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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.

ETH Easy To Hack

Congratulations to Ethereum for switching from proof of work to proof of stake.

Since they stopped competing on proof of work network security, they made sure that they will never be able to win against Bitcoin in that competition. And since proof of work is the basis for security, they made sure that their project is even more Easy To Hack.

Bitcoin has never been hacked in its history. It is the safest way to run a ledger. Ledgers are important parts of carbon trading tools. If you need to rely on having immutable records to stop global warming and start global cooling, the last thing you want is to base your system on a layer that is Easy To Hack.

Robust accounting is only one part of the story. As the recent White House report on crypto and global warming showed in part 4, there are still more open questions than answers on the problem of how Bitcoin can actually help. But one thing is clear.

These are existentially important matters. And solid accounting is necessary for a solution. The Paris Agreement acknowledges this in its Article 6, which calls for

“robust accounting to ensure, inter alia, the avoidance of double counting,”

Climate cooperation has a double-counting problem. Bitcoin proof of work is the solution to the double-spending problem. It enables more robust accounting than anything else in human history. Bitcoin is definitely not Easy To Hack.

Maybe it will not be enough to solve the problem of global warming on its own, just as proof of work as invented by Adam Back was not yet Bitcoin’s consensus mechanism.

But it may very well be an important building block in such a solution.

Estimating My Carbon Footprint

Thinking a bit now about what Bitcoin can do to help with the climate emergency, one way would be to help with the CDR (carbon direct removal) financing.

When thinking about markets for that, I was asking myself this question. How many tons of carbon is my personal footprint right now? How much would I need to remove to leave the world at least not off worse?

I was born in Germany in 1958. I lived there until 1995. Since then I am in Japan.

So the rough estimate to multiplicate the German emissions per capita for the years between 1958 and 1995. Then the Japanese figure for the years between 1996 and 2022 (the time when I am writing this).

The first factor is 37 years of time and 13 tons per year. I have taken figures from ourworldindata and rounded them a bit. That would result in 481 tons, so I round that up to 500.

The second factor is 27 years and 10 tons per year (again from the same source and rounded). That adds another 270 tons. Again rounding up to 300 I get 800 tons as a very rough estimate for my whole life until now.

It would be nice to know exactly how much it would cost to suck that amount of CO2 out of the ambient air and dispose of it securely. I would be even nicer to have transparent, honest, and trusted market places where you could check those figures just as easy as checking for the latest price of some stock or other.

I am afraid that I do not have the answer to that right now.

Trading Proof of Removal Rights

This post will be part of a new category on this blog. I want to keep that category name for myself right now, so it will be just without category.

It is a work in progress. In its early stages.

The last CO2 emission records are bleak. Over 36 billion emissions only last year. Highest ever increase year on year. Did humanity not notice that there might be a slight problem of overheating the planet by increasing emissions like that?

Of course. Everyone knows. So why do we still see this failure of reducing emissions? Why do we still see the problem getting worse and worse?

My theory is that humans, in aggregate, are just too dumb to be in charge. We know just enough to have the ability to dig out and burn fossil fuels, but are not quite smart enough to refrain from doing so.

While I have been aware of this problem for quite some time and have also developed a solution that would solve it in one Last Week with time left to spare, I am not quite convinced that humanity is smart enough to adapt such a simple solution.

So that will very likely leave future generations with lots of CO2 in the atmosphere and ever less of the fossil fuel treasure the present generation is burning in their cars. Things are going to get a lot worse before the emissions stabilize and then go negative.

That will leave a big job to clean up the mess. And the market dealing with that job is still in its infancy. Until April 2022 all of humanity has financed only 10,000 tons of carbon removal from the atmosphere.

Comparing to Bitcoin, carbon removal is where Bitcoin was in about 2010. Just getting the whole thing started.

If you had a time machine, would you go Back to the Future and buy a sports almanac?

Or would it not make more sense to go back to 2009, January, and download the Bitcoin client to start mining while there is no competition?

Can we build a reverse time machine? One where people living now tap the resources of 2035 to start removing carbon from the atmosphere at scale?

If we can do so, would Bitcoin be needed as a part of the solution?

Book Review: How to Avoid a Climate Disaster, by Bill Gates

Written in 2020, the first thing sticking out was that there is no mention of the European Green Deal. I am not sure why.

Another thing is that Gates is calling readers to run for office in an election. I am not aware of any political office Gates is running for himself. Maybe he thinks it is not the most efficient use of his time to work as a President of the United States, which is what I assume he would choose if he followed his own advice here.

The main solution he proposes is to get more technical options developed faster. Gates’ own efforts at helping with new nuclear technology are an example of that.

To get more development faster, he wants more tax dollars and more private sector activity. I found the idea of having companies work with each other more expressed on page 222 especially interesting, since that is the basic idea I am advocating for too. In my view, oil companies should work together to set up a production schedule similar to the Bitcoin production schedule. Have production reduced by half every four years. Then lean back and watch the price and your profits skyrocket, while saving the planet from a climate disaster at the same time.

I also liked the market based thinking in much of the book. If you want to achieve zero carbon, it would seem to be a good idea to have a market for carbon removal. Said market has received some boosts lately, but is still in its infancy.

As Gates notes, there are 51 billions of tons of CO2 equivalent now emitted each year. In contrast, until the recent announcements in April, the world collectively has only financed removing 10,000 tons, ever. That changed for the better, with several projects investing large sums, but it is still far less than necessary in the long term.

If you develop technology to remove carbon from the air directly, who is going to buy that?

And if I buy 1 ton of carbon removal from some vendor or other, will I be able to sell that 1 ton removal on a secondary market 20 years from now to someone else, when the market is established and the price of 1 ton of removal is much higher?

Or could I sell that 1 ton of removal to the European Central Bank one week later for whatever I just paid, like the ECB is doing with bonds emitted by European Union Member States? How would such a transaction even work?

The answer to these questions is that they do not work right now. There is no way to sell now to the ECB or twenty years later to Bill Gates (in that case turning a profit from the transaction).

I think that should change. I wonder if there are some smart people who could figure out how to use Bitcoin for this purpose. Or in the alternative prove that it is impossible to do.

Book Review: The Cryptopians, by Laura Shin

This book was released on 22.2.2022, which is a date with a lot of numbers 2 in it. That is a good fit to its topic, the 2nd best blockchain by market cap, the Ethereum project.

I liked reading this book and recommend it to anyone interested in the space.

I have a very low opinion of Ethereum, which was strongly influenced by the “DAO” hack and other glaring problems. As such I found the detail about that particular episode useful.

But it was also interesting to note what the whole Ethereum idea was supposed to be about in the first place. Enabling more use cases by having a more complex and variable system.

Bitcoin in is more limited. It does one thing well, securing funds on the base layer. Digital gold with wings, immutable, borderless, peer-to-peer, with a reliable inflation schedule. You may need something else for other use cases.

Reading all the details about that DAO hack, I was reminded again why I don’t trust Ethereum at all. It is amazing how they left the door so wide open for anyone to steal any amount of funds.

I was less convinced by the parallel disclosure by the author on the name of a person she thinks was the DAO hacker. That disclosure requires the hacker being dumb enough to name his GRIN wallet with a string making it easy to identify him. Not something you would want to do if you are using a privacy enhanced blockchain in the first place and have strong incentives to make sure third parties are unable to identify you. At best this is a theory of having that person being framed by the real hacker, since the real hacker of course would be interested in pointing to someone else.

Who is Pierre Poilevre?

He just announced running for Prime Minister of Canada. I noticed because Samson Mow retweeted that announcement. As did over 10,000 others in the first hour.

Including me.

I am not a Canadian citizen, so I do not have a vote. But I do have a chance to participate in the Twitter Internet vote on who and what deserves attention.

I do not know much about this candidate, except a recent speech on the history of money he gave in the Canadian Parliament. That attracted already some attention.

If he wins, maybe Canada can start competing with El Salvador for the future of finance.

Ban Cars Before Bitcoin

Some people want to ban Bitcoin mining because it uses much energy, increasing the safety of the system to levels no other blockchain has.

As far as global warming is the motivation for that, the impact would be limited compared to banning gasoline cars.

That is because much more people use cars than use Bitcoin. And because gasoline cars use 100 percent fossil fuel, while the majority of Bitcoin mining is from renewable energy, giving a boost to renewable energy projects in the process.

Any emissions in connection with Bitcoin mining are not caused by the ASIC machines doing the mining. They are caused by the fossil fuel power plants producing the electricity. It is a good idea to phase out fossil fuel power generation. That is the cause of CO2 emissions, not whatever use is made of the electricity.

Fort Knox is Everywhere

I had an opportunity to discuss my ideas on solving global warming yesterday. I got a cool reception.

One of the questions to my presentation was left without answer, for lack of time. So I write a couple of lines here instead.

I was talking about the recent discussion on requiring permission to use electricity in a specific way to operate a computer. Some people think that others should not be allowed to use electricity for bitcoin mining.

The recent hearing at the United States House of Representatives, calls for a ban on mining in the EU. and discussions on a ban in Russia are in the headlines. China actually made mining illegal last year, leading to a large drop in the hash rate and relocation of industry to other countries. The Bitcoin ecosystem needed about half a year to recover from that particular ban.

The object of measures like these is to save energy and do something about global warming. The effect is to weaken Bitcoin security.

In the Bitcoin security model, using a lot of energy means it is difficult to attack. You would need large amounts of energy and mining machines to do so. You would be able to make more profit by staying honest.

The effect of measures like the Chinese ban was to decrease security for a while. As long as there is no ban in all countries and the bans are not enforced completely, there will always be mining.

My point here is a comparison to gold. With gold, securing the gold bars requires building safes, like in Fort Knox. The United States Bullion Depository located there currently holds about 4580 tons of gold, secured by a fortified vault building and the United States Army post located next door.

The Bitcoin hash rate is the equivalent of that. But the difference is that gold security is not independent of location. You can mine and contribute to the hash rate anywhere. There is no need to concentrate your efforts at one location.

You can also mine anytime, 24/365. Bitcoin is a source of electricity demand that is always available, without a need to build power lines.

That is an excellent match for renewable energy projects. Since a couple of years ago, renewable energy is the cheapest option, which means that Bitcoin miners will seek it. The latest Global Mining Council report shows that renewable energy shares are very high in the industry, beating even Germany and the United States.

If you get in the business of banning some industry or other for their energy use, it does not make much sense to ban the cleanest one first. There are lots of other industries and countries that need to improve vastly before they achieve Bitcoin levels of renewable energy share.

And Bitcoin is part of the solution, not part of the problem. It works like a world wide feed-in tariff for renewable energy projects, accelerating the move away from fossil fuels. If you worry about global warming, the last thing you want to ban is the biggest and most reliable customer of renewable energy projects. A customer that can switch demand on and off at any time and does not require building any power lines.

You Have My Permission to Solve Global Warming

But not that of the EU Commission. At least not yet.

I am talking about the solution of giving fossil fuel producers the power of scaling down production in a coordinated way.

For example, if oil production was already scheduled as bitcoin production is (cutting production by half every four years), obviously emissions would go down fast. Oil left in the ground can’t cause CO2 emissions.

Obviously that would be very good news for the owners of those oil resources, since they would go up massively in value.

So these producers have a massive incentive to introduce some kind of schedule.

Unfortunately, that might be in violation of antitrust rules, which were introduced to a world which had no reason to worry about producing too much oil. For example, the Standard Oil case of the American Supreme Court was decided in 1911.

It follows that these antitrust rules are blocking this solution. It follows that they must stand back. Solving global warming is much more important than keeping gasoline prices low for consumers. Drivers should switch to electric vehicles anyway. Rising gasoline prices are a good thing to accelerate that change, not something that should be fought with antitrust law.

So here is my permission. Anyone who sets up a coordinated production plan for oil can be certain that I am not going after them for antitrust law violations.

I am sorry to say that the EU Commission, which actually has the power to enforce antitrust rules, has not issued a similar declaration.

So the oil industry might still need to find some way to deal with antitrust law before they can go ahead and solve the problem.

One way would be to fight. Tell the EU that they can go ahead and start some antitrust procedure or other. Tell them too that as a consequence, no oil from companies affected by such a move will be sold to the EU, so as to stop that oil from influencing the EU market (the pretext the EU uses to order all producers world wide to follow their rulebook).

Another way to fight would be to found some companies for the purpose. Give them some of the oil resources and have them start production schedules on those resources as a model case. Watch as the EU Commission makes fools of themselves by fighting this scheme while pretending to care about global warming. Use the precedent of winning that fight for expanding the scheme to the whole industry.

Bitcoin may be useful in any such scheme.

For one, it is an accounting scheme that can be trusted by all participants.

It may also be very useful to distribute and trade the production rights. It should be not too difficult to figure out exactly how to do that.

Anyway, the main problem is to get the road blocks from antitrust law out of the way. Bitcoin is not necessary for that and can not help much either.

But once the EU commission (and other antitrust enforcers) join me in giving permission to actually solving the problem, progress might be very fast.

Bitcoin to the Rescue

El Salvador will issue a Bitcoin Bond with the ticker symbol EBB1. Half of the money (500 million dollars) will be used to buy and hold bitcoins, the other half for infrastructure investments, with geothermal energy from a volcano and bitcoin mining the main focus.

Investors in the bond will get the option of permanent residence in the soon to be founded “Bitcoin City”. There will be no taxes there, especially no capital gains tax, which may be of interest to hodlers.

El Salvador is first to the market with such a Bitcoin Bond. The point I want to make here: Nobody needed to develop a new technology to issue it. They could just plug into the existing Bitcoin network to enable this innovation.

I think the same may be true for the problem of global warming. That just hit hard in the United States, with a historic hurricane leaving whole towns destroyed. It may be time to take this threat seriously and deploy a solution that works.

Can Bitcoin come to the rescue? Is the solution already there and it is only a question to intelligently use Bitcoin?

Of course it is already easy to see that Bitcoin mining will contribute to the solution, as opposed to contributing to the problem. That is because mining needs to use the cheapest energy. The cheapest energy already is renewable. It follows that miners will use renewable energy and that deployment of renewable energy will be faster in a world that has Bitcoin as a reliable source of demand that can be switched on and off easily anywhere on the planet. It is just like a world wide feed-in tariff.

El Salvador will use some of their volcano energy from the Bitcoin Bonds to mine bitcoins, which will give them an easy option to export that energy to the world.

That is the easy part.

Now for the interesting question. Can Bitcoin already be used to fairly distribute the right to mine fossil fuels?

Those rights are not distributed fairly to begin with. Some countries like Saudi Arabia and the United States won in the lottery and got huge resources. Others like Japan drew a zero and can’t drill for oil in the first place.

The best way to make sure that CO2 emissions from fossil fuel don’t happen is to leave the stuff in the ground. OPEC has tried to help for a couple of decades. So all we need is an efficient cap on production set by OPEC or some other entity.

When setting that cap, it is also easy to see that Bitcoin serves as a model for radical reduction. Have a long term plan for drilling the remaining treasure. Maybe just use the Bitcoin model of halving production every couple of years.

Can Bitcoin do that already or is is necessary to develop some new technology?

I think it can. The only remaining problem is that of how to deploy the solution.

I will start with first principles. One is that we don’t wait for new technology. This is a moral and legal problem, not one of developing some new altcoin.

One of the most famous and important aspects of Bitcoin is the limit on production. Only 21 million coins ever.

Of course it would be trivial to change that number and have more coins. The only thing that prevents that from happening is that people don’t want such a change. That is not a question of software technology, but a moral and legal question.

In exactly the same way one could imagine a world where there are limits on production of fossil fuel and those limits are backed by the will of humanity to have them. The question of how to administrate those limits and how to distribute the production rights fairly would not be a question of software development.

Let’s start with oil as a sample case. There is already OPEC. Imagine OPEC deciding on a production schedule for the next hundred years, based on radical production reduction. For simplicity make that halving production every four years.

Once that is in place and working, the question of who gets to use that energy for what purpose would be left to the market. Just like it is today.

Obviously prices would be going up massively. That might be popular with oil producers and holders of reserves.

But how to distribute the production rights fairly?

With Bitcoin, it is just a big lottery. Mining is a lottery. Each hash is a ticket, and who wins is just a game of chance. Just like the original distribution of oil resources between countries.

One could imagine issuing some new altcoin for this purpose. Let the mining of that altcoin decide on who gets to produce what oil.

That however would go against the principle of using only the existing Bitcoin network, just like El Salvador just plugged into that for their Bond project.

This has been done before when allocating emission rights under the EU Emission Trade System. That just looked at historic emissions. In the same way, the original allocation of production rights may just be based on historic production shares.

Can that be done just with Bitcoin?

For example, have the UN issue some colored coins in appropriate number. Distribute those to producing countries according to their market share.

Then require them to send those coins to a burn address as proof of production rights. Have a metric on how much must be burned per 1000 barrels.

Lets just start with a simple example. Production in 2020 was down because of the corona crisis. There were 88,391 thousand barrels per day produced, which works out to 32.351,106 over 366 days. So if you set the rate to one satoshi per 100 barrels, all of the world production would easily fit into one single colored coin.

The United States had the biggest share of that at 19.51 million barrel per day, which translates to 19,510 thousand per day, or 7,140,660 thousand over 366 days. So the United States would get that amount of satoshis from the colored coin and be required to burn such amount for proof of production rights. It would be their job to fairly distribute those production rights between individual producers.

After the next halving, they would only receive 3,570,330, assuming that production numbers not change before the date relevant for the halving decision.

Bitcoin would bring a couple of things to the table in this scenario. For one, it is impossible to hack Bitcoin or to change transaction records. Since there will still be plenty of ways to attack the connection between actual production and proof of production rights, it will be useful not having to worry about the safety of the base layer.

It is also useful that the blockchain is a public ledger, so everybody could easily check if the numbers add up and who actually reported what.

Also sending colored coins to a burning address would be proof of destroying them. And that would be a good symbolic fit to the fact that producing one barrel of oil destroys one barrel of the remaining planetary reserves.

That is all for the moment. This was just a simple thought experiment on the question if Bitcoin can already solve the problem without any further software development.

There may be some problems left in actually pulling this off, but those are legal and moral questions.