  Exploring the transformation of value in the digital age By Michael J. Casey, Chief Content Officer May 28, 2021
Bitcoin got its Consensus bump. But is it enough?
Not only did CoinDesk's blockbuster Consensus 2021 conference deliver big news and insights this week, it also gave the bitcoin market what it hoped for: a repeat of the price rally that typically occurs during this important annual event. (See this newsletter's "Off the Charts" section.)
That bump may have been helped by Bridgewater Associates founder Ray Dalio declaring that he prefers bitcoin over bonds and by a host of other sector-friendly developments during Consensus. But let's be clear: the 9% gain for bitcoin makes but a tiny dent in the market's prior losses. We are still down 44% from the all time high of $64,829.  So, contrary to the upbeat mood of our own conference, this Debbie Downer is here to tell you we may face a long haul before returning to the highs of this year. This week's column is about crypto entering another consolidation phase, during which the community will need to engage in a more constructive debate about blockchain tech's impact on the planet.
Of course, energy and bitcoin were far from the only topics discussed in the "big tent" experience that is Consensus, with a speaker list numbering more than 300. Another matter was the outlook for central bank digital currencies, which became the focus of a special edition of our "Money Reimagined" podcast, this one recorded inside the conference. For that, Sheila Warren and I talked to Christian Catalini, chief economist of the Diem project (formerly Libra), and Benedicte Nolens, who heads up the Bank of International Settlements' innovation hub in Hong Kong.
Have a listen after reading the column.
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Crypto Winter Again? Time to Regroup  Illustration: Rachel Sun/CoinDesk I didn't want to write these words:
I think we're entering Crypto Winter II.
It's not about the price decline per se. It's that, after a period when the outside world – the "mainstream" – seemed finally to get crypto, those outsiders are now having second thoughts, as they did during the Crypto Winter of 2018. Crypto people might not like to admit it, but they crave acceptance – more so, perhaps, than adoption. They want to be understood.
This time, the rejection flows from a rising narrative, one that's proving extremely difficult for the community to contain, about the supposedly negative environmental impact of crypto generally and bitcoin specifically.
It's Bigger Than Musk
The price-destroying impact of Elon Musk's negative turn on bitcoin two weeks ago had nothing to do with the immaterial monetary impact of Tesla no longer accepting bitcoin payments. It reflected the realization that even Musk, once a crypto-booster, felt compelled by forces bigger than his giant ego to fall in line with the bitcoin-is-bad-for-the-planet narrative.
Large financial institutions are rapidly becoming sustainability-conscious, with investment committees that demand compliance with ESG objectives. That means anyone in need of capital, including Tesla, has to signal that they are, too.
Given that bitcoin's price rallies this year were fueled by Wall Street institutions buying it as a hedge against fiat monetary expansion, the idea that those same institutions are now more reluctant to do so on ESG grounds will weigh on the bitcoin price, possibly for some time.
That shift from mainstream support to mainstream disapproval offers an echo of Crypto Winter I, when the collapse of the initial coin offering bubble left newby retail investors burned and disillusioned with that era's crypto promise of fast token riches. On the other hand, the run-up before this collapse seemed more legitimate than that one, as the entrance of institutional investors was founded on a solid assessment of bitcoin's value proposition in the context of a challenging macroeconomic outlook.
But even if the circumstances are different, the first Crypto Winter offers lessons in how a quieter period in markets might, ironically, enable the development of the technology. As with that previous lull period, developers of crypto projects are now presented with an opportunity to focus on "building" – or BUIDLing, as the meme went back then.
A ton of important development occurred in 2018-2019, fostering projects that are now integral to the crypto ecosystem. It's when the most serious advances were made in non-fungible token (NFT) trailblazer project CryptoKitties, in MakerDAO's dai token – which spawned the decentralized finance (DeFi) revolution – and in the Lightning network and other layer 2 technologies now helping solve scaling problems.
Similar engineering work is now needed – to reduce transaction costs, to improve privacy while addressing identity challenges, and to continue to scale while optimizing decentralization. But we also need a different kind of development: that of relationships, with governments, with large companies and with the public at large.
If we are going to get ahead of the debate around sustainability, the crypto community needs to engage with these stakeholders. It needs to BUIDL relationships and foster a narrative of shared interest in place of the us-versus-them divisions that are the community's own worst enemy.
Strategic Engagement
When faced with sometimes simplistic criticisms that bitcoin "wastes more energy than Sweden consumes," crypto supporters often engage in whataboutism ("but how much energy does the petro-dollar financial system consume?") or ask philosophical questions about what constitutes "waste." And, yes, if they can convince everyone that bitcoin will solve all their problems in the fiat financial system cannot, they'll also convince them that all this energy consumption is worth it.
But it should be clear by now, after years of engaging in these debates, the argument won't be won with "I'm smarter than you" responses. In fact, it probably turns public opinion more negative because it leaves the impression that the bitcoin community believes its carbon footprint is something to ignore.
Dismissing bitcoin's greenhouse emissions is naive and, frankly, untenable. The reality is that subsidies for fossil fuels worldwide continue to make them a profitable option for miners, which means that, as bitcoin's hashrate increases, it will continue, for now, to grow its carbon footprint.
Per my column last week, there's an opportunity to bring a variety of stakeholders to the table to move bitcoin mining from being a net polluter to becoming a force multiplier for renewable energy that underwrites the development of green, decentralized electricity infrastructure.
That's the kind of BUIDLing we need. Bitcoin miners and others in the crypto community must work with other actors with an interest in green energy solutions to devise collaborative plans that meet both sides' needs.
Go out and talk to city grid operators about variable mining contracts to help manage the "duck curve" problem caused by unused solar capacity. Partner with investors and companies with a direct interest in expanding decentralized electricity grids to deploy mining operations as a funding mechanism for solar, wind and mini-hydro solutions around the world. Sit down with national energy policy makers and strike deals on supportive tax, subsidy and community reinvestment incentives to align miners' interests with sustainability and energy needs.
I, for one, think the new Bitcoin Mining Council, formed by a group of North American bitcoin mining firms with the support of Musk and MicroStrategy CEO Michael Saylor, is a fine idea – unlike a few bitcoiners, who worry about it being a centralized "cabal." This is precisely the kind of coordinated actions among deep-pocketed stakeholders with common interests that's needed to not only move the conversation forward.
At the top of some special ESG-themed programming for "Money Reimagined" on CoinDesk TV Monday and Tuesday, my podcast co-host, Sheila Warren of the World Economic Forum, floated a separate multi-stakeholder initiative: an umbrella organization housed at the WEF to create a framework for ESG-focused innovation in blockchain and crypto technologies. The Crypto Impact and Sustainability Accelerator, which CoinDesk is supporting as a media partner, will bring together interested entities from finance, accounting, industry, tech, government and NGOs to find consensus around a framework with which the otherwise unfettered process of blockchain development should ideally seek to comply. The point is to ensure the open-source tech projects are interoperable and align with overarching planetary goals such as the Paris Climate Accord.
Without this kind of high-level coordination among a cross-section of invested global stakeholders, there can be no common design parameters for ESG-targeting crypto technology. While it's important to allow innovation to freely emerge on its own, we cannot solve the world's problems within the current, chaotic mix of contradictory metrics and tech standards that make it impossible to collectively determine whether we're actually saving the planet or not. Without common standards, markets in ESG digital assets cannot emerge, for example. This WEF initiative may be one of those rare occasions when a high-level talk group is actually necessary.
The bigger point is that the collective needs of society will not be fixed by the crypto community on its own. It must start forming real-world alliances. It needs a seat at the table with those who control the capital and who set the policies that will solve those problems.
Right now, Crypto Winter or not, is the time to do it.
Off the Charts The Consensus Bump Explored As mentioned at the opening, it does appear that Consensus 2021 saw a repeat of the "Consensus Bump" phenomenon. The bitcoin price rose with the launch of the conference and more or less held its gains into the end of the conference.
How real is this effect, though? It might depend on what you use as your benchmark. Some people refer to the bump being a run-up in prices in the days and weeks preceding the conference, others refer to the price performance during Consensus week itself.
We figure we'll stick with the latter and see how it has compared over seven years of Consensus conferences, from the one-day affair on Sept. 10 of 2015 and the three-day event of 2016 to the now four-day conferences that we've seen ever since 2017. The charts below capture each of those seven events, with the red line signifying the date on which the conference began.
Here are 2015 and 2016:  And here are 2017 and 2018:  2019 and 2020:  And this year:  I gotta say, I think there might be a little more myth and wishful thinking in this than reality. Sure, from 2017, there have been one-day "bumps" of varying size at the very start of the event. But it didn't always last throughout the week.
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The Conversation A Mining Cabal?  Illustration: Rachel Sun/CoinDesk One of the big stories of the week that did not emerge directly from Consensus came when a group of North American bitcoin mining companies met with Elon Musk and Michael Saylor to form a council committed to transparency around how much of the sources of energy they use. It started out innocent enough – as a feel-good alternative to the negative press for bitcoin generated a week earlier by Musk's dunking on the cryptocurrency's environmental harm. Saylor and Musk did the honors on Twitter in a tweet/retweet routine:  This was welcomed by some people, signaling Musk's return to a pro-bitcoin stance and a positive effort to make bitcoin greener.  Others had a different take: This was a dangerous cabal, a secret agreement to differentiate coins that would render some better than others and destroy bitcoin fungibility.  But, really, all this was an agreement among these miners to keep publicly reporting the stuff they are already reporting. They're providing transparency. And that's a bad thing?
As Nic Carter alluded to, some of this just reflects how easy it is to push certain narratives in a Bitcoin community willing to hear them. 
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Relevant Reads Consensus Highlights  Some of the highlights of this year's spectacularly successful conference.
A message from CoinDesk  Bitcoin Miner Metrics: Hashrate and Thermocap
How is hashrate calculated? What does thermocap represent? What do hashrate ribbons say about bitcoin price cycles? This research note looks at Bitcoin miner metrics and how investors can use them to glean insight into the asset's price and network fundamentals. Download the free report here.
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