carries over to traditional markets, Santos says, with the growth of retail trading activity and the ease of trading with the click of a button. “Our generation is just more trigger-happy to trade a lot and crypto, obviously, it&#8217;s just on steroids.”



“A lot of folks are still sitting on stablecoins,” Santos continues, but they “haven&#8217;t really fully deployed.”&nbsp;



“I think they&#8217;re using these dips as opportunities to cost their way in.”



<h2 class="wp-block-heading">How much more can it deteriorate?</h2>



Santos found an “interesting piece of language” in the US government’s statements about refraining from helping First Republic Bank. Two words stood out to him: “not currently.”



Santos suggests this may mean the government “will wait for the situation to really, really deteriorate. Although,” he says, “how much more can it deteriorate?”



“The question, of course, then is,” Santos asks, “how bad will it get?”



“If the Fed really will ‘let it die,’ and [they] don&#8217;t step in like they did with Lehman and others in the global financial crisis, then what happens?”



Santos says other banks or private equity firms are likely aiming to optimize for the best possible deal when picking up the pieces. “You&#8217;re basically trying to take First Republic to the brink of receivership, but not let it go into receivership.”



Yanowitz refers to Carter’s tweets, quoting, “I suspect the reason bitcoin behaves this way is not because of some ‘<a href="https://blockworks.co/news/debt-ceilings-and-defaults-bitcoin">long bitcoin short the banks</a>’ narrative, but because each bank failure drives the Fed closer to a liquidity bazooka — driving down the denominator in BTCUSD.”



“It all really comes down to liquidity,” Santos says, “As soon as the Fed really dried up liquidity, then you saw a huge correction in markets, including crypto.”



“I think if crypto rallies initially, it&#8217;ll be just purely because there&#8217;s way more liquidity in the market.”



Yanowitz replies, “Everything pumps and bitcoin is further out on the risk spectrum, so it comes along.”



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Banking

Correlation or Fake Alert? Bitcoin Price Swings on Bank News

Casey Wagner

In a major setback for its regulatory future, the crypto industry has lost what likely was its biggest and most-connected cheerleader in Washington.&nbsp;



FTX CEO Sam Bankman-Fried, who <a href="https://twitter.com/SBF_FTX/status/1491428843760263171?s=20&amp;t=G_OZUC2g2G95lG4SgYexcA" target="_blank" rel="noreferrer noopener">charmed the internet</a> with his nescience when it comes to formal business attire during his congressional appearances, has prided himself on being the industry’s leading voice on Capitol Hill for some time. The tables turned on Tuesday, though, when FTX rival crypto exchange Binance said it would acquire FTX.com, subject to due diligence checks.



Distrust in the 30-year-old billionaire ballooned.



“You don’t go from being worth $32 billion one day to being acquired by your biggest competitor the next without having done something wrong,” said Nic Carter, partner at Castle Island Ventures, during a Blockworks Twitter Spaces on Tuesday.



If FTX user funds were being used to finance Alameda Research, Bankman-Fried’s trading firm, there could be legal consequences. The Binance acquisition — which is pending due diligence and finalizing terms — does not apply to Alameda, nor to FTX’s US arm, FTX.US.&nbsp;



“There’s a good chance SBF does a little time [in jail],” Martin Shkreli, former hedge fund manager and convicted felon, said during an Up Only podcast <a href="https://www.twitch.tv/uponlytv" target="_blank" rel="noreferrer noopener">livestream</a> Tuesday. 



Even without Bankman-Fried, the industry is still well-positioned in DC, according to Kristin Smith, executive director of the lobbyist firm the Blockchain Association.&nbsp;



&#8220;There are a lot of us who are going to continue doing the work that we have been doing&#8230;the industry is well-positioned to continue to have a voice in Washington and to be a productive partner in figuring out the right path forward,” Smith <a href="https://twitter.com/BlockchainAssn/status/1590106866872651776?s=20&amp;t=oaz4yMqWKk4aKaDHeEWodQ" target="_blank" rel="noreferrer noopener">tweeted</a>.



Regardless, the crash of yet another high-profile and generally well-respected name in the space is not going to set regulators’ minds at ease. Daryl Kelly, founder of NTF platform LTD.INC, told Blockworks.



“Clearly there were concerns about FTX and its viability, but this just shows that even a seemingly dominant exchange run by someone who had been considered an industry giant just a week ago… is not immune to the vagaries of what is most certainly the most volatile market in the world,” Kelly said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“How this will play out is anyone’s guess, but I imagine regulators are looking at this situation with a lot more scrutiny,” he said.</blockquote>



There could still be a silver lining to the situation, though, Ryan Rasmussen, DeFi research analyst at Bitwise Asset Management, said.&nbsp;



“One exciting development is the shifting tides on how centralized exchanges and lenders view transparency — Binance announced plans to publish proof-of-reserves, and Kraken already does — putting their cards on the table might have a competitive advantage,” Rasmussen said.&nbsp;



“If FTX had proof of reserves, any fears of insolvency sparked by Binance could have quickly been stomped out. Instead, Binance ate their lunch.”



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Alameda Research

How the Fall of Washington’s Favorite Crypto Billionaire Will Change Regulation

David Canellis

<div id="highlights-block_628516b22f243" class="highlights">
 <ul>
 <li>Permissionless panelists agreed that algorithmic stablecoin Terra’s doomed design was reckless</li>
 <li>Terraform Labs founder Do Kwon was originally scheduled to appear on-stage alongside his critics</li>
 </ul>
 
</div>



Circle redeemed $7 billion worth of USDC last week as markets reacted to Terra’s demise — highlighting how critical stablecoin collateralization is during intense volatility.



The Boston-headquartered stablecoin issuer redeemed $61 billion last year, Circle’s vice president of product management Joao Reginatto said during a panel discussion at Blockworks’ Permissionless event in Palm Beach on Wednesday.



That means Circle processed more than 11% of its total redemptions for an entire year in just one week — a week that saw $280 billion drained from cryptocurrency’s total market capitalization.



Other panelists included <a href="https://www.castleisland.vc" target="_blank" rel="noreferrer noopener">Castle Island Ventures</a>’ Nic Carter, Visa’s head of CBDC and protocol Catherine Gu, MakerDAO lead developer Sam MacPherson, and Frax founder Sam Kazemian. Terraform Labs founder Do Kwon was originally scheduled to appear on the panel.



“Our model is super boring, it’s very, very simple: full collateralization,” Reginatto said. “Customers bring a dollar, we give them 1 USDC, we keep that dollar. They bring USDC, we give them back a dollar.”



Circle’s approach is in stark contrast to Terraform Labs’ failed algorithmic stablecoin TerraUSD (UST). Circle backs USDC with a mix of cash and US Treasurys, while UST sought to maintain its dollar peg via arbitrage and a complicated minting and burning process involving a secondary token, LUNA.



<h3 class="wp-block-heading">Terra was crypto’s ticking time bomb</h3>



Terraform Labs’ bombastic founder Kwon had tried to reinforce UST’s viability by amassing more than $3 billion in bitcoin. This wasn’t technically collateral to back UST, but crypto to be spent on “defending” the stablecoin’s peg if it started to shake.



Still, UST collapsed from $1 to as low as $0.04 earlier this month. LUNA, on the other hand, fell from more than $86 to a fraction of a cent. More than $46 billion had been vaporized from UST and LUNA’s combined market capitalization in just four days.



“Luna/Terra was clearly the largest ticking time bomb [in the crypto space], certainly the most fragile project,” Carter said.



Carter described Terra’s non-collateralized design as “reckless financial engineering,” and labeled its demise predictable for those who “had a bit of perspective.” Terra’s algorithms were veiled in complexity, even deliberately so, making it difficult for onlookers to investigate and understand how they were supposed to work.



“People couldn’t speak out against it because [Kwon] was so vocal on Twitter. There was a sense that you don’t want to offend your industry peers who had invested in Terra — there were enormous incentives to not investigate,” Carter added.



<a href="https://twitter.com/MakerDAO?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor" target="_blank" rel="noreferrer noopener">MakerDAO</a> lead developer MacPherson agreed that Terra’s design was reckless, “pretty much from the start.” UST’s implosion emphasized the need for stablecoins to be collateralized, MacPherson said. It’s why MakerDAO chose to overcollateralize its stablecoin DAI (currently by 164%), “so that users can be certain they can always trade DAI for a dollar.”



<h3 class="wp-block-heading">Stablecoins are crypto’s killer app</h3>



Panel host Kate Rooney of CNBC asked Visa’s Gu how the finance giant felt about the Terra fiasco. Gu said Visa wants “interesting use-cases” and its focus in the stablecoin space is on fiat-backed digital currencies. Visa also studies projects that utilize on-chain collateral — a fancy term for crypto-backed stablecoins such as MakerDAO’s DAI.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“We must think about how these different projects are being constructed — safeguards and standards are important for consumers, retail investors and institutions alike,” Gu said.</blockquote>



It’s important to understand how stablecoin reserves are audited and who models and tests their systemic risks, she said, stating that “even the safest assets can have risk.”



Frax founder Kazemian agreed, despite his stablecoin’s reliance on a fractional algorithm to maintain its peg — although it’s designed somewhat differently to Terra’s UST. Frax is currently 89% collateralized, with the remaining 11% maintained by algorithms that generate value by interacting with various decentralized finance (DeFi) protocols.



Kazemian said: “This is why Frax’s collateralization is entirely on-chain. Its collateralization is adjusted by an algorithm, and you can see the amount of debt and liquidity across lending markets. You can’t just do a lot of these things and hope for it to work out for the best: You paint a target on your back.”



Some believe that CBDCs (central bank digital currencies) could one day fill the gaps in the stablecoin market. Visa’s Gu cited a recent Bank for International Settlement study that found nine out of 10 central banks are researching and actively experimenting with CBDCs. Unlike stablecoins, CBDCs will have the same status as other central bank money, that is, full convertibility to other forms of legal tender currency.



MakerDAO’s MacPherson didn’t have strong opinions about CBDCs, but if they come on-chain they could potentially serve as collateral for decentralized stablecoins, he said.



Circle’s Reginatto was a little less positive.



“Central banks don’t come across as the type of organization that could operate these mechanisms at scale,” he said. “Frax, Maker, Circle, these are very complicated to operate.”



Reginatto also explained that Circle believes in the permissionless nature of public blockchains, stating that the firm never signed a deal with Maker and Frax, but both projects leverage USDC to collateralize their tokens.



But the most scathing critique of the CBDC concept came from Carter, who labeled stablecoins “an incredible consumer product.”



“Stablecoins are crypto’s killer app so far, no question. They’ve been responsible for great transactional autonomy,” Carter said, before stressing that privacy is incredibly important when it comes to cash in a digital context. Policymakers are considering the privacy pitfalls of putting digital dollars on an immutable ledger, but Carter was skeptical that they would ultimately choose to emulate the relative anonymity of cash.



“No government is going to give that to us, no CBDC plan is sincere about that…We have to look at the stablecoin sector for that.”



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Castle Island Ventures

Stablecoins Are Crypto’s Killer App So Far – Just Not Terra

<div id="highlights-block_6273bfd289c6a" class="highlights">
 <ul>
 <li>The Bitcoin industry has railed against a letter signed by nearly two dozen members of Congress requesting the EPA closely regulate crypto mining</li>
 <li>Crypto proponents cite flaws in critics&#8217; data and a misunderstanding of the industry&#8217;s future energy demands</li>
 </ul>
 
</div>



Bitcoin industry advocates responded this week to <a href="https://cms.blockworks.co/cryptocurrency-mining-is-poisoning-our-communities-us-rep-says/" target="_blank" rel="noreferrer noopener">a letter submitted to the Environmental Protection Agency</a> by Rep. Jared Huffman, D-Calif., and signed by a total of 23 Democratic members of Congress.



The extensive rebuttal sent by the Bitcoin Mining Council, a group representing bitcoin miners, is co-signed by nearly 50 industry figures, including Castle Island Ventures’ Nic Carter — who contributed much of the essay — as well as Block’s Jack Dorsey and Galaxy Digital’s Mike Novogratz.



“I had wanted to write a response, there were a whole bunch of key stakeholders who thought a response was warranted based on how misleading the Huffman letter was and how critical it could be,” Carter told Blockworks, noting the EPA could make it more difficult for crypto mining companies to acquire their own energy-production sources.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“If you have 23 members of Congress signed onto this thing, it could get messy.”</blockquote>



Carter claimed the original Huffman letter held several inaccuracies. For one, he noted Huffman highlighted the EPA’s <a href="https://www.fingerlakes1.com/2022/01/12/epa-denies-greenidge-permit-extension-to-operate-coal-ash-pond/" target="_blank" rel="noreferrer noopener">denial</a> of a Greenidge application to keep open its coal ash ponds — large dirt <a href="https://edition.cnn.com/2021/12/07/us/coal-ash-explained/index.html" target="_blank" rel="noreferrer noopener">ditches</a> used to dispose of harmful coal byproducts that are not biodegradable.



But Greenidge is now a gas-only operation that mines bitcoin. The firm uses those ponds to continue mitigating waste associated with its past life as a coal plant. So celebrating the EPA’s move against Greenidge’s coal ash ponds isn’t at all relevant to crypto mining, Carter said.



Another sticking point was Huffman’s claim that “a single Bitcoin transaction could power the average US household for a month.” This calculation relies on taking average transaction counts and simply dividing it by the estimated energy usage of the network.



The Bitcoin Mining Council’s response labeled the per-transaction energy cost analysis as a “deeply flawed way to reason about Bitcoin, since projecting future energy growth is not a function of transaction count, but instead of value of Bitcoin issuance (which is a function of price and supply growth), together with the fees users are willing to pay to transact.”



The crux of Carter’s response sought to separate data centers (read: crypto mining farms) from their energy sources. To Carter, crypto miners are just another flavor of data center such as those run by Microsoft and Amazon: large warehouses packed with servers in support of our modern internet infrastructure.



“It’s not really the EPA’s mandate to say what you’re doing with this data center is environmentally damaging, because it’s not the data center activity causing damage, it’s the generation of power and that’s already regulated,” Carter said. 



He noted that some vertically-integrated crypto mining operations — those that control the data center and its energy source — are already sanctioned by the EPA and some state regulators. Just 2% of Bitcoin’s hashrate comes from such mining operations, according to the council’s response to the EPA.



“It’s a myth to say that the EPA is not aware of these things. They’re very much aware of them, and in some cases they’re supported,” Carter added. However, he did note that noise pollution caused by bitcoin miners is unnecessary, and that he’d actively discourage industry participants from setting up in residential areas.



<h3 class="wp-block-heading">Bitcoin runs on a global secondary market for ASICs</h3>



Bitcoin is mined using a proof-of-work (PoW) algorithm, which is often criticized for its energy usage and electronic waste — it has been <a href="https://www.bbc.com/news/technology-58572385" target="_blank" rel="noreferrer noopener">suggested</a> that mining rigs last on average just 1.29 years before being discarded.



Carter questioned whether environmentalists are interested in the truth or whether they’re simply using the concept as a cudgel to attack Bitcoin.



Veteran mining consultant and <a href="https://proofofwork.energy/" target="_blank" rel="noreferrer noopener">proofofwork.energy</a> founder Alejandro de la Torre agreed. Having spent the past five years assisting and building mining operations around the world, he expressed disbelief that any industry participant would simply discard miners after less than two years of use.



He explained that in his experience, once a machine has some sort of error — say a board burns or a part is faulty — miners almost always fix it rather than pay for a brand new rig. In fact, the entire crypto mining industry relies heavily on a lively secondary market for used ASICs, computers specifically designed to mine cryptocurrency.



De la Torre described a global market for ASICs that allowed smaller mining outfits to acquire used rigs from more established mining powerhouses. Richer crypto mining companies know they can eventually sell their top-of-the-line mining rigs as more efficient tech develops.



This creates a symbiotic relationship between small and large operations that benefits both sides: Smaller ones can buy cheaper hardware from bigger ones looking to offset costs associated with state-of-the-art machines. Every mining operation in the ecosystem makes use of this secondary market, De la Torre said.



“Right now, there’s miners all over who are paying next to nothing for their electricity, sometimes even zero,” De la Torre told Blockworks. “Those in Venezuela, or off-grid miners who own their own hydroplants and those that use flared gas.



“They don’t mind buying a machine that’s four years old because they have free electricity — so they run their machines until they die.”



Once ASICs finally fail — often after multiple repairs and numerous owners — they can be repurposed. Much of the circuitry and aluminum can be sold for scrap and otherwise recycled. De la Torre estimated the average lifespan of an ASIC is closer to six years, far longer than the 1.29 years often cited by environmentalists.



“That’s why the economics of bitcoin mining work so well,” De la Torre said. “You buy a machine for, as an example, $10,000. You run it for two years, then you sell it for $6,000. You’ve only lost $4,000 on the machine, while you’ve generated lots of bitcoin with it.”



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Alejandro de la Torre

Bitcoiners Protest Democrats’ ‘Misleading’ Letter Sent to EPA

Sebastian Sinclair

<div id="highlights-block_620dcc7aef20b" class="highlights">
 <ul>
 <li>Castle Island Venture Fund III will focus on financing startups building monetary networks, internet infrastructure and financial services</li>
 <li>The $250 million fund follows its second fund focused exclusively on public blockchains</li>
 </ul>
 
</div>



Venture capital firm Castle Island Ventures has announced a $250 million raise for its latest crypto fund focused on startups building out monetary networks, internet infrastructure and financial services.



Blockworks <a href="https://cms.blockworks.co/castle-island-ventures-raises-hundreds-of-millions-for-new-fund/" target="_blank" rel="noreferrer noopener">previously reported</a> on the imminent launch of the fund, dubbed Castle Island Ventures III.



According to a company <a href="https://medium.com/castle-island-ventures/announcing-castle-island-ventures-iii-25b91a792e6a" target="_blank" rel="noreferrer noopener">blog post</a> on Wednesday, Castle Island Ventures said it believed the industry was in its &#8220;early days&#8221; of a monetary transition toward a rules-based monetary order and was seeking to capitalize on the movement.



&#8220;The new fund will support our mission to partner with visionary entrepreneurs building transformative companies powered by public blockchains,&#8221; company partner Matt Walsh said in the post. 



<a href="https://www.castleisland.vc/portfolio" target="_blank" rel="noreferrer noopener">Castle Island&#8217;s portfolio</a> includes a number of well-known crypto startups and ventures, including BlockFi, Bitwise, CoinMetrics, Mash, MoonPay and River Financial.



Walsh further said his company intended to invest in firms it believed could affect change in the financial services sector whilst leveraging Web3 protocols to shake up legacy financial services firms and their inability to evolve.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">&#8220;In parallel to the monetary and financial transformation that is underway, ‘Web3’ and new internet architectures propose digital property rights and enable new protocols and businesses that seek to disrupt and disempower online data and tech monopolies,&#8221; Walsh said.</blockquote>



The Boston-based company also announced Ria Bhutoria — formerly director of research at Fidelity — as general partner, joining the likes of Nic Carter, Walsh and Sean Judge.



Its latest raise follows its previous <a href="https://cms.blockworks.co/castle-island-ventures-raises-second-50-million-fund/" target="_blank" rel="noreferrer noopener">$50 million</a> fund last year, focused exclusively on public blockchains. The company&#8217;s first fund debuted back in 2018 and was valued at $30 million.



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Castle Island Ventures Confirms $250M Fund Targeting Web3 Startups

Michael Bodley

<div id="highlights-block_61f96a54916d2" class="highlights">
 <ul>
 <li>The firm is expected to finalize its fundraise in the next couple of weeks, sources said</li>
 <li>Castle Island has previously hit on winning VC stakes in companies including Bitwise and BlockFolio</li>
 </ul>
 
</div>



Cryptocurrency venture capital firm Castle Island Ventures has raised hundreds of millions of dollars for its latest fund as institutional investors continue to plow capital into the space, despite record valuations.&nbsp;



The huge fundraising haul reflects Castle Island’s track record of investing early — often in pre-seed or seed rounds — in some of the most successful crypto companies in the industry, according to three sources familiar with the matter who confirmed the fundraise.



Sources were granted anonymity to discuss sensitive business dealings. The precise amount raised isn&#8217;t known, and the firm declined to comment.



The new fund remains open to investors, sources said, though it’s expected to finalize its capital-raising haul in about two weeks. In the meantime, Castle Island is working to finalize commitments from a number of large investors.&nbsp;



The fund, Castle Island Ventures III, is the third for the firm, which also engages in co-investment opportunities with its limited partners. This time around, sources said, Castle Island scored larger institutions as investors, branching out from the high-net worth individuals and family offices that have traditionally backed private digital asset plays.&nbsp;



The third fund is set to follow the strategy of the firm’s first two vehicles — at least for the most part. Those funds earmark about 20% of capital to early-stage tokens, often coming in and investing before the token launches.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“On one hand, these valuations are crazy high,” one source said. “On the other, LPs are looking for experienced, winning managers that can still derive a ton of alpha from this space.”</blockquote>



Massachusetts-based Castle Island’s <a href="https://www.castleisland.vc/portfolio" target="_blank" rel="noreferrer noopener">portfolio</a> includes the likes of Bitwise, BlockFi, Casa, ErisX, Matrixport, MoonPay and River Financial. 



Castle Island is led by co-founders and managers Matthew Walsh and Nic Carter, both veterans of Fidelity’s crypto investment operations. Sean Judge, formerly of Highland Capital, is a general partner.



It would likely go down as one of the largest so far this year, even as firms including <a href="https://cms.blockworks.co/sources-brevan-howard-launches-first-digital-assets-fund-in-massive-crypto-push/" target="_blank" rel="noreferrer noopener">Brevan Howard set up</a> their own operations, which are expected to take in large amounts of capital.



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Castle Island Ventures Raises Hundreds of Millions For New Fund

Jacquelyn Melinek

<div id="highlights-block_612ceed43cc75" class="highlights">
 <ul>
 <li>Everyone still wants dollars, but tens of millions of people prefer them in stablecoin format because it&#8217;s unencumbered. It&#8217;s an open transactional network, among other advantages, Carter said </li>
 <li>“We’ve achieved recognition that bitcoin is not going away, regardless of whether you dislike it and it is an important part of the macro conversation,” he said </li>
 </ul>
 
</div>



Nic Carter, a general partner at Castle Island Ventures and co-founder and chairman of Coin Metrics, joined Blockworks for an interview at Bretton Woods: The Realignment after speaking on multiple panels during the conference.&nbsp;



In this interview, Carter discussed themes from the conference and shared some insight on:&nbsp;



<ul class="wp-block-list"><li>The dollar system&nbsp;</li><li>US sanctions and politicization&nbsp;</li><li>Blockchain applications&nbsp;</li><li>Liberalizing access to dollars&nbsp;</li><li>Central bank digital currencies (CBDCs)</li><li>Altering the nature of social media across the internet&nbsp;</li></ul>



Watch the full interview with him below. 



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
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Bitcoin

Nic Carter Shares Insight on Dollars, CBDCs, Blockchains and Bitcoin

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 <ul>
 <li>Discussion about bitcoin electricity and energy consumption spilled over into multiple sessions during The B-Word conference.</li>
 <li>Consumers use industrial products like refrigeration, air conditioning, heating, clothes dryers and washing machines but don’t think critically about the energy requirements of those industries, Nic Carter said.</li>
 </ul>
 
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Bitcoin miners consume <a href="https://cbeci.org/">0.26%</a> of the world’s electricity production. At the same time, support for the cryptocurrency industry is growing as sustainability and the value for bitcoin increases, multiple speakers, including Elon Musk, Jack Dorsey and Nic Carter, said during <a href="https://www.thebword.org/c/the-b-word">The B-Word</a> conference on Wednesday.&nbsp;



These same miners also consume 0.11% of the world’s energy production, according to 2021 <a href="https://bitcoinminingcouncil.com/wp-content/uploads/2021/07/2021.07.01-BMC-Q2-2021-Materials.pdf">data</a> from the Bitcoin Mining Council.&nbsp;&nbsp;



Discussion about bitcoin electricity and energy consumption spilled over into multiple sessions during the conference with some speakers focusing on the details of mining itself and how energy is consumed during the process.



<h3 class="wp-block-heading">The Devil’s in the details&nbsp;</h3>



&#8220;Historically the vast majority of bitcoin’s energy expenditure derives from (initial) issuance,” said Nic Carter, general partner at <a href="https://cms.blockworks.co/fidelity-veterans-go-full-time-crypto-at-the-right-time/">Castle Island Ventures</a> and co-founder and chairman of Coin Metrics, in the “Demystifying Bitcoin” panel during the event. 



“It’s not the case that adding more transactions will increase the energy expenditure of the bitcoin network, as a lot of people mistakenly believe. Most of the energy consumption is the price of bitcoin and the value of new issuance that miners are collecting, not the number of transactions,” Carter said.&nbsp;



Most of the energy outlay, in bitcoin’s case, is in the function of the initial creation, he added. However, in terms of actual composition of the energy inputs, that’s trickier to assess because it’s hard to know if miners are using renewable energy to power their equipment.&nbsp;



“There appears to be a positive trend in energy for bitcoin,” Musk said during the “Bitcoin as a Tool for Economic Empowerment” session, where he was accompanied by Jack Dorsey, co-founder and CEO of Twitter, and the founder and CEO of Square, and Ark Investment Management CEO <a href="https://cms.blockworks.co/ark-files-for-bitcoin-etf/">Cathie Wood</a>.&nbsp;



In the past, Musk has <a href="https://cms.blockworks.co/elon-musk-flip-flops-on-bitcoin-yet-again/">flip-flopped</a> between supporting and denouncing bitcoin due to environmental concerns.



But in the panel today, he said he was a bitcoin supporter and owner of the digital coin. However, he added that monitoring bitcoin’s energy consumption was important.



Still, he said he sees a positive shift in the mining industry toward renewable energy and said Telsa buyers may be able to pay using bitcoin once again. “I want to do a little more due diligence to confirm that the percentage of renewable energy usage is most likely at or above 50% and that there is a trend toward increasing that number,” he said. “If so, Tesla will most likely resume accepting bitcoin.”



Musk insisted that he hopes to see bitcoin succeed, and renewable energy will be a big part of that.



Dorsey noted, “Bitcoin is also incentivizing a lot of innovation in the energy space and just looking at unused energy. Just imagine all the unused energy that is just being wasted every single day.”



<h3 class="wp-block-heading">Comparing apples to oranges</h3>



While bitcoin can scale up the number of transactions or the value of transactions, it doesn’t have a linear proportional effect on the energy miners are consuming, Carter said.&nbsp;



Additionally, bitcoin’s energy consumption is 12 times smaller than electrical devices that are always on in US households, according to a Galaxy Digital report. So, every microwave or refrigerator that is continuously left on, is using 12 times more energy than bitcoin.&nbsp;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="512" height="289" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-4.jpg" alt="Bitcoin energy usage" class="wp-image-5755" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-4.jpg?w=512 512w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-4.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-4.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-4.jpg?w=462 462w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-4.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/07/unnamed-4.jpg?w=80 80w" sizes="auto, (max-width: 512px) 100vw, 512px" /><figcaption>Source: Nic Carter, The B-Word, July 21, 2021</figcaption></figure>



It’s not to say those appliances aren’t useful, Carter noted, “but it’s to contextualize bitcoin to compare it to other industry level uses of energy.”



One’s subjective view of an application’s utility changes how they view the product. If someone doesn’t find value in an application, they will believe it’s a waste like some people believe bitcoin is. 



Oftentimes, consumers use industrial products like refrigeration, air conditioning, heating, clothes dryers and washing machines, which massively improve our quality of life, so we don’t often think critically about the energy requirements of those industries, Carter added.&nbsp;



“We don’t regret the energy that’s used on them, the same way we shouldn’t regret the energy used for this novel monetary transmission technology. This is just the mark of civilizational progress, obtaining more energy and putting it to use to efficient sources to make our lives better,” Carter said about bitcoin.&nbsp;



Separately, Musk touched on a similar note. “It makes sense to support something that improves the quality of which way we conduct the economy, (and) bitcoin is a candidate for that,” he said.&nbsp;



In the long term, renewable energy “will be the cheapest form of energy. But it just doesn’t happen overnight,” Musk said.

Nic Carter

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