Crypto Weekly: Crackdown intensifies
Summary: China announced a full-blown crackdown on cryptocurrencies, effectively forbidding roughly any crypto-related activity in the country. On the adoption side, Twitter announced a tipping feature using Bitcoin and Ether. And to end this Crypto Weekly, Bitcoin is not surprisingly still using an abnormal amount of electricity.
Cryptocurrencies are illegal in China
From previously being home to more than half of Bitcoin’s hash rate (the total computational power processing transactions), China started a severe crackdown on Bitcoin mining in May this year, sending the crypto market tumbling as a result. Since then, the prices and hash rate nearly recovered until China sent shockwaves in the community on Friday by virtually declaring cryptocurrencies illegal. The announcement was made by The People’s Bank of China (PBoC) along with 9 other Chinese state authorities, including the Cyberspace Administration of China and the Ministry of Public Security. In addition to the crackdown in May, China has taken several legal actions against cryptocurrencies throughout the years, for example, in September 2017 by demanding Chinese exchanges to close down. Though, Chinese citizens could still use over-the-counter platforms and offshore exchanges. The newly announced ban forbids roughly any crypto-related activity in the country, including foreign exchanges allowing Chinese citizens to trade cryptocurrencies. This time the statement was unitedly issued by not only government agencies but also law enforcement. Shortly after the news broke, the crypto market tumbled making the Bitcoin price decline by as much as 7% while Ethereum tumbled slightly more. Due to China still being a substantial crypto market, many crypto analysts expected the market to take a larger hit. However, the more modest dump was likely due to market participants already expecting a full-blown Chinese ban following the mining crackdown in May.
Twitter launches the option to tip through Bitcoin and Ethereum
After rumors started circulating last month, Twitter officially launched the option to tip users with Bitcoin and Ether last week. Twitter has adopted the Lightning Network to execute Bitcoin transfers, which is an extension to make transactions cheaper and faster on the network. Simultaneously, Twitter announced the plan to let users authenticate their non-fungible tokens (NFTs) – and in return, give the user a badge on his or her profile after the authentication of the NFT. Twitter’s co-founder and CEO, Jack Dorsey, has for a long time been a passionate advocate for particularly Bitcoin. His other company, Square, made a Bitcoin purchase worth $50mn last year and announced its intention this year to develop a Bitcoin hardware wallet.
Bitcoin is – still – extremely energy-intense
According to Cambridge University, the mining of Bitcoins is presently consuming 0.44% of the total electricity consumed worldwide. Following up on that, a study by NYDIG published last week stated that Bitcoin represented 0.1% of global carbon emissions in 2020. In the same study, NYDIG concluded that Bitcoin’s emissions will maximum amount to 0.9% of the world’s total in 2030. By all means, these are not insignificant numbers – also compared to other cryptocurrencies based on proof-of-work manage to have a much smaller footprint.
However, the community still managed to turn the study into something positive by mentioning it will ‘only’ at maximum be 0.9%, even though it is a consequential part of global carbon emissions. The capability to turn negative news into positive owns is the forte of the cryptocurrency community as seen so often before. The large carbon footprint of Bitcoin serves as a cornerstone for regulators globally to pose heavy regulation on Bitcoin and other cryptocurrencies due to it being an argument the majority understand, and with an increasing focus on carbon emission, the pressure on Bitcoin will nothing but intensify. As an example, China used this argument when cracking down on Bitcoin mining.