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Started Hosted Blog

Started Hosted Blog

Recently my blog that I hosted myself at k-lenz.name/LB for close to 20 years went down with a database error.

I considered investing some time to find and fix the error. Then I decided I would rather use that time to start over with this new hosted blog.

Leave the technical side to people who know what they are doing and pay a small amount of money.

I will probably figure out how to point the old address to this new one. I will also need to figure out how to deal with all the old content.

German Public TV about Bitcoin and Climate Change

Germany has a system of television where people are forced to pay for public channels even if they are not watching. All citizens are required to pay a tax for some channels even if they have no interest in anything they produce.

The German Federal Constitutional Court sees this tax as constitutional, because they assert that it is not a tax but a fee for providing a useful service. They go so far that the potential to watch these programs is useful even for people who don’t own a television set in the first place.

This is the equivalent of producing a state sponsored magazine with tax funds and send it to every citizen and then telling them it is “potentially useful” even to people who won’t read it. I don’t approve of that. The television tax should be abolished and the state sponsored media should be required to compete in the market place like everybody else.

I am bringing this up because one of the tax funded channels just aired a critical report on Bitcoin’s energy usage.

This is a legitimate question. Hal Finney, who is one of the most likely candidates for having been Satoshi, brought it up in his third tweet about Bitcoin way back in 2009.

The report then says that a change to proof of stake discussed for one of the altcoins may be the solution. I doubt that. Proof of work has been proved to work reliably for over 10 years. Proof of stake will be unable to provide the same thing, trustless and reliable security. The fact that Bitcoin uses a lot of energy is a good thing for providing security. The idea that you could get the same security without investing the same energy is dreaming of a free lunch.

Anyway, I share the interest shown by Hal Finney in 2009 and by the recent state sponsored media report on what to do about the CO2 emissions caused by the Bitcoin network. This may become a major issue in Germany where the Green party is the strongest force now in polls running up to the elections later next year.

And I actually share the concern about the climate crisis. If Bitcoin is contributing to that crisis, that would be a major point against supporting it.

You can forget about Bitcoin changing to proof of stake. If it did, it would cease to provide the trustless security it does now. This is not just a “potentially useful” service like the television tax funded media, but a crucial element of 21st Century finance, the base layer everything else will depend on.

So we need to face the fact that Bitcoin uses energy. And a lot of it too.

One way to mitigate the climate impact is to use renewable sources, especially those not yet able to deliver to consumption centers for lack of power lines. With big demand potentially available in any desert area, Bitcoin may help with accelerating the transition to renewable energy

But the real challenge is to build a system of allocating production rights for fossil fuel. Do what OPEC has tried to do for decades, but with everyone (not just sovereign states) at the table.

If it can be shown that oil production can be set on a rapidly decreasing schedule like bitcoin production, that would actually solve the climate crisis. Any oil that is left in the ground will not be burned, no matter what kind of reduction targets are or are not adopted in some place or other.

This is the simple solution to the climate crisis. It is so easy. There are only a few pieces missing in the puzzle.

One of those pieces is Bitcoin. There is no way to build a trustless secure system like that without a solid foundation. A base layer that is decentralized and trustless.

So far from Bitcoin being the problem for the climate, it will be a central piece of the solution, if we are lucky.

Berlin Referendum on 2030 Climate Neutrality

Hans-Josef Fell just announced a referendum in Berlin with the goal of enacting a law requiring climate neutrality until 2030.

In contrast to the federal level, Berlin has a system of referendum since 2006. There have been three successful initiatives in the last decade, two of them concerning airports and the other one privatization of the water infrastructure. See the relevant Wikipedia article for more information.

Fell is one of five representatives of this initiative. It is supported by a broad coalition of organizations interested in more effective climate policy.

A previous step in the process of the referendum already resulted in over 30,000 signatures, clearing the hurdle as the first such project under corona conditions.

I support the general idea and would sign as well, if I still lived in Berlin.

Shark Duck Living on a Tree

A year ago, I never heard of Michael Saylor. Now of course I follow him.

And here is what he just said about one of the altcoins, when asked if he was investing. He explained it like an ecosystem. There are species that have been around for hundreds of millions of years, because they are engineered to do one thing, and do it well. In contrast, that particular altcoin was a

shark duck living on a tree

which of course does not make any sense. If you want a successful altcoin, it needs to do one thing, and do that one thing well.

One problem still to be solved is how to distribute the right to produce fossil fuel in a fair manner. That is an important problem, since fossil fuel consumption needs to go down, which in turn means you can’t allow anyone to produce as much as they want. We need a new form of OPEC. One that is decentralized, trustless, and with a clear inflation schedule going down fast.

Here is the video of Saylor talking:

Røkke Shareholder Letter about Seetee

I just read a letter to shareholders by Kjell Inge Røkke on the subject of the new company “Seetee” he just funded.

I had never heard of Røkke, but I just searched at Wikipedia and found out that he is Norway’s richest person with a career started in fishing and expanding to all sorts of interests. His main interest now is actually a company massively involved in fossil fuel called Aker ASA.

That letter to shareholders is well worth reading. It discusses Bitcoin, the main area the new company will be acting in. I found it saying many things I have been saying here as well.

Being of the opinion that solving the climate emergency will need cooperation from the oil industry, I think it is remarkable that someone representing the Norwegian oil industry should partner with Blockstream to explore the many ways Bitcoin can become part of the solution as opposed to being part of the problem. That shareholder letter describes Bitcoin as a very useful big battery that will be able to accelerate building new renewable capacity.

I did not find anything about using Bitcoin to solve the problem of allocating permits for producing fossil fuels on a world-wide trustless and decentralized basis. Maybe it is still to early for that.

I found it very interesting that the new company has chosen to start a cooperation with BLockstream. Their Liquid project may be a starting point for trying to get something like that going.

But maybe someone should look at this idea and find out if it can be done. Or if not, why not.

It appears that the name of this new company is derived from two science fiction books by Jack Williamson, Seetee Ship and Seetee Shock. The “Seetee” is for “C.T.”, which in turn means “contra terrene” or antimatter. I have not read these either, but am interested to do so.

Bitcoin Energy Use Problem

The Guardian released a short video yesterday where Alex Hern discusses his wrong views about the matter.

He notes correctly that the Bitcoin network uses a lot of electricity. He also notes correctly that the percentage of renewable in the mix is large compared to other industries.

He then somehow proceeds to tell people they are not allowed to use that electricity for the purpose they seem fit, even if they pay for the electricity like any other customer.

Since when is the Guardian in the business of deciding of who gets to use what electricity for what purpose? And who makes those decisions?

I am so old, I remember when this kind of decision was left to something called “the market”.

But I would also like to appeal that decision.

Hern is correct to call attention to the issue. He joins a guy called Hal Finney, who raised exactly that point in his third tweet about Bitcoin in January 2009, which reads “Thinking about how to reduce CO2 emissions from a widespread Bitcoin implementation”.

Clearly the point Hern raises deserves attention.

The simple solution would be to stop Bitcoin adoption. Use a credit card instead to pay for your coffee.

The problem with that solution is that Bitcoin is not about low value transactions to pay someone else a small amount. There are lots of other ways to do that already before Bitcoin. It is about paying yourself, ten years later, while preserving the purchasing power. I am not aware of anything else that can achieve that as well as Bitcoin.

Bitcoin is a saving technology, not a payment network.

And one thing crucial to saving is security of the funds.

The electricity use of the Bitcoin network is the cost of that security. It is impossible for anyone to change any entry in the database after a couple of confirmations. That is because there would be so much energy cost involved that you would be better off not paying for the attack than whatever you could gain from changing the record.

Still, the question remains. How can the CO2 cost of Bitcoin be reduced?

Maybe one of the numerous altcoin proposals will come up with a better solution to the problem of keeping an immutable database than proof of work, the only thing that has been proven to work in an uninterrupted 12 year record. I would not count on it.

Or maybe, and that is where my interest lies, it is possible to use that immutable database for the purpose of solving the climate crisis. Make Bitcoin part of the solution, as opposed to part of the problem.

That is already happening. Bitcoin helps deploy new renewable capacity. That is because you don’t need a power line before deploying. Bitcoin gives you a massive amount of demand anywhere on the planet. We can finally build large scale desert renewable projects before building the power line capacity.

Hern actually discusses that point. He thinks this gives a bad incentive to not build the power lines.

I disagree. Eventually, those power lines will be built. It will just take some time. Like the Suez canal, you build those power lines once and then use them for centuries. But being able to build the capacity first and the power lines second is a big deal.

The shift is not only in place, it is also in time. Electricity demand fluctuates a lot over time. So there are time slots where you can’t sell electricity in some local market. In contrast, the demand of the Bitcoin network is constant any minute of the day and any day of the year. That helps to smooth out the system and helps people finance renewable installations.

But that is only the smaller side of things.

The real fun starts when the fossil fuel industry starts using the immutable blockchain ledger to allocate production rights.

That would massively decrease CO2 emissions, by the simple method of keeping the fuel in the ground.

I don’t have the solution to that particular problem. It may be impossible to do. But having an absolute cap on fossil fuel production just like there is an absolute cap on bitcoin production baked firmly into the protocol: that would be very valuable to have.

And it might be the answer to the question raised by Finney in 2009 and by Hern right now.

Lack of US Transmission Lines

David Roberts writes about this in a series of posts on his new David Roberts writes about this in a series of posts on his new “Volts” mailing list.

First he notes why this topic is important. As in many other places that want to add massive renewable capacity, people find out that good locations for generating may be far away from where people want to use the electricity.

This means more transmission. And Roberts will write the whole week about what the new administration can do to help.

I have one comment here only, since I have been thinking about exactly this point for about a decade now.

Of course you want to build more transmission. But there are different ways to transport energy too.

The simplest thing is to just start mining bitcoins. You can do that anywhere on the planet. So while you wait for Roberts’ and Biden’s efforts to build more transmission, your stranded renewable project can still generate income, even before you get in line for grid connection.

Another traditional way to do it would be to make aluminum. That industry has a long history of placing their factories where the cheap energy is. And transporting the aluminum is a way of transporting energy.

Other ways that come to mind is using limestone or ammonia like in the Neom Helios project.

Anyway, while it is true that all things equal having more transmission is a good idea, that does not mean you need to wait for the world wide power grid. There are a lot of ways to monetize renewable energy without a grid connection. Bitcoin is only the easiest and fastest solution.

Fast Lobbyist Reaction

After the recent insurrection failed to overturn the election results, there is a long list of companies that have pledged not to give money to those who voted against confirmation of the election results.

Since many politicians rely on corporate money to finance their campaigns, this will have some influence going forward.

And it is a remarkable change that came about very fast.

In the same way, I can see a future where fossil fuel companies redirect their money to putting hard limits on CO2 emissions.

I have explained before why they might do that. They do have a financial incentive. Having a hard limit on production raises prices, as has been clear since the Texas Railroad Commission first imposed quotas on oil production many decades before.

But they also just might do it because, as they know, it is the right thing to do, even if it cost them money (it does not). These companies that place a high value on democracy and refuse to finance enemies of the American Constitution are not motivated by money. They are motivated by doing the right thing.

It is way past obvious that the right thing is a hard limit on fossil fuel production. The whole fossil fuel industry should start joining forces with Bill McKibben and direct their lobbying efforts against burning the planet.

The example of this reaction to the insurrection shows that such changes can come very fast.

FinCEN Rule Proposal

FinCEN just published a proposal for a new rule.

It requires regulated exchanges to keep records on who owns the address some bitcoin is first moved to from the exchange for transactions over $10,000 in value.

The EU has floated similar ideas in Recital 9 of the 2018 money laundering Directive. It reads:

“The anonymity of virtual currencies allows their potential misuse for criminal purposes. The inclusion of providers engaged in exchange services between virtual currencies and fiat currencies and custodian wallet providers will not entirely address the issue of anonymity attached to virtual currency transactions, as a large part of the virtual currency environment will remain anonymous because users can also transact without such providers. To combat the risks related to the anonymity, national Financial Intelligence Units (FIUs) should be able to obtain information allowing them to associate virtual currency addresses to the identity of the owner of virtual currency. In addition, the possibility to allow users to self-declare to designated authorities on a voluntary basis should be further assessed.”

If this new FinCEN proposal leads to exchanges requiring information on who owns a withdrawal address, this may lead to an automatic voluntary self-declaration. All users would need to do is nothing. If they withdraw their bitcoins to an address they control themselves, the information would already be accessible to law enforcement.

As long as they don’t move the bitcoins to another address. Which of course they could do without any reporting requirement under that FinCEN proposal. And then move it again a couple of times, with no third party knowing if the addresses in question are controlled by the user or someone else.

If you don’t mind giving law enforcement access to that information, doing nothing would make your bitcoin holdings on that address “white bitcoins” (as defined in an earlier post in 2013). This may become useful for the holder down the road.

Imagine for example the highly theoretical case that some user sells the bitcoins they bought in 2021 a couple of years later at a measly price of only $77,000 (instead of waiting for Bitcoin to flip gold). Imagine further that they actually declare the income from the price increase and pay relevant taxes.

Such a user would be able to point to the official record to show exactly at what price they bought in.

And anyway, if you are just buying and hodling, there is not much downside to having the withdrawal address accessible to law enforcement. If you are buying from a regulated exchange, the buying transaction is in the record anyway and can be traced to the buyer.

XLink Desertec Project

As I learn from this Greentechmedia article by Jason Deign, there is a new startup in the United Kingdom with big plans.

Their big plan is to connect North Africa directly with the UK. They want to build a long subsea cable hugging the coasts of Portugal, Spain, and France, at a cost of $21.6 billion. One advantage they see is that it is easier to get the necessary permits with only these countries involved.

This is similar to the Asia Super Grid idea Masayoshi Son proposed, a long power line from the Mongolian desert right up to Japan.

The nice thing about this kind of project is that you only need to build that power line once and then can use it for centuries. The Suez canal was a very cheap project if you figure in that it is still in use and divide the cost by the number of years it is operating.

Book Review: Kim Stanley Robinson, The Ministry of the Future

This book was released in October 2020. I liked many things about it and disliked some others.

Let’s get rid of the negative points first.

This is supposed to be fiction, but the story is incoherent. Readers are treated to lots of completely different sets of characters and independent short stories. The whole thing feels like a collection of short stories.

That makes the book somewhat difficult to read.

And one of the good ideas in the book, the “carboncoin” concept, greatly suffers from a lack of understanding of Bitcoin, which is obvious alone from the fact that in his world Bitcoin goes to zero. But there are also scenes where one of the characters tries to pitch the “carboncoin” idea to bankers.

I am trying for a moment to imagine Satoshi Nakamoto convening a meeting of central bank managers and trying to convince them of the merits of Bitcoin. I recall that is not exactly what happened to assure the success of the idea.

But the basic idea of using a new cryptocurrency to solve the climate emergency does have some appeal.

The interesting point about Robinson’s carboncoin is that it rewards taking CO2 out of the atmosphere, as opposed to rewarding only letting carbon stay in the ground. That may be a possibility.

Back to the real world and back to the present world for a moment. Bitcoin already is helping massively with the climate emergency. That’s because it is a virtual planetary power line that allows you to shift power demand to any location. Or in simpler terms, it allows you to sell electricity wherever you produce it without having to wait for a power line to be built.

That is a big deal. It takes time to roll out the power lines to the good offshore wind locations. It takes time to roll out the power lines to the good solar desert locations. Of course, in the next couple of centuries these power lines can be built. But since time is short right now, being able to build the renewable project first and worry about the power lines later is a big deal.

Of course, Bitcoin is also an excellent model for what should happen for fossil fuel supply. It should go down by half every four years, for a radical and predictable production rate reduction. Once that happens, it does not matter if the gap is closed by renewable or energy savings. The market will just take care of how to deal with less fossil fuel in the mix.

Anyway, I like the fact that Robinson gives some space in his novel to a “carboncoin” idea, even if I am not convinced by the details he proposes.

The good parts are the short stories about various catastrophic developments. There is a story about what happens in a serious heat wave (hint: lots of dead people). There is a story about Los Angeles getting drowned by a vertical river rainfall.

And there are some interesting ideas of how the future could be better than the present. One is the idea of a world citizenship as an answer to the refugee problem. While it is fair to say that for example in the United States there is some degree of racist discrimination left, there is much more discrimination on a world wide scale between a citizen of the United States and one of Syria. The former have drawn the lucky tickets in the lottery.

Robinson also describes air traffic migrating to airships, progress in giving more space to animals, drone terror attacks no one can defend against. There are many interesting ideas about the future in this book.

And I definitely agree with the general idea that humanity has a decent chance to solve the climate emergency. In his future, CO2 levels in the atmosphere are going down again. While I don’t know if the future will look exactly like the story in this book, I am optimistic.