Tag Archives: Bitcoin

Impact of cryptocurrencies on Environment

Reading Time: 3 minutes

Last year new trend in e-conomy called NFTs made it to the headlines and quickly started picking up popularity. Poland was no exception with various Celebrities and Influencers like Magda Gessler or Krzysztof Gonciarz presenting to their followers their NFTs. This spurred controversies, as some of those celebrities often engaging in pro-environment initiatives (like it is the case with Gonciarz) support the trend which is definitely not the most eco-firendly. Before I explain, how NFTs impact environment, let’s define what they actually are and how they work.

Gonciarz’s NFT profile picture

NFT (non-fungible token) is a customized virtual token which is acquired with cryptocurrencies, in most cases with Ethereum. NFTs very often take a form of a pixelized image for example a fictional Ape. To acquire one you need to buy it from an artist and in return you get a certificate confirming that you purchased it, but you are not the owner of the picture though. The fact that you have purchased a NFT is confirmed and by the blockchain technology.

To ensure that transaction with cryptocurrencies are safe and are executed properly, the data about buyer and seller are encrypted into a complex mathematical equation and placed in a dispersed network of users. Data about transactions, when they took place and how much they were worth is sorted in so called blocks. As blocks are constantly updated with new transactions new blocks are connected with the old ones hence the name blockchain. To simplify, every user can look at details behind the transaction at any time.  Solving the equation provides you with a reward. This procedure, dubbed by the community ‘mining’, requires a lot of computing power, which means that it requires a lot of energy.

Mining, which is the source of cryptocurrencies entering the market, is the reason, why the demand on GPUs is very high recently. Mining is also cause of serious ecological concerns. When we sum up all miners in the world, their equipment uses amounts of energy which can be considered enourmous – for example amount of energy Bitcoin minining uses can be compared to energy used by all inhabitants of a highly developed countries like Sweden. If the way mining works won’t be changed, then it will use up more and more energy, due to cryptocurrencies and NFTs becoming more popular. It is also worth mentioning that despite most of miners using renewable energy sources, still most (61%) of the energy reaches mining computers thanks to non-renewable spurces of energy like burning fossil fuels. Significant amount of mining takes place in China or Russia, where energy is very cheap but mostly comes from non-renewable sources. NFTs, due to relying on cryptocurrencies, is part of this process which results in draining lots of energy, while it also accounts to CO2 emissions which humanity needs to reduce in order to fight the Global Warming.

Plik:Ethereum-icon-purple.svg
Ethereum’s logo

Is it possible for the cryptocurrencies to be more eco-friendly and consume less energy? Yes, some of the cryptocurrencies are using up many times less energy than the most popular Bitcoin and Ethereum. Ethereum is also planning to change the way the currency is being mined in order to cut down their emission by as much as 99%. After all, while cryptocurrencies at the moment are bad for environment, there is huge chance that it may not be the case in near future.

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Bitcoin as a legal tender in El Salvador

Reading Time: 5 minutes
The ocean waves in El Zonte
(Photo of “Bitcoin Beach on El Salvador by Kate Linthicum / Los Angeles Times)

El Salvador in September became the first country to accept digital currency (Bitcoin) as a legal tender. As a county in Central America, El Salvador has a hard time dealing with natural disasters such as earthquakes and hurricanes. It’s economy has also been hampered by government policies that mandate large economic subsidies, and by official corruption. Subsidies became such a problem that in April 2012, the International Monetary Fund suspended a $750 million loan to the central government. President Funes’ chief of cabinet, Alex Segovia, acknowledged that the economy was at the “point of collapse”.

A man buys soda in a store that accepts Bitcoins in El Zonte.
https://compote.slate.com/images/c7ef7ddd-9ea1-468b-a887-1e9a4d9e4f7b.jpeg?width=1440&rect=4000×2667&offset=0x94

In June 2021, President Nayib Bukele said he would introduce Bitcoin as a legal tender in El Salvador. It was said by Jack Mallers, (founder Strike which is a Venmo-like application that allows people to send bitcoin to each other almost instantly and allows them to freeze their money in a dollar amounts) that Bitcoin would help countries like El Salvador protect themselves against “potential shocks” of inflation for traditional currencies – as El Salvador doesn’t have it’s own central bank and is contigent on monetary policy of the United States. The Bitcoin Law was passed by the Legistalive Assembly on 9 June 2021, with a majority vote of 62 out of 84. Bitcoin officially became legal tender ninety days after the publication of the law in the official newspaper. Since then bitcoin, as well as the United States dollar, is the official currency of El Salvador. Also, what I think is interesting, in the law it is said that foreigners can gain permanent residence in El Salvador if they invest 3 Bitcoins into the country. It is also worth to know that as a resident of this country you don’t have to pay capital gains tax.

Is it an easy thing to use cryptocurrency in such country as El Salvador?

Critics have pointed out that the plan is very light on details and that Bitcoin is notoriously difficult to use as a day-to-day currency partly due to its volatility. In addition, there’s a good chance that a large number of businesses in the country won’t even be able to accept the cryptocurrency; El Salvador has the lowest number of internet users in Latin America (about 45% of population). Bukele (El Salvador’s President), however, has been pointing to a El Zonte where residents have been using Bitcoin for nearly two years as evidence that the cryptocurrency could help power the economy nationwide. But he didn’t mention the fact that people there also had a long introduction to the cryptocurrencies.

What is a bitcoin beach and how it’s gotten it’s name?

Playa El Zonte, also known as “Bitcoin Beach” is a beach located in El Zonte, El Salvador. It all started with an anonymous donation from an American donor. It is said that he had gotten rich while trading the cryptocurrency and believed it “was going to change the world.”

How the people from Bitcoin Beach were able to learn about Bitcoin?

The investors firstly were trying to convince older people that bitcoin is a good thing for them, they started to pay their children in digital coins to pick up the trash from the beach etc. Also the main factor that helped them to introduce Bitcoin was the pandemic and the fact that the tourism industry collapsed. The families from the city started receiving from Michael Peterson, a 47-year-old California native, about $35 in Bitcoin and when they wanted to cash the money, they needed and app which allows that. That’s how Bitcoin Beach Wallet was created. It is said that 18 months after the project launched, roughly 90% of El Zonte’s households are interacting with the currency regularly.

What are pros and cons of using bitcoin on El Salvador?

So firstly – 70% of the population is unbanked (according to study from 2017) which is an estonishing number. We can hope that introducing Bitcoin would increase a percentage of bank users, but also we have to take under consideration that only 45% of the population is using internet, so it might be not only a hard thing for them to learn, but it also might be hard to convince them that using digital currency can be good or even life changing.  Reports indicate that some residents have struggled to access the payment system because of limited data plans and lack of access to more advanced smartphones.

We also have to think about the Bitcoin itself. According to the Bank of America bitcoin industry’s global CO2 emissions have risen to 60 million tons, equal to the exhaust from about 9 million cars. Considering the environmental impact it has, maybe there would be better cryptocurrency for everyday use.

In an interview with Roxana Valles, the 42-year-old proprietor of a small beachside grocery store she said that using Bitcoin has allowed her to invest for the first time. But what if the Bitcoin’s value drops like it happened in April 2021? One Elon Musk’s tweet about Tesla not accepting Bitcoin caused a big crush (about 50%) “I’d be very interested in seeing what happens if we enter a bear market,” says McCormack, the British podcaster. “If you’re a shop owner and you have $50 a day in Bitcoin sales and all the sudden that goes up to $60, that’s cool. But what happens when it starts going down to $40 or $30?”

Steve Hanke, professor of applied economics at Johns Hopkins University and director of the Cato institute’s Troubled Currencies Project says that “Businesses tend to unload Bitcoin as fast as they can because of the fluctuating exchange rate. If you receive it in the morning, it could easily be down 5 or 10 percent by the close of business,” said Hanke. “Are you running a business in which you’re speculating in Bitcoin, or are you running a business where you’re selling clothes or shoes?” People on El Salvador simply need currency that they can either hold or sell without worrying about it’s value changing over night or even in hours.

How the Latin American nation reacted to Bitcoin being announced as a legal tender?

Protester with "no to Bitcoin" sign
https://ichef.bbci.co.uk/news/976/cpsprodpb/11C68/production/_120580827_gettyimages-1235276291.jpg

Since the day the Bitcoin Law went into effect — when the coin was valued at just $46,777 — the value of Bitcoin has already significantly increased. But this optimism is not shared by everyone. It’s a country where not only internet or bank access are hard to reach, but also an education opportunities are limited. Not everyone is open to cryptocurrency and people are not interested in learning about it. They have hard time accessing Chivo app, which is supposed to help them with receiving and paying with Bitcoin. Chivo wallet makes the transactions instant and almost costless.

SUMMARY

Making Bitcoin a legal tender in El Salvador is definitely a bold decision. Like every groundbreaking innovation it has it’s supporters and opponents. We will see in the future how it turns out for El Salvador’s economy. I hope it’s going to end up well for them, but personally I think there may be a better cryptocurrency than Bitcoin for them to use, possibly more eco-friendly one.

SOURCES:

https://www.reuters.com/business/el-salvadors-bitcoin-beach-town-digital-divide-slows-uptake-2021-06-14/

https://www.ft.com/content/56588fee-dca8-450d-a848-80d29f02f45e

https://slate.com/technology/2021/06/el-zonte-el-salvador-bitcoin-beach-legal-tender.html

https://www.bloomberg.com/news/features/2021-06-17/world-s-biggest-bitcoin-experiment-is-a-surf-town-in-el-salvador

https://www.inverse.com/innovation/bitcoin-el-salvador-protests-chivo-app

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You are unconsciously mining Bitcoin!

Reading Time: 2 minutes

You can become the Bitcoin owner in two ways. The simpler way is to buy it on one of the many cryptocurrencies exchanges for the US dollar, or exchange it for other cryptocurrencies. The more difficult way is to mine it. Many of you have probably heard about mining a bitcoin, in a nutshell, it is sharing the computing power of your laptop or PC, or other high-performance machines. Today, cryptocurrency mining on a laptop is unprofitable, and special mining machines are used for this purpose, that is computers consisting of a dozen or so graphics cards or more, as well as super-fast processors. The higher the equipment’s performance, the more dug-out bitcoins are.

“Computers” used for cryptocurrency mining.

The text above is an introduction to cryptocurrency mining. I just wanted to introduce you to the issue, because many people have heard about it, but no one knows how it works. Why am I focusing on this? Because probably many of you have already mined cryptocurrencies without even knowing about it. How is this possible? Thanks to the CoinHive plugin. This is a JavaScript code that website owners put on their websites. This code uses the computing power of the person’s laptop entering the site to dig cryptocurrency such as Bitcoin, Ethereum, or Monero. As mentioned above, cryptocurrency mining on one laptop is unprofitable, but what if we use thousands of such laptops? Pockets of website owners will quickly fill up and we will not be aware of anything. The Pirate Bay has recently admitted such practices, and in December it was discovered that customers using WIFI in several Starbucks cafes in the US also unconsciously mined Bitcoins. Starbucks quickly solved the problem saying that it was the internet provider, who “hacked” café’s WIFI, and not the franchise owner.

Many website owners explain this with high server maintenance costs, or the desire to disable website ads in exchange for allowing them to mine cryptocurrency on your laptop while browsing their website. What do you think about such practices? If you have ever entered a simple website and your computer has started to reach high temperatures and the CPU fan has been running at full speed, you may have unconsciously been mining cryptocurrencies.

 

Sources:

https://nypost.com/2017/12/13/free-starbucks-wi-fi-caught-mining-for-bitcoin/

https://www.cnbc.com/2017/12/12/starbucks-customer-laptops-hacked-to-mine-cryptocurrency.html

https://gizmodo.com/the-pirate-bay-added-a-cpu-hijacking-bitcoin-miner-to-s-1818488143

 

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Bitcoin – Future global currency or big bubble?

Reading Time: 2 minutesWhen I first saw a movie In Time starring Justin Timberlake and Amanda Sayfried last year, I began to wonder if it is possible to unify the global payment system. I am not talking about extending a person’s lifetime, as it is shown in the film, but one global currency. For those who like sci-fi and various visions of the future world, I strongly recommend this film. But let’s talk about cryptocurrencies, Bitcoin in particular.

In Time (2011)

Is it possible for Bitcoin to become world’s global currency? With the market cap of nearly $100 billion it surpasses its crypto competitors and is definitely the most popular one. Just imagine how convenient it would be, going abroad and not thinking about exchanging the currency, doing business with international partners and not worrying about the decline in the value of a particular currency against other. America will never accept euro as its own currency, eurozone on the other hand will never accept dollar as the local currency. The same is happening with other great powers and their currencies. And at this point a bitcoin appears. Cryptocurrency, which is decentralized, has no bank over it, and all transactions are extremely difficult to trace. Sounds beautiful? Unfortunately, it also has its disadvantages. Thefts are also extremely difficult to trace and decentralization has its pros and cons.

The questions is what Bitcoin holders are expecting it to be? Do they hold it just to sell it with profit, to speculate, or do they believe that one day it will become global currency, commonly accepted in all countries by all shops and institutions. Right now you can pay using Bitcoin in some restaurants and shops but still it is long way for Bitcoin to be widely used. On the other hand, we are seeing increasing interest from the states and institutions. The Swiss city of Chiasso has recently made it possible to pay taxes with bitcoin, state institutions see a profit in it and we hear more and more about the possibility of taxing all cryptocurrencies. European Central Bank chief Mario Draghi recently said that ECB has no power to regulate Bitcoin and that cryptocurrencies are not mature enough to think about regulating them. So we can breathe a sigh of relief, because in the near future politicians will not put their hands on it, but unfortunately investment banks will, Goldman Sachs is thinking about trading Bitcoin and other cryptocurrencies. If this happens it will just be another speculative asset.

 

 

Sources:

In Time movie

Cryptocurrencies market cap

Regulating the cryptocurrencies

Swiss town to accept tax payments

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Bitcoin exchange Bitfinex was hacked losing $70M worth of bitcoin. It found unprecedented solution.

Reading Time: 2 minutesBitfinex is one of the most popular Hong Kong-based bitcoin exchange. On August 2nd one of the company employees confirmed a loss of 119,756btc. This with a base price (from the time prior the hacking) of $650 USD per bitcoin converts to $ 77,841,400 USD equivalent.

After the news of the hack was published the market value of bitcoin fell down by almost 20% settling on $540 USD per bitcoin.

bitcoin value drop

No information about how did it happen was released. All is known is the fact that funds in other currencies haven’t been compromised and that only some accounts lost their bitcoins while other didn’t lose any.

BitGo claims that they found no evidence of a breach to any BitGo servers.

The weird thing is the fact that this exchange does not have any limits on withdrawals as other exchanges. This would limit the possible losses caused by such an attack.

The company found an unprecedented solution to this situation. It was decided to spread the loss evenly between everyone who is using Bitfinex exchange. It means that customers will see on their accounts a generalized loss percentage of 36.067%.

As a compensation of the 36.067% Bitfinex will grant everyone a new token called BFX in the amount proportional to the loss of a client.

This solution was not welcomed be everyone. Especially by those who kept their savings in other currencies like USD.

The plan is to eventually rebuy the token living customers with what they had on their accounts prior the hack. The BFX token is going to be tradable on their platform allowing customers to set their value (representing how they see chances of rebuying the token really happening; I would be rather skeptical)

 

How do you like the solution of Bitfinex?

Would you store your bitcoins in an online wallet? (It is not the first time big amount of bitcoins disappear without a trace)

 

Sources:

http://www.cnbc.com/2016/08/08/bitfinex-users-set-to-lose-36-of-their-holding-in-bitcoin-hack.html

https://twitter.com/BitGo

https://www.reddit.com/r/Bitcoin/comments/4vupa6/p2shinfo_shows_movement_out_of_multisig_wallets/

https://techcrunch.com/2016/08/08/hacked-bitcoin-exchange-bitfinex-will-reduce-balances-by-36-to-distribute-losses-amongst-all-users/

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