03/01/2024 0 Comments

1. Bitcoin will soon be ‘halved’—what that means for its price

Bitcoin’s price has surged 36% since spot bitcoin ETFs were approved on Jan. 10. As of Thursday morning, its price was around $62,460.

But an upcoming event known as halving could that push price growth further.

Halving happens automatically when 210,000 “blocks” are created as part of the bitcoin mining process. This happens approximately every four years, and it discourages coin production by reducing the reward for mining new bitcoin by half. The last halving event was in 2020, and the next one is expected sometime in April.

Halving is meant to slow the supply of coins as it approaches its total supply, which is capped at 21 million coins. The built-in mechanism mimics the scarcity of gold and ensures that bitcoin mining becomes more expensive over time.

“The expectation is that the halving will lead to an increase in price because people expect supply to become constrained,” says Douglas Boneparth, president of Bone Fide Wealth and a member of CNBC’s Financial Advisor Council.

“When supply goes down, price goes up, assuming demand remains the same or greater,” says Boneparth, who holds investments in bitcoin and other cryptocurrencies.

Historically, the value of bitcoin has increased shortly after its three previous halving events, albeit with diminishing returns with each halving, according to CoinDesk.

Of course, the implications of bitcoin’s halving could be baked into its current price, since the imminent halving is widely known.

“It could be priced in, but now that the spot ETFs are here, the thinking is that institutions will need to buy more bitcoin on the open market to back the flows into their funds,” says Boneparth.

2. There’s a power struggle brewing over crypto and AI — literally

One new lawsuit and one new essay signal intensifying battles over energy demand from artificial intelligence and crypto-currency mining.

Why it matters: Both technologies demand electricity-thirsty computing at a time when the world is already failing to steeply cut emissions.

State of play: A federal judge on Friday granted crypto industry plaintiffs a temporary order blocking new Energy Department collection of the sector’s power usage data.

-Meanwhile, AI ethicist Kate Crawford writes in Nature that “we need pragmatic actions to limit AI’s ecological impacts now” — in terms of both power and water usage.

-She says a good start — but only a start — would be recently proposed Democratic legislation creating standards for assessing AI’s impact and setting up a voluntary reporting framework.

Catch up quick: On crypto, the DoE’s independent stats arm, with White House blessing, recently began an “emergency” data survey.

-The Energy Information Administration cited preliminary estimates that showed crypto mining is 0.6% to 2.3% of U.S. power demand, but added more rigorous info is needed.

-The agency is concerned about strained power grids, electricity prices and CO2 emissions.

The other side: The Texas Blockchain Council and bitcoin miner Riot Platforms filed suit in a Texas federal district court late last week, alleging “contrived” urgency and “invasive government data collection.”

The big picture: An International Energy Agency report last month estimates that data centers, crypto and AI accounted for roughly 2% of global power demand in 2022 — and that could double by 2026.

-But at the same time, AI has numerous potential climate benefits.

-Think help with improving battery materials, extreme weather forecasts, and managing increasingly complex grids as renewables, storage, EVs and other tech proliferate.

The intrigue: The massive power needs of generative AI are hardly a secret.

-Bloomberg reports that Google has pioneered a technique that’s gaining currency.

-It’s about “using software to hunt for clean electricity in parts of the world with excess sun and wind on the grid, then ramping up data center operations there.”

What’s next: We’re keeping an eye on this crypto court case and federal work to marshal AI benefits while addressing power use.

3. No Crypto Mining or Nodes, Impacting 16% of Ethereum’s Infrastructure

Discover how Hetzner’s prohibition of crypto activities affects Ethereum’s network and the ongoing debate on decentralization in the cryptocurrency ecosystem. What does this conflict signify for the future of blockchain projects?

As Ethereum gears up for its pivotal upgrade, The Merge, cloud giant Hetzner reiterates its ban on crypto mining and node operations, stirring unrest within the crypto community. Hetzner’s policy, which prohibits the use of its services for cryptocurrency-related activities, including mining and running blockchain nodes, poses a significant challenge for nearly 16% of Ethereum nodes that rely on its infrastructure. This move by Hetzner not only underscores the difficulties blockchain projects face with centralized internet service providers but also highlights the ongoing debate about the necessity for decentralization within the cryptocurrency ecosystem.

Centralization vs. Decentralization in Crypto Infrastructure

The recent reaffirmation by Hetzner of its anti-crypto mining and node operation policy has reignited discussions regarding the reliance of the cryptocurrency ecosystem on centralized cloud services. With Hetzner hosting a substantial portion of Ethereum’s nodes, the community is prompted to reflect on the resilience and independence of its infrastructure. The situation is exacerbated by the imminent Ethereum upgrade, The Merge, which shifts the network from proof-of-work (PoW) to proof-of-stake (PoS), further complicating the compatibility of Ethereum’s operations with Hetzner’s policies.

Ethereum’s Ecosystem at a Crossroads

The controversy surrounding Hetzner’s stance arrives at a crucial time for Ethereum. The network is on the verge of The Merge, a significant update anticipated to enhance the blockchain’s efficiency and sustainability. Misconceptions about the update’s implications on transaction speeds and costs have been widespread, despite clarifications that substantial improvements are expected only after a subsequent update, the Shanghai update. Hetzner’s decision highlights the broader challenges faced by the Ethereum community and other blockchain projects in ensuring their operations remain unaffected by the policies of centralized service providers.

Looking Ahead: The Implications of Centralized Policies on Decentralization

The standoff between Hetzner and the Ethereum community serves as a critical reminder of the ongoing tensions between the ideals of decentralization and the realities of centralized service dependencies within the cryptocurrency space. As the ecosystem continues to evolve, the response and adaptability of both blockchain projects and service providers like Hetzner will play a pivotal role in shaping the future landscape of cryptocurrency operations. While Hetzner’s policy poses immediate challenges, it also presents an opportunity for the Ethereum community and other blockchain networks to explore and reinforce more decentralized infrastructure solutions.

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Harvey CHEN