Kyle McDonald, an independent researcher, predicts that the bitcoin network could be “regulated away”, which could cause the price of bitcoin to plummet.
He recommends selling bitcoin now. Indeed, after the Ethereum blockchain transitioned to a significantly less energy-intensive method of validating transactions known as “proof-of-stake”, investors and regulators may find that the energy-intensive method used both by Bitcoin and Ethereum now called “Proof-of-Work” was never really needed.
Speaking on CoinDesk TV’s “First Mover” program on Friday, McDonald mentioned the “climate crisis” and Bitcoin’s massive energy consumption. He said that since “Bitcoin doesn’t have the coordination like Ethereum to leave proof-of-work”, “it could be the first to be upregulated.”
Crypto’s power consumption has become a major point of contention for environmentalists and governments, and McDonald said bitcoin will never see “$69,000” again. The cryptocurrency traded close to that figure in November last year.
Ethereum’s transition, a software update dubbed “The Merge,” is set to take place this month, and an expected benefit is that fewer computers will be needed to run the blockchain.
McDonald said the possibility of Ethereum reducing energy costs by 99.95% is “very realistic.”
If you go from a system that consists of generating as many random numbers as quickly as possible using 10 million [graphics processing units] worldwide, to a system that runs on a few thousand computers that consume very little power, it will make a big difference, McDonald said. Graphics processing units, or GPUs, are used in cryptocurrency mining.
To track Ethereum’s energy movement, McDonald created the Ethereum Emissions Tracker, which takes a bottom-up approach but doesn’t take into account Ethereum’s price or electricity price, according to the McDonald’s website.
I’ll start with the hashrate, then go through the hardware and make a technical argument about how much electricity to use, he said.
NFT risk
One risk, however, relates to non-fungible tokens (NFTs), McDonald said. That is, “there is a good chance that some miners will temporarily switch to proof-of-work after merging.”
If miners change, there may be duplicates of NFTs on another chain for a short time, he said. If that happens, it may “perhaps even dilute their values”.
But OpenSea, the largest NFT market in the world, said it will only support the proof-of-stake chain, adding that it is preparing for the transition to ensure the “process runs smoothly.”
