It’s the FUD (Fear Uncertainty and Doubt) that’s driving the markets right now... in particular, the KING of crypto – Bitcoin. Let’s quickly review what happened over the past week.
· Elon Musk
· Elon Musk
· Oh yeah… Elon Musk
For Bitcoin investors, this past week was like the gunslinging wild wild crypto west. First, Elon Musk goes on SNL and jokingly calls DOGE coin “a hustle,” which tanked the DOGE price by 30%. Then, one of the world’s largest cryptocurrency exchanges, Binance, is under investigation for alleged illicit activity. Wait, it gets better! Then, Musk announces that Tesla will suspend the payment of vehicles with Bitcoin because they “are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions.” See below. No surprise on the price action here – BTC has tanked almost 25% in the last seven days.
As mentioned in a previous newsletter, Bitcoin and other cryptocurrencies use a method called “Proof of Work,” meaning the cryptocurrency is ‘mined’ by solving complex mathematical equations. Solving these equations is ‘proof’ that the computers have done the ‘work,’ and miners are rewarded for their effort in Bitcoin. According to the University of Cambridge, Bitcoin consumes 129.24 TWh per year. It sounds like some fancy numbers, but to put that into perspective, Argentina consumes around 121 Twh, the United Arab Emirates consumes 113.20 Twh, and Norway consumes 122.20 TWh per year! All in all, Bitcoin’s energy consumption is greater than some countries in the world!
Even though we are seeing miners move to renewable sources of energy, there’s no question that doing this “work” uses a lot of energy. For now, I’m going to hold my tongue on the whole Bitcoin - Energy Consumption narrative but take a look at this Twitter thread between Peter McCormack and Elon Musk.
But let’s take a step forward. What is the solution? How do you make Bitcoin more environmentally friendly? And for every investor or speculator who thinks the environment isn’t their problem, you may want to reconsider after I tell you about one potential solution I recently came across.
It’s called Chia, and NO, I’m not talking about the chia pets sitting in a terracotta tray on your windowsill. Chia is a new cryptocurrency designed to offer the same utility and use case as Bitcoin without the large energy consumption. Just to quickly give some background context, the person who created the P2P (peer to peer) file-sharing protocol BitTorrent network is the founder of Chia.
Remember how Bitcoin uses a system called Proof of Work? Well, Chia uses a system called Proof of Space and Time, which is the verification of transactions using unused hard drive storage on your computer.
Before now, I never really discussed the option of mining blue-chip cryptos such as Bitcoin and Ethereum in my previous newsletters. Why? Because I didn’t view it as one of the more profitable investments for 2020/2021, unlike Helium mining, which we discussed last week, mining blue-chip cryptos isn’t something you could easily do from the comfort of your home.
So, for now, we are practicing the best strategy for “blue-chips” known to humankind- HODLing!! Now, if you were in the crypto space years ago before the Bitcoin halving periods, I’d be discussing crypto mining more avidly as it would be a great opportunity to make some coin. For the new crypto investors or the seasoned investors that never bothered to look at the technical side of mining cryptocurrency, Chia crypto (Chiacoin) might be your golden ticket.
The Chia team calls validating transactions “farming” instead of mining, and the blockchain is called Mainnet, which anyone can download on the Chia website. The farming analogy is no coincidence. According to Tom’s Hardware, an ultimate source for tech news:
“You need to clear a field (i.e., delete any files on your storage devices that are taking up space), then you plow and seed the field (compute a plot for Chia), and then… well, you wait for the crops to grow, which can take quite a long time when those crops are Chia blocks.”
And just so you know exactly how early you are to Chia, this cryptocurrency only started trading this month under the ticker symbol ‘XCH.’ With only a $550 million mcap compared to an $860 billion market cap (Bitcoin). This new “green” currency has a lot of legs to go.
Even more, Chia is on the table as a “green alternative” method of payment for Tesla vehicles. Tesla is not the only company interested in the new cryptocurrency; Amazon has also announced Chia can be mined on their Amazon Web Service cloud servers!
Honestly, it’s not too far off. Just think, if Chia had the same adoption level as Bitcoin today, it would do everything Bitcoin can with just a fraction of the electricity. After all, Chia’s entire marketing scheme is a ‘more eco-friendly alternative to Bitcoin.’ Allowing people to ‘farm’ Chia with an average PC and empty hard drive space replaces, or at best displaces, the need for ASIC miners (the machine used to mine Bitcoin) AND the 72,000 GW of energy used to create one Bitcoin. There is no debate on which model is more sustainable between the King of crypto and the newbie on the block - the only question is when the rest of the world will take notice.
I was going to write a great conclusion about Chia and its use case, but this tweet came across the wire at the time of me writing this newsletter.
I don’t know what more I can say except these three letters… FUD
Stay safe, stay informed, and DYOR. If you master the last two-you won’t be shaken or moved by words alone. If you can master all three- you’ll be an early adopter AND among the last of the crypto enthusiasts still standing…HODLING your future!
I wish you all a great start to your week.
Until we meet again,
Stay curious
-Zo
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