Crypto Weekly: No thanks, to 19mn Bitcoins for $25
Summary: On Saturday, Warren Buffett stated that he would not acquire the entire supply of Bitcoin, even if it was offered to him for $25. To save decentralization, the community should appreciate that Buffett turns down buying every Bitcoin. Nonetheless, one might ask whether decentralization is the case, as the European Union has considered an outright ban on trading Bitcoin due to its environmental impact. Speaking of burning bridges, this week the largest non-fungible token (NFT) sale burned over 55,000 Ether from transaction fees.
Warren Buffett would not buy all Bitcoins for $25
During Berkshire Hathaway’s shareholder meeting on Saturday, legendary investor Warren Buffett said that he would not acquire every Bitcoin in circulation, even if it was offered to him for $25, correctly arguing that it is a non-productive asset. Buffett’s business partner Charlie Munger was not surprisingly supporting Buffett’s skepticism towards Bitcoin: "In my life, I try and avoid things that are stupid, evil, and make me look bad in comparison to someone else. Bitcoin does all three,” Munger stated.
Regardless, the logic of buying the entire supply of Bitcoin for $25 is contrary to the foundation of Bitcoin and other cryptocurrencies namely decentralization. If Buffett was to own all Bitcoins, it would no longer be decentralized, nevertheless wiping out its entire unique selling proposition. By evolving from being decentralized to a centralized database, Buffett is fundamentally right that Bitcoin would be worthless. Since the logic of acquiring all Bitcoins is after all contrary to its selling proposition, one might ask whether Buffett comprehends the unique selling proposition of decentralization, but only looks at its non-productive feature and speculative nature.
Bitcoin’s proof-of-work seems more short-lived than ever
We have previously argued that the future of energy-intensive proof-of-work looks dim, as it risks the wrath of politicians amid environmental concerns. Not only is Bitcoin threatened by harsh regulation but with the common ascending intention to be sustainable, users, developers, and institutions are also looking at alternatives, damaging the adoption of the largest cryptocurrency.
It seems we now have the first genuine indication from Western countries that the politicians might be willing to legitimately fight Bitcoin over the environment, no matter the cost of doing so. It has been known that the European Union earlier this year voted no to ban proof-of-work in the union. However, according to documents recently obtained, officials suggested not only a proof-of-work ban but also an outright ban on trading Bitcoin to apply pressure on the Bitcoin community to follow in the footsteps of Ethereum to adopt environmental-friendly proof-of-stake. It was explicitly stated in the EU meetings that: "If Ethereum is able to shift, we could legitimately request the same from bitcoin. We need to ‘protect’ other crypto coins that are sustainable. Don’t see [the] need to ‘protect’ the bitcoin community." Even though the European Union ended up voting no to the ban, it emphasizes that the politicians are particularly keen on regulating proof-of-work.
This takes us back to the topic of Warren Buffett and decentralization. When the EU has the latitude to illegalize the trading of Bitcoin due to its consensus mechanism, it is yet only as decentralized as the politicians permit, why the potential case of one individual owning the entire supply of Bitcoins is striking. Namely, to what degree does it affect decentralization that one individual sets the standard of decentralization versus the politicians. We cannot fully answer that question, but the community might look for an answer to whether total decentralization is possible or decentralization is at the mercy of politicians.
Burning 55,000 Ether in a matter of hours
Over the weekend, the maker of the famous non-fungible token (NFT) series Bored Ape Yacht Club and CryptoPunks called Yuga Labs sold for $319mn in its first NFT metaverse sale called Otherdeed. By holding these NFTs, users can later claim land in the Otherdeed metaverse whenever it goes live. This was easily the largest NFT sale, not only looking at what Yuga Labs’ cashed in but also the considerable spike in Ethereum fees, on which the sale occurred. As many users tried to buy the NFTs simultaneously, the Ethereum transaction fees spiked to as much as $4,000 per transaction. Because the majority of transaction fees are burned, in a matter of hours, over 55,000 Ether worth $154mn was burned due to the Otherdeed sale. Yuga Labs has since stated that they are looking to develop its own smart contract cryptocurrency to escape from Ethereum’s elevated transaction fees.
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