Kyle McDonald told CoinDesk TV’s “First Mover” the Bitcoin network may be regulated away because of its energy consumption.
Independent researcher Kyle McDonald believes that the Bitcoin network may be “regulated away,” which would lead to a collapse in the value of bitcoin.
He advises selling bitcoin right away. The reason is that investors and regulators may realize that the energy-intensive method that both Bitcoin and Ethereum use now, called “proof-of-work,” was never really necessary after the Ethereum blockchain switches to a significantly less energy-intensive method of validating transactions known as “proof-of-stake.”
Speaking on Friday’s “First Mover” episode of CoinDesk TV, McDonald referred to the “climate crisis” and the enormous energy consumption of Bitcoin. According to him, Bitcoin could be “the first to be regulated away” because it “doesn’t have the coordination like Ethereum to leave proof-of-work.”
Environmentalists and governments have made cryptocurrency’s energy use a major point of contention, and McDonald predicted that bitcoin will never reach “$69,000 again.” In November of last year, the cryptocurrency traded near that level.
This month is expected to see the implementation of “the Merge,” an update to Ethereum’s software that will reduce the number of computers needed to maintain the blockchain.
According to McDonald, it is “highly realistic” that Ethereum could reduce energy costs by 99.95%.
“It’s going to make a difference when you switch from a system that’s running on a few thousand relatively low-power computers to a system that’s about generating as many random numbers as quickly as possible with 10 million [graphic processing units] around the world,”
Ethereum’s switch, a software update called “the Merge,” is expected to happen this month, and one expected benefit is that not as many computers will be required to keep the blockchain going.
To track Ethereum’s energy movement, McDonald created the Ethereum Emissions tracker, which takes a bottom-up approach, but doesn’t factor in Ethereum’s price or the price of electricity, according to McDonald’s website.
“I’m starting with the hash rate, then looking at the hardware and making a technical argument for how much electricity must be used,” he said.
Non-fungible tokens (NFTs), however, present one risk, according to McDonald. In other words, “there’s a good chance some miners will temporarily switch to proof-of-work after the Merge occurs.”
He warned that if the miners do switch, there might be duplicate NFTs on one chain for a short while. It could “potentially even dilute their values” if that happened.
However, the largest NFT market in the world, OpenSea, announced that it would only support the proof-of-stake chain and that it had been preparing for the change to ensure that the “process runs smoothly.”