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TBW #27: Binance continues to expand its European footprint

TBW #27: Binance continues to expand its European footprint

Read all about The Big Whale's 27th Premium newsletter.

Hello Whales and welcome to the little newcomers who have just joined us in the Premium edition.

There are already more than 1,500 of you reading us every week.

Thank you so much! 😍

To devour this week

🖊️ Editor's editorial

🔥 Our exclusive news

⚡ ️ The Big Dossier

🤖 The focus of the week

THE BIG SPLASH

Pierged 😬

The respite will have been very short-lived. Barely six months after halting its asset purchases, the British central bank yesterday made an emergency announcement to resume them. The aim of this operation? To prevent the British debt from exploding.

In recent days, British interest rates have literally soared (above 4% on 10-year maturities), not least because of the Bank of England's new rate hike, which is intended to combat inflation not seen for more than 40 years.

The problem is that this situation concerns everyone, not least the European Central Bank (ECB), which has also started to raise interest rates to combat inflation. With the same consequences: the cost of debt is rising almost everywhere in Europe.

How much longer will Christine Lagarde be able to hold out between the necessary rise in rates to 'calm' inflation and the resumption of asset purchases to avoid an explosion in European debt? The British Central Bank has just given her part of the answer: not (very) long.

THE BIG NEWS

Our EXCLUSIVE NEWS 🔥

👉 Binance sets its sights on Europe

Binance isn't the biggest exchange platform on the planet for nothing. In addition to its aggressive marketing, the Chinese-born giant has also become a heavyweight in... lobbying. According to our information, the company headed by CZ is in the process of recruiting lobbyists all over Europe. In France, according to our information, Binance has acquired the services of Julia Fenart, who has just left France Digitale - the lobby for French start-ups! Julie Fenart joined Binance a few weeks ago. Her first coup? The appearance of the French Minister for Digital Affairs, Jean-Noël Barrot, at the major event organised by the company in Paris on 14 and 15 September.

👉 METAV.RS raises €3 million

While the euphoria surrounding metavers has clearly died down, start-ups in the sector continue to attract investors. According to our information, French start-up METAV.RS (20 staff) has just completed its first round of funding, raising €3 million from a number of investors including consultancy firm Sia Partners, fund 50 Partners and Sébastien Borget (The Sandbox). The start-up, which was set up at the beginning of the year, has developed a platform enabling brands in any sector to gain a foothold in The Sandbox, Decentraland and other virtual worlds. METAV.RS has reportedly already signed up a number of major brands including Stellantis.

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THE BIG STORY

Bitcoin and energy: is the criticism justified?

Lido

"Bitcoin is an energy sink", "Bitcoin consumes more than Belgium"...

You've no doubt heard these arguments at least once, and you'll continue to hear them as global warming becomes a crucial issue - and so much the better!

But is it justified?

That's what we wanted to find out, with figures and experts to back it up.

First the figures. At the risk of upsetting a few people, bitcoin does indeed consume a lot of energy. We're currently talking about 94 TWh per year, the equivalent of a country like Kazakhstan or more than Belgium (so your cousin is right 😝 ). On another level, bitcoin consumes 50% more energy than all American lighting, according to Cambridge University, which is an authority on the subject.

Is bitcoin as bad for the environment as it is made out to be?

Part of the answer to this BIG question lies in analysing the energy mix used by miners to run their machines.

  • How much of it is fossil fuel?
  • How much of it is renewable?

According to the latest quarterly report from the Bitcoin Mining Council (BMC), an organisation that brings together the world's leading bitcoin miners, 59% of the energy they consume is said to come from renewable sources.

"This is a level that few industries can claim, especially the banking sector," explains Romain Nouzareth, co-founder and boss of Sato, a Canadian miner that operates with 100% energy from renewable sources (hydroelectricity in his case).

At his facility in Joliette (Quebec), he even uses the heat released by his machines to heat the neighbouring factory.

This figure of 59% renewable energy share should even increase in the coming years, according to Romain Nouzareth: "Miners are pragmatic economic agents, they want to get their electricity at the lowest price and renewable energies are the cheapest on the market."

According to a report published in June 2021 by the International Renewable Energy Agency (IRENA), "green" energies have effectively become cheaper than all the others. This spectacular drop in prices is thought to be linked to the improved competitiveness of solar and wind technologies over the last decade.

It is therefore likely that the share of renewable energies will increase sharply in the mix of miners. All the more so with the geopolitical context putting upward pressure on gas and oil prices.

In a year, gas prices have doubled in Europe and the Russian-Ukrainian war could continue to push up the thermometer.... In the United States, many mining facilities connected to carbon sources are also in trouble. In the state of Georgia, Compass Mining announced at the end of August that it was closing several sites because of soaring prices.

"Today it is very difficult to mine from fossil fuels, unless you find yourself in conditions, like in Kazakhstan, where the boss of the coal-fired power station also runs the electricity company and a mining farm", notes Sébastien Gouspillou, boss of Big Block Datacenter, a French mining company with a strong presence in Africa. In short, the return of cheap fossil fuel energy is not for tomorrow.

Mining can promote the energy transition

In this economic context favourable to renewable energies, mining offers another very important advantage: financing infrastructure. "It's still often more profitable to build coal-fired power stations than hydroelectric dams," laments Sébastien Gouspillou.

Why? Because dams are expensive and therefore take a long time to pay off financially, and above all because many of them are built in regions where there is not necessarily the infrastructure (connections, lines, etc.) or the demand that goes with it.

Bitcoin mining can precisely make it possible to recover surpluses and thus contribute to financing infrastructure. "We can improve the profitability of dams," continues Sébastien Gouspillou.

"For energy storage, we traditionally use batteries, but their cost is extremely high, so bitcoin mining presents interesting prospects for optimising renewable installations," stresses Damien Ernst, an energy expert and professor at the University of Liège. "But it's not the only option; converting electricity into hydrogen could also work well," he points out.

According to Sébastien Gouspillou, bitcoin mining would be akin to an "economic battery" that would improve the profitability of renewables (MicroStrategy boss Michael Saylor says the same thing). "Despite what the degrowthists say, we still need to build a lot of infrastructure to produce electricity. Bitcoin can tip the balance in favour of renewable facilities," he insists.

All told, there are more than 2,400 coal-fired power stations spread across 79 countries, and their electricity generation capacity is set to increase by 21% via new projects, notes the NGO Global Energy Monitor in its annual report.

According to the same source, no fewer than 34 countries are currently in the process of building new sites using this highly polluting energy...

"We need to succeed in making them understand that mining can be a solution for their income and the planet", stresses Sébastien Gouspillou, who says that he is "increasingly listened to". The Frenchman also points out that he has installations in Kenya and Congo, while hoping to succeed soon with other Central African countries.

A concrete example: transforming flared gas

Bitcoin mining can also be an asset for reducing the environmental impact of another extremely polluting activity that is often overlooked, namely "flared gas".

What is flared gas?

This is the waste that escapes with great flames from oil and gas installations when energy is extracted from underground. Flaring alone would be responsible for the equivalent of the greenhouse gas emissions released by France, according to the World Bank.

It represents a monumental waste of a natural resource that could be used for productive purposes, such as generating electricity. The amount of gas currently flared each year could power the whole of sub-Saharan Africa.

Some argue that flared gas should be seen as an opportunity for economic gain, with a number of options operators can consider to monetise their gas, including mining. "It's wasted energy, so we might as well take advantage of it to mine bitcoin, especially if it reduces emissions into the atmosphere," judges Professor Damien Ernst.

In some cases, oil companies "graciously" let miners use flared gas to avoid paying environmental fines. But it also happens that this gas is "sold" to the miners, as in the United States, which creates a market (absolutely not virtuous) for the benefit of oil companies.

The conversion of flared gas into electricity is still experimental. It is difficult to control and few miners have the capacity to do so... This could nevertheless evolve, notably via the company Crusoe Energy, which raised more than 500 million dollars last spring to develop the appropriate system. Several projects around the world are expected to get under way very soon. US hydrocarbon giant Exxon is currently conducting several experiments along these lines.

Why are we being so demanding with Bitcoin?

Of course, for political reasons! Many industries don't like Bitcoin. But its energy consumption is also a real issue that no one can avoid, especially at a time when the fight against global warming has become paramount. This is an observation that the players in the sector (not all of them) share, without wanting to shoulder all the responsibility.

"The climate is obviously an issue for us, but it's up to governments to make the strategic decisions. Our job is to come up with a solution to manage the electricity network as well as possible", he believes.

Some also advocate integrating miners more fully into the economic circuit. "Let's generate revenue from energy that hasn't found a taker until now, to help lower everyone's bill," concludes Romain Nouzareth.

(Very) incomplete sources of information

The debate on bitcoin's energy consumption is often biased for two reasons.

  • There is little information
  • It is sometimes FALSE

If the lack of information is problematic (The Big Whale is also there for that 😎 ), the presence of false information is even more so. And at this little game, some people have become experts.

One of the best known is undoubtedly "Digiconomist".

Since 2016, this site created by Dutchman, Alex de Vries, has provided ample fodder for the media and certain think tanks, which rely on its now famous "Bitcoin Energy Consumption Index" to talk about bitcoin consumption.

Digiconomist's "peculiarity" is that it systematically retains the highest levels (165 TWh in June 2022), and its methodology of comparing bitcoin's consumption with that of countries (which we used above) is regularly challenged.

Digiconomist also focuses on the electronic waste that bitcoin miners would generate because their machines would be obsolete after... fifteen months. An argument that makes some people smile. "We have machines from 2016 that are still running very well," quips Sébastien Gouspillou of Big Block Datacenter.

An important detail: Alex de Vries has worked for the Dutch National Bank, as well as the Dutch bank ING.

"Serious" studies exist

While credible publications are not legion, there are some nonetheless! The study by the Center of Alternative Finance, an independent laboratory based at Cambridge University, is surely one of the best on the subject. "Their work is of fairly good quality", stresses Sébastien Gouspillou, who does however point out a few shortcomings when it comes to mapping by country.

"Cambridge relies on data from mining pools, whereas many do not provide their real IP address when they want to remain discreet", explains Sébastien Gouspillou. "This is why Ireland and Germany can be among the most 'consumer' countries when there are virtually no miners on their territory.

The example of Big Block Datacenter is quite interesting. The mining company is considered to be in Europe, and more specifically in Belgium, while operations are carried out in... Africa. "Our satellite operator is registered in Belgium," laughs Sébastien Gouspillou.

Another study has also made its mark on the industry. And for good reason, it comes from there! "The Cambridge study is still relevant, but I think the Bitcoin Mining Council (BMC) has better data," points out Romain Nouzareth, whose company Sato sits on this international organisation that brings together the main miners (70% of the global network!).

The study does have one big weakness, however: its data is declarative and its members could be tempted to lie to "greenwash" the industry. Other studies have appeared in recent months and have enjoyed some success. This is the case with the one by Arcane Research, which is also produced by a player very close to the industry players.

In 2022, there is still no "perfect" report on the energy consumption of bitcoin (and cryptos) does not yet exist. But the increasingly important debates on the subject clearly show that things are going to have to speed up. And who knows, maybe that will lead to the creation of a branch or agency dedicated to the subject?

Discord

THE BIG FOCUS

"We're making a bit too much of Bitcoin's energy consumption"

Yat Siu

For Émeric de Vigan, who is Vice President of Electricity at Kepler, bitcoin, properly used, can play a role in the energy transition.

THE BIG WHALE. What is your position on Bitcoin?

Émeric de Vigan. I have an opinion that is largely biased because I worked in electricity trading, where the underlying is... physical. The price of electricity is determined by consumption, wind generation, the availability of power stations, and the list goes on. Seen in this light, I don't think Bitcoin has much value. If I were to be a little provocative, I'd even say that I don't understand why it isn't worth zero...

Is its level of energy consumption a problem?

Not really. We are currently experiencing a paradoxical situation: there is a serious risk of energy shortages in some parts of the planet and energy surpluses in others. Bitcoin mining is an interesting way of using up the surplus because you can decide to turn the mining machines on or off very quickly. I think we're overdoing it a bit with bitcoin's energy consumption. It's a bit like saying that an email consumes a certain number of kilowatt hours. We need to take a step back from all this.

Can bitcoin be a vehicle for energy transition?

Why not, but that would be tantamount to saying that bitcoin mining is akin to storage. It's an interesting idea, just like using the batteries in electric cars for storage or network support mechanisms. But the key is to ask whether there is a business in mining bitcoins part-time.

A country's electricity consumption can vary a lot. Would it help the network if we filled the gaps with on-demand consumption?

Yes, enormously. The operator responsible for security of supply (RTE in France) has to manage very occasional peak situations where there is potentially a shortage of energy, and then manage times when there is a lot of surplus.

Does encouraging the consumption of bitcoin, even from renewable sources, pose an ethical problem?

Pushing consumption in general is not optimal, especially when we need to show sobriety. After that, if we can combine consumption and flexibility, that's interesting.

This edition was prepared with ❤️ by Raphaël Bloch and Grégory Raymond. The Big Whale is a free and independent media. By supporting us, you are contributing to its development.

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