Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I Heard podcast,
Speaker 1: and I'm Stacy Murray Ishmael, Managing editor of Crypto for
Speaker 1: Bloomberg mus Yes, I know it's Saturday, but we're here
Speaker 1: to offer you our listeners a special audio only version
Speaker 1: of a new weekly video series called Crypto I r L.
Speaker 1: That's I r L Like in Real Life, and it's
Speaker 1: hosted by friends of the show, Katie Greifeld and Tim Stenovic.
Speaker 1: This is episode four of Crypto I r L. If
Speaker 1: you want the full video experience, head over to Bloomberg
Speaker 1: dot com, slash qt or check it out on YouTube.
Speaker 1: I know you said you didn't want to talk about
Speaker 1: energy even for one episode, but I have bad news.
Speaker 1: What's up? We're doing two episodes when it comes to
Speaker 1: energy and Christmas can't stop talking about it. Should I
Speaker 1: do my merge joke about merging the two episodes together?
Speaker 1: Is that the joke? That the whole joke? All? Right?
Speaker 1: That was terrible? But do you think we should do
Speaker 1: a catch up for people who theoretically didn't watch the
Speaker 1: first episode? Yeah? How about this? Okay? But seriously, I
Speaker 1: think it's important to go to Texas figuratively speaking get
Speaker 1: the other side of the argument. Talked to a traditional
Speaker 1: proof of work, bitcoin minor in air quotes dirty minor,
Speaker 1: and see what they're all about. We're talking Texas, We're
Speaker 1: talking to energy usage. It's almost like if the classic
Speaker 1: TV show Dallas were around in this day and age,
Speaker 1: it would be about bitcoin mine. That's cute. Kind of
Speaker 1: makes me think that we should have some sort of
Speaker 1: different intro for the showy it was, I just tell
Speaker 1: us when you do at our Justice Sure. We are
Speaker 1: a national organization UM, and we work with clients and
Speaker 1: partners across the country to advocate UM for measures to
Speaker 1: fight the climate crisis, for more sustainable food and farming
Speaker 1: practices UM, to keep toxics out of our homes and
Speaker 1: in our water bodies UM, and to protect a public health.
Speaker 1: So we started to get concerned about cryptocurrency mining in
Speaker 1: New York because New York actually has a landmark climate
Speaker 1: law on the books called the Climate Leadership and Commune
Speaker 1: Protection Act. It's one of the country's strongest climate laws.
Speaker 1: So we have been watch talking to make sure the
Speaker 1: state can meet those mandates, and we learned about the
Speaker 1: energy consumption of cryptocurrency mining. Were concerned about what that
Speaker 1: would meet for New York's ability to meet our mandates.
Speaker 1: So a lot of stuff that we do on our
Speaker 1: phones and online uses a lot of energy. And I
Speaker 1: guess my biggest question for you is our selfies more
Speaker 1: important than bitcoin? I hate this photo. I hate this photo,
Speaker 1: but go on, we had to take this. I this
Speaker 1: is very cute. It looks like you guys polaroid. I
Speaker 1: wanted it bigger. Actually you wanted it was ninety to
Speaker 1: make it bigger though, and we're told that was too much. Yeah. Yeah,
Speaker 1: but you're you raised an important question, right, Like, there
Speaker 1: are so many things that we use these days that
Speaker 1: use a lot of energy. But there's a couple of
Speaker 1: points to respond to that. One is with cryptocurrency, we
Speaker 1: don't have to there are other ways to validate cryptocurrencies
Speaker 1: that don't consume as much energy. Um yeah, yeah, yeah,
Speaker 1: So you're speaking our languages. Okay, good, So I'm amongst
Speaker 1: my people because it's quite nerdy. Most people don't mining.
Speaker 1: What's she's a nerd? So you're good, see you? Uh yeah,
Speaker 1: So proof of work versus proof of steak, But it's
Speaker 1: not even just about proof of steak. There's also proof
Speaker 1: of burn proof authentication. I've never heard a proof of burn.
Speaker 1: You had this and then when you said proof of burn,
Speaker 1: we're just checked out. Good thing the show is recorded.
Speaker 1: It means we can just stop and add things like
Speaker 1: this and just drop them right into the conversation. So
Speaker 1: proof of burn. Proof of burn is another way through
Speaker 1: which participants in a blockchain network reach the consensus that's
Speaker 1: needed to approve trans actions. It uses less energy than
Speaker 1: proof of work because it doesn't involve minors solving cryptographic puzzles. Instead,
Speaker 1: network participants gain the power to verify transactions by sending
Speaker 1: a portion of their tokens to a wallet where the
Speaker 1: coins will be burned. This essentially means that those tokens
Speaker 1: will be permanently removed from the circulating supply. Miners will
Speaker 1: then get rewarded for their work by receiving native tokens
Speaker 1: of that blockchain. I'm glad we cleared that up. Yeah,
Speaker 1: so there's actually validation methods beyond proof of work, improof
Speaker 1: of steake. I think those are the validation methods that
Speaker 1: are talked about the most, but there's others, and we
Speaker 1: don't particularly care about proof of steak per se. What
Speaker 1: we do care about the energy consumption, and with proof
Speaker 1: of work, that validation method does come with huge energy consumption.
Speaker 1: So energy use for bitcoin is often compared to traditional banking, right.
Speaker 1: Digital banking does use a lot of energy, but when
Speaker 1: you talk about the consumers, it's very different. And also
Speaker 1: at this point, energy consumption of crypto is already half
Speaker 1: of what traditional banking is, so it's almost it's getting closer.
Speaker 1: What you're saying is that the energy consumption taken up
Speaker 1: by the traditional financial institutions around the world is a
Speaker 1: lot of energy and a lot of you know, crypto
Speaker 1: advocates would point to that as being a reason why
Speaker 1: it's you know, okay to do crypto, because existing financial
Speaker 1: systems use a lot of energy. But you're saying that
Speaker 1: serves a lot more people, so it's in a sense
Speaker 1: it's justified more. We have to cut energy consumption everywhere. Right,
Speaker 1: So this is certainly not to say that the energy
Speaker 1: consumption of traditional banking is a good thing. There's definitely
Speaker 1: a ratio difference here, but ultimately we need to be
Speaker 1: looking to make everything more energy efficient, and with cryptocurrency,
Speaker 1: we know that there are methodologies that are extremely less
Speaker 1: energy consumption and proof of work, so proof steak is
Speaker 1: what most people are familiar with. There was a big
Speaker 1: merge with ethereum where they're switched. They've switched now from
Speaker 1: proof of work to proof of steak. Um. That means
Speaker 1: their energy consumption has gone down over I mean, this
Speaker 1: is a huge way to cut down emissions and being
Speaker 1: more climate forward. So how how would you design a
Speaker 1: low to rein that in? I mean, would you ban
Speaker 1: crypto mining? Would you ban currencies that use proof of work?
Speaker 1: So some of the ways that are currently being explored
Speaker 1: or um So I'll give an example. UM. The federal
Speaker 1: government came out with report a couple of weeks ago
Speaker 1: looking at the energy environmental impacts of proof of work,
Speaker 1: and what they've recommended is different agencies to come up
Speaker 1: with various standards that would rotch it down energy consumption
Speaker 1: over time. So that could be one way to do it. Um.
Speaker 1: But that being said, the report also notes that if
Speaker 1: those things don't work, the federal government should look into
Speaker 1: limiting what types of validation methods get used for cryptocurrencies. UM.
Speaker 1: So that might not necessarily be the first step that's
Speaker 1: taken in terms of eliminating proof of work, but it's
Speaker 1: clear that given the environmental and energy impacts, even our
Speaker 1: federal government is thinking that might be a route we
Speaker 1: have to take. Well, Tim and I have asked the
Speaker 1: question to a few people at this point, why can't
Speaker 1: the bitcoin blockchain also transition to proof of stake? And
Speaker 1: the answer we get is that you sacrifice security, you
Speaker 1: sacrifice other things and basically the entire ecosystem has to agree,
Speaker 1: and they probably won't agree. And when you think about that,
Speaker 1: I mean, how do you respond to that? How do
Speaker 1: you go about campaigning that actually this is the whitefle word. Yeah,
Speaker 1: I won't disagree with Like, it would be complicated for
Speaker 1: the bitcoin network to make a switch from proof of
Speaker 1: work to proof of steak um. A lot of the
Speaker 1: arguments roof of work through steak regarding like security and
Speaker 1: things like that. Not an expert in these areas, but
Speaker 1: I found a lot of them to be more philosophical
Speaker 1: and not actually based on the technology itself. I want
Speaker 1: to step back from the facts and talk about emotions.
Speaker 1: Because I've said this to Tim before, I tend not
Speaker 1: to like talking about energy uses and bitcoin because it
Speaker 1: feels like there's so much emotion on both sides, like
Speaker 1: it quickly devolves these discussions into people just talking back
Speaker 1: and forth. And I mean, from your stance at Earth Justice,
Speaker 1: how do you navigate that and deal with again, very
Speaker 1: hot emotions it can turn into on both sides. It
Speaker 1: is really tough emotions. I do have to say, in
Speaker 1: the realm environmental advocate advocacy, it's not unusual, right, I
Speaker 1: do work around building electrification for example, when people love
Speaker 1: their gas stoes. So there are a lot of emotions
Speaker 1: at play here. UM. We try to keep things very
Speaker 1: based on the facts, you know, and when it comes
Speaker 1: to the climate crisis, there's just such an urgency there.
Speaker 1: So that's why we're looking at this. We try our
Speaker 1: best to make it clear that we're not opposed to
Speaker 1: crypto UM. You know. I think some of that sensitivity
Speaker 1: comes in is feeling like they're tapped right like, because
Speaker 1: there are people who are very anti crypto UM. And
Speaker 1: I think the perception is, oh, environmentals are saying this
Speaker 1: is not a good use of energy, and it's not
Speaker 1: really that. It's pointing out this is very energy intensive
Speaker 1: their ways to do it that aren't and we need
Speaker 1: to be doing this across the board when it comes
Speaker 1: to raining and energy consumption, right, white fixtures, their energy
Speaker 1: standards for light fixtures, their energy standards for appliances. So
Speaker 1: that's the type of thing we need to look at
Speaker 1: for the cryptocurrency mining universe as well. Okay, as painful
Speaker 1: as it was another problem, you have no idea what
Speaker 1: it's not a photo of me? Okay, as painful as
Speaker 1: it was for us to go and buy this a
Speaker 1: single use plastic water bottle. It's ridiculous. Uh. I have
Speaker 1: to ask where on the spectrum something like this falls
Speaker 1: versus crypto I mean we're talking the entire spectrum here.
Speaker 1: You also have like a private jet. Well, the private
Speaker 1: jet would not fit in the room. Yeah, I tried
Speaker 1: to get one, but it was not approved. So which
Speaker 1: angle do you mean, like in terms of carbon impact,
Speaker 1: in terms of like importance and addressing. I mean, I
Speaker 1: do you think if we look at it like in
Speaker 1: a holistic way, right, the use of the use of
Speaker 1: a single use plastic bottle versus in the production that
Speaker 1: goes into it, then what happens to it after it
Speaker 1: gets recycled, if it can get recycled, and that versus
Speaker 1: cryptocurrency industry in general, like which one is worse? Which
Speaker 1: one is more useful, which one has more utility. It's
Speaker 1: hard to weigh things in that manner because both have
Speaker 1: serious impacts that we're seeking government to act on. Right,
Speaker 1: So that single use water bottle looks delicious, so it
Speaker 1: actually has government regulations UM that deal with the waste
Speaker 1: impact here right, UM, certainly not enough. We're advocating for
Speaker 1: more UM. But for example, we're in New York. In
Speaker 1: New York, uh, that has a five cent deposit on it.
Speaker 1: So that water bottle is much more likely to become
Speaker 1: another water bottle than a water bottle in like I
Speaker 1: don't know, I'm going to name maybe like trash. Some
Speaker 1: other states they don't have a deposit law, right, like
Speaker 1: the five cent fee, the ideas like oh that incentivizes
Speaker 1: consumer and recycling. Right, so we have some kind of
Speaker 1: environmental standards for that water bottle. We want to do
Speaker 1: the same with cryptocurrency mining right now, that really doesn't exist.
Speaker 1: It's a new industry that we're looking at, so we
Speaker 1: have to play catch up. So as we're going to
Speaker 1: speak to the CEO of Riot Blockchain, which of course
Speaker 1: operates in Texas, to set a lot of issues with
Speaker 1: energy uses in general, but also with crypto mining. What
Speaker 1: would you say him? So, Texas has been dealing with
Speaker 1: a number of issues related to their grid where there
Speaker 1: have been major power outages. Um. Crypto companies have contracts
Speaker 1: to turn off UM when there's high energy demand. UM.
Speaker 1: So something I would ask is, you know what could
Speaker 1: be done to reduce energy consumption and make sure that
Speaker 1: they're powered by renewal energy off the grid to make
Speaker 1: sure there aren't strains on the grid and that consumers
Speaker 1: utility bills don't go up, because that has been happening
Speaker 1: in places across the country where you have these high
Speaker 1: energy users leading to so much energy consumption that everyday
Speaker 1: homeowners are paying more on their bills. So I'd be
Speaker 1: really curious to hear what are his thoughts on that, Like,
Speaker 1: as a business hopefully looking to do good in his community,
Speaker 1: how does he want to work with regulators to address that?
Speaker 1: Is that a line of messaging that you've thought about
Speaker 1: in terms of communicating to the general public, Like, you know,
Speaker 1: I don't want to call it an attack ad necessarily,
Speaker 1: but couldn't if it's indeed the case, couldn't you come
Speaker 1: out and say crypto mining is leading to higher energy bills?
Speaker 1: For the normal everyday person, like, is that actually happening. Yeah,
Speaker 1: So this is something that we do talk about um
Speaker 1: very often. We don't need to point it out when
Speaker 1: it happens these communities, people notice. Um So, Plattsburgh, New York,
Speaker 1: ended up addressing cryptocurrency mining their community because they had
Speaker 1: like um like shipping containers of crypto mining industry that
Speaker 1: came into town. They get a lot of hydro that's
Speaker 1: what keeps energy really cheap in Plattsburgh. And what happened
Speaker 1: was energy bill started going up because the crypto mining
Speaker 1: company was using so much energy. They're kind of using
Speaker 1: the reserve of hydro powers. They were having to supplement
Speaker 1: their grid with more expensive energy, which is fossil fuels. Um.
Speaker 1: So they're grid a dirtier and the bills went up
Speaker 1: because they had to supplement with more energy. Uh So
Speaker 1: it kind of triggered an outrage right away. So in
Speaker 1: some ways you don't even need to talk about when
Speaker 1: it happened to people notice. But it is something that
Speaker 1: we do talk about with the public that when miners
Speaker 1: are plugging directly into the grid, it can be to
Speaker 1: utility bill hikes. This brand thanks a lot for hanging
Speaker 1: out with us I r L. Yeah, thanks for having
Speaker 1: me I r L this special audio only episode of Crypto.
Speaker 1: I r L will be right back with more from
Speaker 1: Katie Greifeld and Tim Stanovic. If you want the full
Speaker 1: video experience, head to Bloomberg dot com slash q T. Yeah,
Speaker 1: isn't good to see you. Good to see you as well.
Speaker 1: I feel like we can't have this conversation about energy
Speaker 1: rate at this moment without talking about proof of work
Speaker 1: versus proof of steak because Ethereum, that blockchain, has got
Speaker 1: a lot of press about the fact that it did
Speaker 1: switch to proof of steak and the number we keep
Speaker 1: hearing is that that cut its energy usage by nine percent.
Speaker 1: And We've asked this question in a few different ways
Speaker 1: to a few different people, But I'd love to hear
Speaker 1: your thoughts on why bitcoin can't just switch from proof
Speaker 1: of work to proof of steak. Yeah, A couple of
Speaker 1: thoughts come to mind on that topic. You know. First, Yeah,
Speaker 1: I've I've seen the same statistic that Ethereum has reduced
Speaker 1: with energy consumption by switching a proof of steak. But
Speaker 1: the fact is is that energy energy consumption is still there.
Speaker 1: You know, Ethereum might not be using it in the
Speaker 1: form of its consensus system. But all the GPUs out
Speaker 1: there that we're mining for ethereum now are just going
Speaker 1: to do something else. They're gonna mind another coin, they're
Speaker 1: gonna be sold the GAMER, They're going to be used
Speaker 1: for AI machine learning. The price of these things didn't
Speaker 1: go to zero, so the energy consumption net net hasn't
Speaker 1: changed whatsoever. Proof of work drive security for something so
Speaker 1: important as money. Proof of steak maybe works for other applications,
Speaker 1: but Bitcoin will never change from proof of work to
Speaker 1: proof of steak um. If anyone wanted to make that change.
Speaker 1: The development of bitcoin is completely open. Someone could propose
Speaker 1: that code and they could see the consensus that it reaches.
Speaker 1: I'm optimistic it won't get much. So let's just put
Speaker 1: that on the record. Bitcoin never gonna go to proof.
Speaker 1: Say we've established that, all right, interview, interview over done? Done? No,
Speaker 1: not done, We're not done. So are there are those
Speaker 1: stats about crypto using more energy each year than the
Speaker 1: entire country of Argentina or one bitcoin transaction? Uh, the
Speaker 1: power that it takes to do one of those powering
Speaker 1: more than fifty one home for fifty days. One American
Speaker 1: home for fifty days. Are those stats just bunk Transactions
Speaker 1: do not have an energy p load. Bitcoin mining is
Speaker 1: separate from transaction verification process at, etcetera. In bitcoin mining,
Speaker 1: we are simply putting work behind each new block we
Speaker 1: add to the blockchain. Within that block our new transactions,
Speaker 1: but those are verified through note software that I can use,
Speaker 1: you can use, anyone can use that. It's helped driving
Speaker 1: that peer to peer network. So the number of the
Speaker 1: amount of energy that bitcoin mining uses is not related
Speaker 1: to transactions in any ways. It's all consensus system driven. Okay,
Speaker 1: so maybe maybe somebody who would criticize what you're doing
Speaker 1: would say something, you know, something along the lines of, Okay,
Speaker 1: we need AI, we need a traditional financial system. Uh,
Speaker 1: it's nice to be able to have gaming. Uh. Those
Speaker 1: are all justifiable in the sense of energy consumption. But
Speaker 1: they might say, I don't necessarily agree with the concept
Speaker 1: of creating this alternative money, the idea that the world
Speaker 1: needs this. What would you say to people like that,
Speaker 1: I'd say, that's an interesting take. In the environment that
Speaker 1: we're in, where our wealth is inflated away entirely outside
Speaker 1: of our control, our ability to transact with each other
Speaker 1: is controlled by third parties, whether it's businesses, governments, some
Speaker 1: collection of governments, what have you. I think a number
Speaker 1: of recent events have made the use case for bitcoin
Speaker 1: more than ever. Money is the number one way that
Speaker 1: we communicate with each other, you know, Tim and Katie,
Speaker 1: I could say something to you, you could say something
Speaker 1: to me, but we are only truly honest with how
Speaker 1: we spend our dollars. People ultimately vote with their pocketbook,
Speaker 1: they ultimately vote with their feet, and bitcoin enables humans
Speaker 1: globally to communicate that way in commerce and what have
Speaker 1: you without third parties controlling that. That is very important
Speaker 1: to human freedom, and that is very important to the
Speaker 1: advancement of humans globally. So it is a very important
Speaker 1: and noble use of energy that bitcoin has. It is
Speaker 1: giving freedom globally to everyone, giving the individual sovereign control
Speaker 1: over their money. Jason, I'm wondering if the bet gets
Speaker 1: harder to to justify though, in an environment where we're
Speaker 1: seeing the worst energy crisis that we've seen in decades.
Speaker 1: You're in California, but a lot of your operation is
Speaker 1: in Texas. I mean, what do we hear from California
Speaker 1: just recently? Don't charge your cars because the grid can't
Speaker 1: handle it, even the Texas grid asking some bitcoin miners
Speaker 1: to go offline when it got hot so that people
Speaker 1: would be able to use their air conditioners and the
Speaker 1: load on the grid would be limited. Does it get
Speaker 1: harder to justify this in an in an environment like this,
Speaker 1: it actually gets easier when you look at these energy markets.
Speaker 1: It's something a lot of people don't understand necessarily, is
Speaker 1: how their energy grid works. People think maybe there's energy
Speaker 1: being produced somewhere and we're just all buying it as
Speaker 1: we need it. But in a transition to more renewable
Speaker 1: generation sources, that supply of energy is very um volatile.
Speaker 1: Wind is only wind. Wind generation is only generating wind
Speaker 1: power when the wind is blowing. Solar generation is only
Speaker 1: generating solar power when um the sun is shining, So
Speaker 1: those are not necessarily always correlated to when the demand
Speaker 1: for energy is. So bitcoin miners play a very important
Speaker 1: role by what's known as valley filling, by being a
Speaker 1: constant demand for power that does not impact the peak
Speaker 1: demand because, as you noted, Tim, we are shutting off
Speaker 1: when either the grid is calling on demand response or
Speaker 1: the economics are simply invoking that response. Itself. By being
Speaker 1: by valley filling and being this constant demand, we help
Speaker 1: give renewable generation sources greater visibility and their financing, and
Speaker 1: we help make all generation more effective and UM cost
Speaker 1: effective and efficient. We're eliminating the volatility and power demand,
Speaker 1: which makes great stronger. So that's why you know UM
Speaker 1: Bitcoin miners are becoming ur COT's most trusted demand resource.
Speaker 1: And it was even the Urcott Interim CEO himself who
Speaker 1: said earlier this year that bitcoin miners are helping Orcott
Speaker 1: keep renewable generation operational because a lot of that power
Speaker 1: is often curtailed because there's not an off taker for it.
Speaker 1: An interesting stat for you, there was about seven point
Speaker 1: four terawatt hours in West Texas where a lot of
Speaker 1: wind and solar generation is that was curtailed over there
Speaker 1: was no one to buy it and there was no
Speaker 1: way to transmit it. So there's a lot of inefficiencies
Speaker 1: in the power markets out there when you have a
Speaker 1: lot of renewable generation that is intermittent and not always
Speaker 1: match with demand. Bitcoin miners helped level out that demand,
Speaker 1: keep the grid and the right frequency, and we do
Speaker 1: not impact the peek because we are participating in demand
Speaker 1: response and shutting off on. We were talking about just
Speaker 1: the whole concept of this program today, and we were thinking, Okay,
Speaker 1: if we're talking Texas, we're talking energy. We're talking mining
Speaker 1: here and extracting, you know, some sort of resource. We
Speaker 1: thought of the TV show Dallas from the eighties, thought
Speaker 1: of it. I have not heard of it, And I'm
Speaker 1: wondering if you can sider yourself like if Dallas were
Speaker 1: made today, would you be the JR of I'm not familiar.
Speaker 1: That makes two of us. Jason. Good to see you,
Speaker 1: Thanks for joining us. Good to see you. Thank you,
Speaker 1: Tim and Katie. Are we an energy show? Now? Are
Speaker 1: we really done with the energy discussions? We are done.
Speaker 1: I can guarantee you that our next show is not
Speaker 1: a bad energy Okay, I'm gonna show up just to
Speaker 1: find out what we're going to talk about. Good, I'll
Speaker 1: be here. Took M. Want to see these episodes of
Speaker 1: Crypto I R L in video. Check them out on
Speaker 1: Bloomberg Quicktake at Bloomberg dot com, slash qt, or find
Speaker 1: Katie and Tim over on YouTube on the next episode
Speaker 1: of Bloomberg Crypto. September might have a reputation for being
Speaker 1: cruel to the Bitcoin faithful, but are they also in
Speaker 1: for a scare in October. This is Bloomberg Crypto, a
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Speaker 1: at Bloomberg dot net or find us on Twitter. We're
Speaker 1: at Crypto. The supervising producer of Bloomberg Crypto is Vicky Vergolina.
Speaker 1: Our senior producer is Janet Babin. Our producers are Mohammed
Speaker 1: Faruk and Sharon Barriro. Our associate producers are Ty Butler
Speaker 1: and Moses on Them. Dast to wonder At is our engineer.
Speaker 1: Original music by Leo Sidron. I'm Stacy, Marie Ishmael. Have
Speaker 1: a great weekend.