Billion-dollar companies across the globe are betting big on Bitcoin (BTC). Recent analysis from European investment manager Nickel Digital Asset Management found that 20 publically listed companies with a market capitalization of over $1 trillion have about $9.6 billion invested in BTC. Individual investors are also taking an increasing interest in the asset.
The “Third Annual Bitcoin Investor Study” from Grayscale Research found that demand for Bitcoin has risen tremendously. According to the study, 55% of current Bitcoin investors began buying the asset over just the last 12 months. Grayscale’s report also notes that the market for those interested in Bitcoin investment products expanded to 59% in 2021, up from 55% in 2020 and slightly more than one-third in 2019, reflecting steady growth.
Yet while the world’s enthusiasm for Bitcoin may be increasing, concerns regarding its environmental impact have become more apparent than ever. For example, Grayscale Research also found in its investor study that over 30% of investors are concerned about Bitcoin’s potentially negative impact on the environment. Interestingly, this consideration only became apparent in 2021, as shown in the report.
Models to calculate Bitcoin carbon emissions
Given the rising distress over Bitcoin’s carbon footprint, new models are emerging that aim to help investors and businesses alike understand how to ensure their BTC holdings are sustainable. For example, the Frankfurt School Blockchain Center and digital asset manager INTAS.tech published a study on Nov. 16 outlining a new approach to offsetting the CO2 emissions caused by the Bitcoin network. The formula developed factors in two approaches: a transaction-based approach and an ownership-based approach.
Philipp Sandner, a professor at the Frankfurt School Blockchain Center, told Cointelegraph that asset managers and investors across Germany, in particular, are concerned about Bitcoin’s CO2 footprint being compliant with environmental, social and governance (ESG) standards. As such, Sandner explained that he wanted to create a formula that would enable asset managers, mining companies, exchanges and individuals to calculate the CO2 footprint of their BTC:
“Normally, we assign the largest burden of CO2 compensation to Bitcoin mining companies, but you still have ETF issuers, companies and exchanges that want to prove to customers that they are doing something about their CO2 footprint to compensate for their Bitcoin.”
According to Sandner, the goal at the beginning of the study was to first compute the global energy consumption of Bitcoin between Sept. 1, 2020 and Aug. 31, 2021. The results show that 0.08% of worldwide CO2 equivalent came from Bitcoin. Based on this number, Sandner remarked that the maintenance of the worldwide Bitcoin network required 37.97 million metric tons of CO2 equivalent.
In order to calculate the carbon footprint of Bitcoin from an investor perspective, the study notes that companies can either focus on the proportional network usage in bytes in relation to the Bitcoin blockchain growth during a specific time frame or on the amount of Bitcoin held for a specific period. According to the document, an average Bitcoin transaction contains 670 bytes on the Bitcoin blockchain, representing an estimated carbon footprint of 369.49 kilograms of CO2 equivalent. Sandner explained:
“These carbon emissions can be compensated with a certificate from the EU Emissions Trading System. One certificate for one tonne of CO2 is around $50, which would equal roughly $18 to compensate for a single BTC transaction. Now, if an investor or company was holding one BTC over a year period, this would cost roughly two tonnes of carbon emissions. If compensated with the EU Emissions Trading System, this would then be around $100.”
Benjamin Schaub, senior consultant at INTAS.tech, told Cointelegraph that companies could apply the formula mentioned for transactions and Bitcoin ownership to compute their carbon footprint that should then be offset. “What makes this model great is that all the data needed is publicly available. There are no assumptions here, it’s just about how companies engage with the Bitcoin network.”
Schaub added that Iconic Holding GmbH, which offers exchange-traded products in Germany, is currently applying this method to ensure sustainability: “We are also in discussion with a few very big exchanges. I strongly believe that over the next year major players in the space will care more about this topic.”
While it’s difficult to predict the future, it’s notable that some major exchanges and exchange-traded funds (ETFs) have started to apply similar approaches to offset Bitcoin’s carbon footprint. For example, Schaub noted that the crypto exchange BitMEX is attempting to make its BTC holdings carbon-neutral. According to a recent BitMEX Research blog post, the company believes that the most effective way for users and exchanges to evaluate Bitcoin’s carbon footprint is through on-chain transaction fees. A BitMEX spokesperson told Cointelegraph that the company concluded that each $1 spent on Bitcoin transaction fees can incentivize up to 0.001 metric tons of carbon emissions, based on the company’s formula.
There are only a few approaches currently available to help companies offset their Bitcoin carbon emissions, with Sandner commenting that transaction fees become more important as the Bitcoin network ages. As such, he believes that companies must consider a transaction-based approach when it comes to ensuring carbon neutrality.
Schaub further pointed out that the source of electricity being used should be taken into account, noting that the model developed by INTAS.tech and the Frankfurt School Blockchain Center looked at the energy mix as applied in the United States and Germany: “This ensures that we can observe more miners becoming aware of this topic and are looking for electricity from renewable sources.”
In addition to exchanges like BitMEX developing models to calculate Bitcoin carbon emissions, some ETFs are doing the same. For instance, Canadian Bitcoin ETF issuer Ninepoint Partners launched a carbon-neutral Bitcoin ETF in May 2021. Alex Tapscott, managing director of digital assets at Ninepoint, told Cointelegraph that while this was the right thing to do, it also benefits the business as a whole:
“Many investors with ESG requirements were concerned about Bitcoin’s footprint and have stayed on the sideline. We wanted to make it easier for them to be stakeholders and participate in Bitcoin’s upside.”
Tapscott added that oftentimes, the investors in Bitcoin funds, along with the miners themselves, are the ones demanding that the industry be more sustainable. Given this, Tapscott believes that in 10 years, Bitcoin will be close to 100% renewable: “It may even help subsidize the development of renewable projects because it’s a rough and ready buyer you can place at source. In the meantime, carbon offsetting is a good way to bridge the gap.”
How accurate are these models?
Although it’s becoming more important for various companies to offset their Bitcoin carbon emissions, it’s vital to recognize the challenges associated with the models discussed.
For instance, Sandner remarked that all of the numbers compiled within the model he helped create are changing over time. “The hashrate is changing for example, as we recently saw with the Chinese mining ban. The hashrate dropped by 50%.” As a result, Sandner is aware that the fluctuations of metrics must be taken into consideration. He added that each country has a different mix of CO2 intense energy, noting that Norway tends to be greener than other regions. Lastly, Sandner pointed out that the carbon prices need to be carefully observed, adding that prices have been increasing during December.
Moreover, a BitMEX spokesperson mentioned that the company’s formula is not a perfect methodology, noting that the exchange expects and welcomes critique. However, the company believes that the formula does improve on other estimates out there. According to the post, the equation used is fairly simple, as only average Bitcoin prices are leveraged rather than estimates of Bitcoin mining electricity costs.
Sandner ultimately believes that the largest share of work to be done is still ahead, noting that most of these approaches are still emerging:
“The Bitcoin mining council in the U.S. for instance is trying to find new models. Once these methods have been developed then companies will need to adopt them, but it’s still too early. Awareness is starting to emerge, but this is just the beginning.”
Fed report finds most Americans who own crypto tend to be high income hodlers
Only 12% of American adults used crypto in 2021, and the demographic gap between those who invested in it and those who used it in transactions was enormous.
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The United States Federal Reserve Board has included data on cryptocurrency in its new Economic Well-Being of U.S. Households in the 2021 report. The Fed’s ninth annual report looked at survey results from 11,000 people questioned in October and November 2021.
The report indicated financial wellbeing is the highest it has been since reporting began, with 78% of U.S. adults “doing okay or living comfortably financially.” That is an increase of 3% over the last three years. As a diagnostic of financial fitness, the report cites the 68% of Americans who say they could cover a $400 emergency expense using cash or its equivalent alone.
The report looked at cryptocurrency usage for the first time. It found that 12% of U.S. adults held or used crypto in 2020, with 11% holding it as an investment, 2% using it for a purchase or payment and 1% sending it to friends or family. Investors holding crypto “were disproportionately high-income, almost always had a traditional banking relationship, and typically had other retirement savings.” Forty-six percent had annual incomes of $100,000 or more and 89% of those who were not retired had retirement savings. Twenty-nine percent had incomes under $50,000.
The profile of the typical user making transactions with crypto differs starkly from investors. The report claimed that almost 60% of these users had incomes below $50,000, with 20% having incomes under $25,000. Only 24% had incomes above $100,000. Thirteen percent did not have a bank account. That compares with the 6% of adult Americans who lack bank accounts. Twenty-seven percent of those who used crypto for transactions did not have credit cards, compared to 17% of the total population.
Those who used crypto for transactions faced other disadvantages as well. Almost a quarter did not have a high school diploma, according to the results of the report.
WEF 2022: Bankers at WEF see the need for caution and speed on central bank digital currencies
Experts point out sticking points as well as greatest needs in the creation of central bank digital currencies for domestic and cross-border, wholesale and retail, uses.
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The process of introducing a central bank digital currency (CBDC) is fraught with unknowns, some of which were elucidated in a panel of experts gathered Monday at the World Economic Forum in Davos, Switzerland. The panel concluded that good design is key to a successful CBDC, and there are fewer challenges for wholesale CBDC introduction.
Bank of Thailand governor Sethaput Suthiwartnarueput said that although many central banks are considering a CBDC, there is little practical experience with them. The Thai National Bank began proof-of-concept programs in 2018. Its mBridge project began as an experiment in establishing a cross-border wholesale payment corridor with the Hong Kong Monetary Authority and has grown to include the Bank of China, the United Arab Emirates and the Bank for International Settlements. Cross-border transactions using traditional banking technology can take days to complete, while CBDC transactions are much faster.
Suthiwartnarueput said the use of blockchain technology can have unintended consequences. It is good for transparency, he said, but anonymity affects scalability. There is risk in a CBDC’s design because smart contracts require that the handling of every situation be specified ahead of time. He cited the current sanctions on Russia as an example of a potential challenge to CBDC design. The Thai central bank is looking at a “limited pilot” for a retail CBDC in the fourth quarter of this year.
International transactions between persons, especially remittances from workers located in other countries, which make up a market of $48 billion per year, are one of the most pressing use cases for CBDCs. Suthiwartnarueput said CBDCs can carry out such transactions at 50% less expensive and 68% faster than current money transfer technology. Currently, the average fee for a transfer of this type is 6.3% of the transaction sum.
Credit Suisse chairman Axel Lehmann pointed out the rapid progress being made by non-blockchain fast payment technologies and raised questions for domestic retail CBDCs, such as whether accounts with central banks would pay interest. Privacy and intermediation are other thorny issues for retail CBDCs. International Monetary Fund managing director Kristalina Georgieva said, “We feel a little behind the curve” in the creation of retail CBDCs, and Bank of France governor François Villeroy de Galhau agreed, saying a “CBDC is not the monopoly on progress,” and central banks should not waste time in introducing it.
Suthiwartnarueput and the French central banker agreed that cross-border wholesale CBDC settlements may become a reality within five years.
fUSD stablecoin launch and rumors of Cronje’s return send Fantom (FTM) price higher
After a strong 2,000% rally in early 2021, Fantom (FTM) price collapsed alongside multiple altcoins and even though the blockchain has an impressive capability, it has yet to find mass adoption due to the lack of a compelling use case. FTM price hit an all-time high at $3.46, only to collapse to its pre-bull market lows under $0.25 after the failure of the Solidly DeFi project and the departure of developer Andre Cronje.
Three reasons for the uptrend in FTM price are the launch of the first native stablecoin on the Fantom network, new protocol upgrades and partnership announcements, which bring new functionality to the network, and speculation that Andre Cronje is working with decentralized finance (DeFi) protocols on Fantom.
Fantom launches its first native stablecoin
The most notable development to occur in the Fantom ecosystem in the past few weeks was the release of fUSD, the first native stablecoin on the network.
The launch of fUSD comes on the heels of the collapse of TerraUSD and looks to capture some of the capital flight from algorithmic stablecoin by offering an over-collateralized alternative.
On May 20, the Fantom Foundation released an update outlining the maximum collateral factor and minting cap for each supported form of collateral. The foundation also set the fUSD staking reward at 11.3%
The update also included details on Fantom liquid staking, setting a global cap of 150 million staked Fantom (sFTM), removing validators for the list of those eligible to mint sFTM and setting a loan-to-value (LTV) ratio of FTM at 90% for the purposes of minting sFTM.
New partnerships improve sentiment for FTM
A handful of recent protocol updates and new partnerships have also helped to bring a boost in momentum to Fantom, including the launch of Snapsync, which allows new nodes to quickly join the network.
With the integration of Snapsync, the time it takes for new nodes to synch could be reduced from 24 to seven hours, helping to enhance network reliability, improve scalability and create a greater degree of decentralization.
Fantom has also announced that it is currently in the process of launching Gitcoin on the Fantom network to simplify the process of obtaining grants to develop in the Fantom ecosystem.
Fantom also partnered with Unmarshal and XP.Network. Unmarshal is a Web3 infrastructure provider that will integrate its indexing services with the Fantom protocol to give developers easy access to organized and granular on-chain data.
Through the partnership with XP.Network, Fantom users will be able to bridge nonfungible tokens (NFTs) between Ethereum (ETH), BNB Smart Chain (BNB), Elrond (EGLD), Aurora (AURORA), Tron (TRX), Avalanche (AVAX) and Velas (VLX).
Did Andre Cronje return?
Another factor, albeit speculative, bringing a boost FTM price is speculation that well-known DeFi developer Andre Cronje could be contributing toward DeFi development on the Fantom network.
Amid rumors about the return of lead DeFi developer Andre Cronje, the price of the native FTM token has risen by almost 40%. Cronje proposed a number of measures aimed at stabilizing the situation and increasing the sustainability of the Fantom ecosystem as a whole.
— Ashley Torres (@torresamba) May 23, 2022
The speculation started when Cronje submitted an fUSD optimization proposal that designed to solve a major depegging issue with the stablecoin on May 20 . A Fantom wallet that is believed to belong to Cronje has also added more than 100 million FTM over the past two weeks.
VORTECS™ data from Cointelegraph Markets Pro began to detect a bullish outlook for FTM on May 20, prior to the recent price rise.
The VORTECS™ Score, exclusive to Cointelegraph, is an algorithmic comparison of historical and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.
As seen in the chart above, the VORTECS™ Score for FTM spiked to a high of 89 on May 20 at the same time as its price began to increase 62.3% over the next three days.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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