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Elon Musk, founder of Tesla, was recently baptized “technification”, O king of technology. A better nickname can be “Wizard of Oz”.
The entrepreneur has an amazing ability to pull the strings of the cryptographic world. In February, Bitcoin prices jumped when Musk revealed the company had bought $ 1.5 billion value of the cryptocurrency. So did the price of dogecoin after similar Delphic tweets.
But last weekend dogecoin will fall when Musk admitted in an American comedy show that the asset could be a “bustle”. And now bitcoin has also fallen afterwards another tweet, this time a revelation that Tesla will stop accepting bitcoins for the purchase of electric cars. “We are concerned about the rapidly increasing use of fossil fuels for mining and bitcoin transactions, especially coal,” Musk said.
Activists and journalists Of course, they have been highlighting this issue for months. Two startling statistics encapsulate the problem.
First, it seems like to date, two-thirds of bitcoin, created using computer algorithms, has been mined in China data centers depending on the electricity generated by the coal. In fact, the link between Bitcoin and black things is so close that cryptocurrency expert Alex Lipton points out that bitcoin prices move whenever accidents occur in Chinese coal mines.
Second, the $ 2 million crypto market has expanded so rapidly that it is engulfing large amounts of energy. Bitcoin mining, which accounts for half of all cryptocurrencies, currently uses the same amount of energy annually as the Netherlands in 2019. Scientists warn this threatens Paris’ climate goals.
Bitcoin enthusiasts like businessman Anthony Scaramucci point out that statistics need context and that traditional finances also consume a lot of energy.
So are other types of technology. Like a paper co-authored by a former researcher of Google’s artificial intelligence ethics unit notes, some of the AI processes behind Google search are “It simply came to our notice then as much energy as a trans-American flight ”.
Even with these warnings, the fact is that Bitcoin’s carbon footprint is embarrassing, not just for Tesla, but for millennial investors in cryptography who care about ecological issues. And that in turn highlights three big lessons for all investors.
First, no one can afford to ignore current environmental, social, and governance concerns, even in actions labeled as ESG. Tesla appears in many ESG funds because investors have focused on the point of the electric car and ignored other issues.
However, digital transparency now allows activists to monitor business activities more effectively than ever before. This means that investors need a side view when valuing firms, as ESG risks are rarely static or binary and often involve constantly changing offsets.
Second, and from this point on, investors should see the debate about the carbon footprint of technology as an example of this changing landscape. Work is underway to fix Bitcoin’s carbon issues. The Rocky Mountain Institute, a non-profit organization with clean energy, recently joined forces with UN officials and fintech leaders to explore solutions. One could lead to changes in computer processes around cryptography to reduce power consumption; last week it is called a “green” cryptocurrency that uses less processing power To share was launched.
Another option is to use green electricity sources, for example, by exchanging Chinese coal for Icelandic hydroelectric power. Enthusiasts like Scaramucci think this could solve the problem if there is a registry that allows investors to track the origin of bitcoins.
Which idea may work is unclear. But the debate probably explains why Musk sent his tweet. And why veteran investor Stanley Druckenmiller he said this week that it’s not clear which cryptocurrency will end up dominating (assuming you think, as Druckenmiller does and I do, that cryptography is here to stay). Few people predicted 15 years ago that Facebook, not MySpace, would come to dominate social media.
The third point is about regulation. The reason Musk can act as the Wizard of Oz of cryptography, with impunity, is that the sector is opaque and largely unregulated. Financial policymakers are already threatening repression.
But as a report of the notes of the Bank for International Settlements, “the vast majority of jurisdictions in the world” have not implemented controls to stop money laundering, let alone market manipulation. In addition, there is “significant variability in the definition of regulatory perimeter between jurisdictions.” In plain English, supervision is a mess.
Libertarians like it that way. So could Musk. But if cryptography is to become more common (with any sign), it will need much more accountability and transparency. Perhaps this will be impossible to achieve given the anti-establishment origins of cryptography.
But the fight for ecological standards could possibly start this process by providing a cause for young cryptography enthusiasts to come together. If so, this could turn out to be the most important impact of Musk’s tweet and a reason for investors and regulators to carry out late control of Chinese mines, both the coal variety and the computer.
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