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The congressional hearing hilariously titled “America on ‘FIRE:’ Will the Crypto Frenzy Lead to Financial Independence and Early Retirement or Financial Ruin?” is the gift that keeps on giving. NewsBTC already analyzed some aspects of it, but Peter Van Valkenburgh’s testimony merits an article on its own. The Director of Research at Coin Center got several important ideas on the record, and we’d better register and remember them.
The previous article’s introduction still stands:
The U.S. Congress Oversight and Investigations Subcommittee held a hybrid hearing on Bitcoin and cryptocurrencies. The institution summoned Alexis Goldstein, Director of Financial Policy for the Open Market Institute, Sarah Hammer, Managing Director at the Stevens Center for Innovation in Finance, Peter Van Valkenburgh, Director of Research at Coin Center, and others.
Related Reading | New 2021 FATF Crypto Guidelines Labelled as Mass Warrantless Surveillance
Since we at NewsBTC already did the job and covered the ridiculous statements of Representative Brad Sherman, it’s time to give the mic to someone more qualified and informed. Let the record reflect that a full video of the whole hearing is not available at the time of writing and that we’ll base our report on everything we could find on the open Internet.
U.S. House of Representatives, “We have the #Bitcoin Lightning Network to bundle millions of transactions without a meaningful increase of energy” – @Valkenburgh pic.twitter.com/xXy9lCqAXN
— Documenting Bitcoin 📄 (@DocumentingBTC) June 30, 2021
Luckily for us, Documenting Bitcoin preserved the best bit of Van Valkenburgh’s presentation. The Director of Research at Coin Center sets everything up by explaining why and how the Bitcoin network is censorship-resistant.
“… we have the advantage of knowing everything that the peer-to-peer ledger tells us. It’s shared and open, it’s not a proprietary standard from a corporation. And the peer-to-peer ledger shows us how much work these miners are performing to make sure that transactions get in blocks and they’re not censored by some third party or some government that wants to coerce certain transactions or block certain transactions. It’s this vibrant competition between miners that guarantees that the miner cannot form a cartel, and choose to systematically exclude certain persons from this financial system.”
To complete this idea, let’s quote Van Valkenburgh’s own “Understanding Bitcoin’s energy use” paper.
This competition is healthy because it means that the effort spent securing the network scales automatically with the value of the transaction data on the blockchain—not the number of transactions. So the more value there is riding on the Bitcoin network (because individuals value it more as reflected in the price), the more resources will be devoted to its security.
This leads us to…
This man is a House of Representatives veteran. He knew what he was doing. Van Valkenburgh set everything up, and then he goes to the meat and potatoes of the testimony. He goes for the throat and flips the establishment’s argument about Bitcoin’s energy consumption on its head. He shifted the narrative and put a spotlight on the traditional financial sector’s known inefficiencies.
“As far as energy usage, it’s worth noting that the traditional financial sector uses an estimated five times more energy than Bitcoin. Granted, the traditional financial sector moves more money. But it’s worth noting that Bitcoin’s energy usage doesn’t scale per transaction. So, most of the costs are the fixed cost of setting up an open peer to peer system that’s robust. And we have thechnologies like the Lightning Network that can bundle millions of transactions into that existing system without a meaningful increase in energy. So, it’s possible that we can have an open financial system that’s censorship resistant using one fifth of the energy of the current financial system.”
So yeah, the Lightning Network and its wonders are registered in the U.S. House of Representatives’ record. And, even though Bitcoin’s aim is not to outright substitute the ”current financial system,” the record reflects that Bitcoin is more energy-efficient and censorship-resistant as a bonus. Lastly, it’s worth noting that “five times more energy than Bitcoin” is an extremely generous estimate in favor of the traditional sector.
BTC price chart on FTX | Source: BTC/USD on TradingView.com
The fine people at Coindesk got hold of Van Valkenburgh’s prepared testimony. In a recent episode of their “The Breakdown” podcast, they cover an altogether different area:
There are a couple of key shifts in perception he tries to make, first, around the idea that crypto isn’t regulated, that’s wrong. It’s regulated all over the place at the state and federal level. It’s just fragmented. Second, crypto is for crime: wrong again, in 2020, only 0.34% of all cryptocurrency transaction volume involved a criminal sender or recipient and remember, those numbers came from Chainalysis, an organization that a huge number of government agencies spend multiple millions of dollars with every year.
Related Reading | Bitcoin Lightning Network Sees Storm Of Activity And Adoption
This ties up nicely with the above discussed, and with this direct Van Valkenburgh’s quote:
“For every transaction we want blocked, there’s a transaction that we should celebrate for being unstoppable. Yes, there are criminals making payments on the Bitcoin network because banks won’t bank them. There are also pro-democracy activists and Belarus and anti-police violence protesters in Nigeria, taking donations on the Bitcoin network because local banks won’t bank them. For every decentralized app that’s trying to scam investors. There’s another that’s testing out ways to disperse universal basic income, will remove the corporate control over social networking, or eliminate the hacking risk inherent in centralized identity solutions.”
Suffice to say, this man went into the belly of the beast and spoke the truth. The Bitcoin movement will be forever grateful.
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