The Fate of Satoshi's Fortune?
  The biggest crypto news and ideas of the day Nov. 2, 2021 If you were forwarded this newsletter and would like to receive it, sign up here. Sponsored by  Welcome to The Node.
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Today's must-reads Top Shelf  FRAMEWORKS: In a long-awaited report from the President's Working Group on Financial Markets on stablecoins, the Biden administration argued that these fiat-pegged crypto assets should be placed under the remit of banks and overseen by federal regulators. CoinDesk's Nik De and David Z. Morris go deep. Elsewhere, the European Union's Markets in Crypto-Assets (MiCA) framework is soon to be ratified, offering a comprehensive guide to how crypto businesses can expand through the 27-nation bloc.
DIGITAL LIFE: Upland, a metaverse game combining the EOS blockchain with real-world landmarks, has raised $18 million at a $300 million valuation, the company announced Tuesday. Meanwhile, The Sandbox, an Ethereum-based digital land project, closed a $93 million Series B funding round led by SoftBank. And Spruce, an identity startup, closed a $7.5 million funding round led by Ethereal Ventures and Electric Capital. BITCOIN'S FOOTPRINT: Compass Mining, the bitcoin mining service provider, signed a new 140 megawatt hosting deal with Canada's Red Jar Digital, adding to Compass's current 30MW capacity. The facility will be located in Ontario, Canada and will reportedly run on 95% clean energy. Elsewhere, BitMEX is wrestling with Bitcoin's energy draw. The derivatives exchange purchased $100,000 worth of carbon credits to offset its use of the network. (More on BitMEX's "imperfect" solution below.) COINBASE NOTE: Coinbase, the largest U.S. crypto exchange by spot-traded volume and number of customer complaints (kidding, kidding), has acquired customer service startup Agara for as much as $50 million. Agara offers an artificial intelligence-powered voicebot used for customer support. Also, "value-oriented investment firm" Hayden Capital said in an industry note that Coinbase revenues could grow to nearly $50 billion by 2025.
SATOSHI'S FORTUNE? The civil trial of Ira Kleiman vs. Craig Wright kicked off in Miami on Monday to perhaps answer one of Bitcoin's greatest mysteries: Who is Satoshi Nakamoto and what happened to the estimated 1.1 million BTC in his possession? Kleiman argues his now deceased brother and Wright co-invented bitcoin and should share equal ownership over some of the earliest mined bitcoin. A panel of 10 jurors selected Monday will have three weeks to hear the evidence and decide the fate of Satoshi's fortune – if it exists and if Wright can access it.
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Putting the news in perspective The Takeaway  Carbon Credits for Crypto Companies Are a Distraction Daniel Kuhn, here. BitMEX, the Bahamas-based derivatives exchange, is looking to mitigate its environmental footprint by purchasing $100,000 worth of carbon credits. Those credits represent 7,110 metric tons of carbon dioxide emissions, the amount BitMEX figures it's on the line for through its bitcoin-based business.
It's a fine effort especially because, to my knowledge, no one is criticizing BitMEX for its energy draw. The move, which would offset BitMEX's share of bitcoin transactions and its corporate servers, would make it one of the first "carbon neutral" crypto exchanges, it said in a blog post. (Rival derivatives platform FTX has made a similar pledge.)
There is a hitch: Carbon credits don't work as advertised. Or at the least, they're not a total solution to the anthropogenic crisis humanity and the planet face. BitMEX's voluntary decision – pledged last year – to go to "net zero" is laudable, but the climate is an industry-wide concern, and we need better solutions than just shuffling deckchairs on a sinking ship.
As I write, more than 130 heads of state and thousands of attendees are gathered in Glasgow, Scotland for a two-week long conference sponsored by the United Nations and dedicated to finding solutions for climate change. At a collective level, United Nations (UN) officials say we must cap the rising global temperature at under 1.5 degrees Celsius (2.7 degrees Fahrenheit), the "point of no return."
A complete overhaul to the global economy, switching nearly all operations to renewable energy sources, and also pulling greenhouse gases from the environment, is necessary to combat this collective threat. The risks of missing are overwhelming: we're talking mega-storms, wildfires, droughts, floods and famines, a rising and more acidic ocean, habitat collapse, war and domestic violence and the great extinction of flora and fauna (including human beings). Some of these dire predictions are already coming true.
With this background, it's worth discussing how corporations have approached the climate issue. As of February 2020, nearly a quarter of all Fortune 500 companies had signed pledges to go carbon neutral by 2030.
Carbon offsets are a large part of this trend to go "green." A generic term for a wide range of assets and activities, offsets are essentially promises to reduce environmental degradation in one area to compensate for environmental degradation elsewhere. A company can make a green-sounding pledge to go "carbon neutral" by buying credits from some other company that has polluted less that year. In short: offsets allow normal economic activity to continue apace. They operate on the understanding that "x" amount of emissions will be released no matter what, and that heavy polluters can be made better if other companies pollute less. A new survey from Ecosystem Marketplace found that the voluntary carbon offset market is on track to cross $1 billion for the first time, as all-time market value hits $6.7 billion. Guilt is distributed. "Offsetting essentially means for every ton we remove, we emit a ton somewhere else," Kate Dooley, a research fellow at the University of Melbourne who studies the impact of carbon accounting, said in a recent interview. "We have no space now for continued carbon dioxide emissions. Emissions need to go to zero within a few decades, and we need removals on top of that to reduce atmospheric concentrations."
Offsetting is financialization at its worst: reducing activism to arbitrary economic activity. While carbon credits can and do help fund renewable efforts – typically reforestation, but also solar fields and the like – those efforts may be less than advertised. Greenpeace notes that carbon sinks have a short shelf life: Once a forest burns, or is logged, or dies naturally the carbon it traps is re-released. The only solution, real-hardcore climate activitists admit, is to reduce consumption and the amount of carbon released into the environment.
It's funny, because BitMEX researchers would likely agree with all this. In their report, they note the limited applicability of carbon offsets. The crypto industry should confront its problems and avoid "hollow promises and vague ESG pledges," BitMEX said.
Crypto has a target on its back precisely because of its energy use. Bitcoin has no choice but to burn vast amounts of energy to secure its network. It transforms a shared commodity – electricity – into a scarce digital asset, a money backed by its supporters, not a state, through "proof-of-work." You can argue (and I would disagree) that this is literally wasted energy, but you can't really stop it, that's the point of being decentralized.
There's also controversy around how to measure Bitcoin's energy footprint. Although the network is publicly audible, no one can guarantee what is powering it. It's arguable that Bitcoin is a greener money than others, because miners are incentivized to find cheap power sources (renewables are often subsidized or naturally cheaper) or make use of "stranded" energy (like from gas flares).
BitMEX took a somewhat heterodox approach to measuring bitcoin's carbon footprint, deciding to put a kilowatt figure on transaction volume. (Many industry activists have spilled ink saying you cannot compare Bitcoin, a base layer monetary network, to Visa, a payments rail, when it comes to transactions and energy use; Visa, by transaction count, has a far less intensive energy draw.)
BitMEX estimated that every $1 spent on BTC transaction fees can incentivize up to 0.001 tons of carbon emissions. So "assuming a $50 per ton cost of carbon, for every $1 spent on transaction fees, [an exchange] would need to spend 5 cents offsetting the carbon costs, 5%," BitMEX worte. That money is better spent elsewhere.
BitMEX notes its consumption model is "imperfect" and "controversial." I'd argue it's hardly a solution. But there is still hope. Bitcoin, and crypto generally, can incentivize investments in renewable energy. We've already built network scaling solutions like SegWit, transaction batching and the Lightning Network that reduce Bitcoin's footprint.
There are also crypto-based systems for tracking or trading carbon credits, with the idea that blockchain could make these markets less opaque and more liquid. These are notable efforts but are not true solutions. If crypto companies want to make a difference, they ought to put their outsized profits in building actual infrastructure: propagating scaling layers, building out solar and wind farms, funding carbon trapping research. Real solarpunk stuff, not more financialization.
While world leaders gather in Glasgow, their luxury cars idling outside the Scottish Event Campus, crypto can work quietly on solutions to fix the climate crisis. We're not responsible for the worst of what's to come. But this is an industry that's unafraid to experiment and built from the ground up. It's totally conceivable Bitcoin goes carbon neutral in the not-too-distant future (social pressure is good for that).
But for that to happen, we have to admit that carbon credits are little more than a distraction.
–Daniel Kuhn
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Polymesh: Crafting Tokens Both Wall Street and Washington Can Love
Security tokens are on the rise. According to STOMarket.com, well over 100 tokens compete for attention from U.S. investors, with a combined market cap exceeding $1.1 billion. Such widely held names as Apple, Tesla and Google offer tokenized versions of their stock. But still, that could be an order-of-magnitude undercount.
"There are far more private and far fewer exchange-traded security tokens," says Graeme Moore, head of tokenization for Polymath, a blockchain company that develops tools for digital securities. "The real figure is more like $5 billion to $10 billion."
This poses a multibillion dollar problem that continues to grow exponentially: regulatory compliance.
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