The United States House of Representatives Energy and Commerce Committee’s Subcommittee on Innovation, Data and Commerce gathered to discuss blockchain technology and the future of Web3 on June 7. Crypto industry members, including Polygon Labs president Ryan Wyatt and several legal experts, appeared before the committee to engage in what transpired to be a constructive dialogue.
This meeting was held just after the SEC announced back-to-back lawsuits against major crypto exchanges Binance and Coinbase. In Wyatt’s testimony, he discussed the potential of blockchain technology and its value to users, and the benefits of building a healthy and well-regulated blockchain ecosystem in the United States.
Wyatt began by addressing the fundamental problem blockchains solve — the “value extraction” problem on the internet. He explained that in the current era of the internet — commonly called “Web2” — large centralized tech companies extract value from users by charging fees for goods and services and collecting user data for their benefit.
According to Wyatt, blockchains solve this problem by democratizing the internet and creating Web3, which is based on decentralized and transparent systems. Blockchains use cryptography and a network of computers to secure and maintain information, eliminating the need for a centralized authority. In this Web3 model, users can control their data and choose when, how, and whether to share it with applications and services.
Regarding how the U.S. government could partner with the industry to advance modernization, Wyatt mentioned that the current regulatory environment is a significant barrier. By fostering a well-regulated blockchain ecosystem, Polygon Labs exec said the U.S. could maintain its competitive edge and ensure the technology industry thrives domestically:
“When regulation does not meet novel technology where it is, the U.S. loses its competitive edge over other countries.“
Finally, Wyatt argued that building a blockchain technology ecosystem in the U.S. benefits Americans by driving economic growth and creating jobs in both the technology and non-technical sectors. It can also allow for better consumer protection by leveraging the transparency of blockchains and aligning regulation with novel technologies.
Wyatt’s testimony provides several examples of Web3 applications and use cases, such as blockchain-based consumer loyalty programs, non fungible tokens in the fashion industry, blockchain-based community organizations, and blockchain solutions for supply chain management in the U.S. Air Force and the Department of Defense.
The hearing comes on the heels of a June 6 Agriculture Committee meeting where members grilled exchange executives and former regulators on compliance and consumer protection. It also marks the first time lawmakers have hosted a crypto hearing that addressed non-financial use cases.
Coinbase holds 5% of all Bitcoin in existence: Data
Blockchain intelligence platform Arkham recently identified that crypto exchange Coinbase holds almost 1 million Bitcoin (BTC) in its wallets. The coins are worth more than $25 billion at current market prices for BTC.
According to Arkham, the exchange’s holdings amount to almost 5% of all existing Bitcoin. Arkham said that Coinbase holds a total of 947,755 BTC. At the moment, Bitcoin’s circulating supply is around 19,493,537, according to coin information website CoinGecko.
Arkham has now identified $25B of Coinbase Bitcoin reserves (~1M BTC) on chain.
This makes Coinbase the largest Bitcoin entity in the world on Arkham, with almost 5% of all BTC in existence – about as much as Satoshi Nakamoto. pic.twitter.com/7sDOczS7WT
— Arkham (@ArkhamIntel) September 22, 2023
Furthermore, Arkham also noted that it tagged and identified 36 million Bitcoin deposit and holding addresses used by the exchange. According to Arkham, Coinbase’s largest cold wallet holds around 10,000 BTC. Based on the exchange’s financial reports, the intelligence company believes that Coinbase has more Bitcoin that are not yet labeled and could not be identified.
While Coinbase holds over $25 billion in BTC in its wallets, the exchange only owns around 10,000 of all the Bitcoin it holds, which is worth roughly $200 million, according to recent data.
Meanwhile, community members expressed varying reactions to the news about the amount of Bitcoin the centralized exchange holds. Some believe it’s a sign to withdraw their BTC from exchanges, warning holders not to wait until exchanges start to halt withdrawals. Others say that since there are legitimate concerns over cold wallets, there’s no good way to store their assets.
When it comes to Bitcoin ownership by companies, business intelligence firm MicroStrategy still owns the most BTC. In earnings results posted on Aug. 1, the firm’s co-founder Michael Saylor declared that the company owns 152,800 BTC, worth over $4 billion at the time of writing.
Coinbase CEO warns against AI regulation, calls for decentralization
Brian Armstrong, the CEO of crypto exchange Coinbase, expressed his stance on artificial intelligence (AI) regulation in a recent post on the social media platform X (formerly Twitter).
On Sept. 23, Armstrong explained that he believes that AI should not be regulated. According to the Coinbase CEO, the AI space needs to develop as soon as possible because of reasons such as national security. In addition, Armstrong also noted that despite the best intentions of regulators, regulation “has unintended consequences,” arguing that it kills innovation and competition.
Count me as someone who believes AI should not be regulated
We need to make progress on it as fast as possible for many reasons (including national security). And the track record on regulation is that it has unintended consequences and kills competition/innovation, despite best…
— Brian Armstrong ️ (@brian_armstrong) September 22, 2023
The Coinbase executive cited the internet as an example. Armstrong believes there was a “golden age of innovation” on the internet and software because it was not regulated. The Coinbase CEO suggested the same should be applied to AI technology.
Furthermore, Armstrong also presented an alternative to regulation in terms of protecting the AI space. According to the executive, it would be better to “decentralize it and open source it to let the cat out of the bag.”
Meanwhile, various jurisdictions across the globe have either started to regulate AI or express concerns about its potential effects. On Aug. 15, China’s provisional guidelines for AI activity and management came into effect. The regulations were published on July 10 and were a joint effort between six of the country’s government agencies. This is the first set of AI rules implemented within the country amid the recent AI boom.
In the United Kingdom, the competition regulator studied AI in order to identify its potential impact on competition and consumers. On Sept. 18, the U.K.’s Competition and Markets Authority concluded that while AI has the potential to change people’s work and lives, the changes may happen too fast and could have a significant impact on competition.
Bitcoin miners double down on efficiency and renewable energy at the World Digital Mining Summit
Bitmain rolled out its next-generation Antminer S21 and S21 Hydro ASIC miners at the World Digital Mining Summit (WDMS) in Hong Kong on Sept. 22, revealing the crucial performance stats the entire industry has been waiting for. The S21 has a hash rate of 200 terahashes per second (TH/s) and an efficiency of 17.5 joules per terahash (J/T), while the S21 hydro hashes at 335 TH/s and 16 J/T, which is notable given that until recently, most Bitcoin ASICS were operating above the 20 J/T level.
With electricity costs continuing to rise year-over-year and the Bitcoin halving projected to occur in April 2024, ASIC efficiency is quickly becoming the paramount focus of miners, and many are also pivoting toward folding in renewable energy sources as a core component of their operations.
Bitcoin miners focus on efficiency and renewable energy
Sustainable development in the mining industry was a core theme discussed in a majority of the panels at the WDMS. In the opening roundtable, team members from Terrawulf, Core Scientific, CleanSpark and Iris Energy shared their perspectives on how further integration of renewable energy sources will become a critical strategy to implement for many miners after the April 2024 Bitcoin supply halving.
According to Nazar Khan, Terrawulf’s chief operating officer:
“There’s a significant transition going on in the supply side of the generation process; there’s a concerted effort to decarbonize the entire supply stack, and so when we talk about Bitcoin miners consuming more renewable energy, that’s part of a broader theme that’s happening across the United States without Bitcoin mining as well. The role that we play is locating our Bitcoin mining loads in places where that’s happening and how do we facilitate that decarbonization process.“
One impact of the upcoming supply halving is that miners will maintain the same capital and operational costs, plus the need to pay down any revolving debts, while essentially seeing their block reward distribution cut in half.
For this reason, miners will either need to increase the percentage of their hash rate derived from sustainable energy sources or make efficiency adjustments to their ASIC fleet to maintain or increase their profitability.
Regarding the rollout of the Antminer XP 21 and its potential impact on the mining industry, BMC founder Justin Kramer said:
“The S21, if reliable, fairly priced and readily available — and yes, that’s a lot of ifs with Bitmain’s history — could revolutionize the crypto mining landscape with its efficiency. It is basically packing the power of two S19 100T miners into one unit. Despite this, the burgeoning aftermarket firmware market, coupled with hydro/immersion systems, give miners more tools to keep older generation miners, such as the S19, profitable also. Thus, while the S21 represents a notable advancement, it may not render sub 110 TH/s miners entirely obsolete.”
When asked about the more exciting aspects of the new S19 XP, Kramer noted that:
“I like that Bitmain is rewarding environmentally friendly mining farms with better pricing and advanced delivery with their new Carbon Neutral Certificate. But, I’ll add that, it was a little surprising when I noticed that both new S21 models offer 33% more hash rate (S21 200T versus 151T on S19j XP; S21 hydro is 335T versus the S19 XP Hydro at 257T). Is this a coincidence? I’m doubtful, and it likely signals more of the same systematic model releases from Bitmain where a slight tweak to the firmware and maybe a few other items that are adjusted results in a moderate increase in hash rate and a brand-new miner.”
Bitcoin is en route to becoming an ESG asset
A theme of the past few years has been an increase in Bitcoin miners and BTC advocates pushing back against the assertion that Bitcoin mining is bad for the environment, and that the industry’s reliance on carbon-based energy production accelerates emissions.
Countering this perspective, Hong Kong Sustaintech Foundation professor in accounting and finance, Haitian Lu, bluntly announced that:
“Bitcoin mining is promoting renewable energy adoption in many areas.”
Lu explained that “over the years, Bitcoin mining has become more efficient and is also using cleaner energy. History tells us that human development from an agricultural society to industrialization to the future of a digitalized economy goes with every increasing energy consumption per capita. What makes the difference is human’s ability to use renewable energy increases, thus achieving sustainable development.”
Like the perspectives shared by other panelists, Lu said that Bitcoin miners’ participation in demand response agreements with power producers and distributors leads to energy grid efficiency, and they “provide an economic incentive for the development of renewable energy “promotion and development of renewable energy projects.”
In addition to Bitcoin mining tapping into stranded energy, encouraging the development of renewable energy projects and helping to balance electric grids, the efficiency advancements of next-generation ASICs like the Antminer S21 reduce miners’ energy consumption while also allowing them to boost their profits.
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