I’ve tried various ways to convince my Dad, a typical Chinese boomer, to allocate part of his hard-earned money into bitcoin, but most of my pitches have failed badly.
For thousands of years in feudal society, the Chinese have a natural inclination to believe in authoritarian power, considering political leaders as head of the family. My pitch of “self-sovereignty” is not just quirky but too wild for my Dad’s generation.
This post is part of CoinDesk’s 2020 Year in Review – a collection of op-eds, essays and interviews about the year in crypto and beyond. Dory DeGeneres grew up in China and works as a VC in the cryptocurrency industry.
Thanks to the economic miracle of the last 30 years, China’s M2 (a measure of money supply) expanded massively and average household income and social wealth grew even more dramatically. Living standard doubled every seven years for the last 30 years. So the pitch to fight inflation does not work, too.
The inflection point came when my Dad saw the news on how Chinese regulators snapped their fingers and halted Ant Group’s initial public offering (IPO) at the last minute. Like many other average Chinese middle class people, he noticed that an admired self-made entrepreneur like Jack Ma is simply nobody in front of authority. If the mighty Jack Ma can fall like a leaf, it’s clearly almost impossible to preserve generational wealth in a guaranteed way. Many of the super-rich in China have been paying financial media NOT to report their wealth status because being loud can easily lead to being shut down violently.
We may argue there is merit in regulators trying to prevent a potential negative chain effect of high-leveraged lending products in the case of Ant Group, but it also reveals that you simply can’t protect your wealth against authoritarian seizure, regardless of political system. U.S. sanctions are another form of seizure, framed in a politically correct way, weaponized under U.S. diplomatic tactics. So at the end of the day, you can only pray political leaders will adhere to what they promised: The private property of citizens is inviolable. They’ve written down such promises in the law, but is the law immutable? Can the law be 100% enforceable? What if they place the rule of man above the rule of law?
With more governments around the world joining the camp of nationalism, brewing strong handed leaders and populist administration, the rise of the bitcoin class is inevitable. This class not only possesses common socioeconomic status, but also common thesis towards life and liberty. Most importantly, the wealth accumulated by this class will not be redistributed by social turmoil such as wars, revolutions and any potential authoritarian seizure. Every 50-100 years, the social structure is shuffled, social mobility cycles through.
The bitcoin class will be immune to all these and quietly pass down generational wealth. For the first time, the division of classes is not by level of income, occupation, or any peer recognition, but by a string of binaries in your cold storage that only you can sign and prove. I can foresee this class to be an unique, shadow power in decades to come, influencing all aspects of social movements and public policies. They live independently, unite whenever necessary. It’s a meta-sovereign class that’s enabled by bitcoin, the cohesion of this group transcends race, language, nationality and religious belief.
We are living in a bizarre world. Central bankers keep printing till eternity. Society is bifurcated. And consensus is impossible to reach. Privacy is traded for convenience. The coronavirus experience tells us something maybe everybody can agree on: we all deserve a better government.
But instead of hoping for a better government or a fairer system, when mostly likely we will be repeatedly disappointed, why not make a conscious decision to opt into the bitcon class?
This is my only working pitch to my Dad, and, recently, he finally opted in.
Until recently, Power Purchase Agreements, or PPAs, were something relatively few companies had ever heard of, and still fewer were interested in acquiring them. Now, they form a vital part of a company’s eco-armory.
Around 15 years ago, many companies could have put any green-sounding statement or series of platitudes on their Environmental, Social and Governmental (ESG) webpages, pepped it all up with a little carbon offset and bingo: they could consider themselves as green as the next multinational.
But as environmental awareness grew, and people started doing the sums on how long trees had to be in existence to genuinely deliver the carbon offset, it became clear that such gestures would no longer cut the mustard, let alone cut any carbon emissions.
Then, around 10 years ago, Renewable Energy Certificates (RECs) made their way onto the ESG agenda. RECs mapped out how much renewable energy was being created, and these certificates became tradeable items that started generating revenue for genuinely green projects.
From merely words, RECs suggested payments and real actions, with solar farms being set up on the back of those payments. They focused on the energy production and not the carbon.
Buying RECs (see my earlier article on this) meant you were able to claim, with some justification, that you had used green-equivalent energy.
But as time wore on, some of the people in the energy community started to feel that RECs, too, were some kind of greenwash.
Depending on how you saw their accountability and philosophy, they could be a great thing, a step in the right direction or, as some maintain, deeply misleading.
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As this recent Times article (below) shows, there is no doubt that energy commentators in the media now openly question the inauthentic nature of the ubiquitous REC.
Eighty pence per megawatt-hour isn’t very much to call a carbon-rich, sulphur-laden output of fossil-derived energy “green”. It smacks of what arch climate sceptics like Nigel Lawson in the UK term “carbon indulgences”, an analogy with how the church in the 16th century accepted money for pardons of sins committed.
And so in the last few years, many companies have looked to something more authentic that will help them differentiate themselves from the carbon-intensive industries of old.
Leading this quest has been Google GOOG . Perhaps unsurprisingly, it has two things that have helped it concentrate the mind around this issue.
Firstly, a truly massive budget with which to attack the problem.
Secondly, it has had to manage an awkward truth. Running a car may be an obvious act of carbon emission, but looking up the route you plan to drive on Google Maps is a carbon-intensive process, too. As more of our activities have shifted to the cloud, more and more carbon is being released, making the cloud a highly carbon-intensive place.
Taking CO2 out of the cloud
In dealing with this issue, Google set about taking on green energy by means of Power Purchase Agreements (PPAs).
These are long-term agreements with power producers that guarantee the provenance of the electricity a company is buying.
In many cases they are used to set up and maintain large solar power plants in places like Bridgeport, Alabama, and Clarksville, Tennessee, to deliver huge amounts of electricity. Where possible, Google co-locates its data centers near these solar farms to reduce any transmission headaches.
The signs are that where Google has gone, others are surely following.
A large university, a big water plant, a metropolitan area, or anywhere with big buying power may be tempted to create a PPA; one that guarantees the energy is not just “green lite”, but is genuinely green.
There can be no doubt that the claim is many times more persuasive than relabeling fossil energy green with the help of a cheap REC.
But, as ever with the story of green energy, things are never quite as simple as they seem.
The original PPAs
The idea of buying electricity directly from the generation station itself isn’t new.
PPAs started when big consumers of electricity would buy their electricity in three-phase form, for industries like aluminum smelting, which consumed truly eye-watering amounts of energy for blast furnaces to melt blocks of aluminum ore.
Such industries found they could save equally large sums of money by going straight to the producer and cutting out the retail layer.
These arrangements certainly work if you are smelting aluminium. They require taking on a large part of the responsibility of measuring and managing your usage, because as a PPA owner or offtaker, you take on the responsibility of balancing the grid.
In fact, in Australia, one of the main functions of aluminium smelting is precisely this: as a tool to balance the grid, and for this reason the industry receives a lot of cheap electricity. Of course, due to the nature of the production process, the power cannot be turned off for more than 4-5 hours otherwise the liquid aluminum solidifies and wrecks the plant infrastructure.
So a PPA isn’t just a bulk order of your favorite type of electricity. It’s a partnership with the grid whereby you enter into a symbiotic relationship with the generator system.
It takes a long time to sort out the procurement contract, and the costs of creating the contract are not insignificant, either. Typically, accounting and advisory firms will take a number of months to hammer out a deal that gets signed off by both parties.
But the evolution of a PPA in the modern carbon-conscious economy is an interesting development, and it brings a very strong statement of environmental intent to any company that wants to use one.
Take the following example: Breweries in the US spend in excess of $200 million on their electricity every year. Not surprising when you think of the processes involved.
Heating up liquids, chilling them, compressing air, refrigerating the final product – all of that takes energy. And many of their drinker customers like their beer maker to show wholesome credentials on carbon. So it makes sense for a brewery to build or sponsor some renewable energy resources, like a wind farm or a solar farm, or both together.
A wind or solar farm might provide a large percentage of the brewery’s power, and instead of paying an electricity bill every month, the brewery can create an investable amount of money that funds the building of their own solar and wind farms in the first place.
In this case they would have invested in a physical PPA because they own the generating asset. They could, of course, pay someone else to own the generating assets and make their arrangement a financial commitment rather than a physical one.
A deal like this would be called a financial or virtual PPA (see earlier article), as opposed to a physical one.
So far, so simple.
But as we’ve learned, that power needs to be backed up by a baseload component. In Google’s case, it’s nuclear. (Though they tend to refer to this somewhat euphemistically as carbon-free thermal).
If you’re a brewery in Western Australia, it would be coal-fired power. Whatever it is, you’ll need something that will drive the plant, the factory or the office in the dark winter months when there is no wind. That component comes as a cost because it’s usually the electricity everyone else wants, too, at that particular time, and there are various ways to secure it for when that time comes.
Buying the baseload for a PPA
Delivering to the PPA when the power from your wind farm isn’t producing the kilowatts, calls for an arrangement known as sleeving.
Rather like BYO (bringing your own bottle to a restaurant), you won’t, of course, pay for the bottle you’re taking along, though you might pay a corkage charge for using the restaurant facilities. You might also need to buy an extra bottle from the restaurant at full price if you don’t judge the quantities correctly.
Sleeving arrangements are almost always necessary because few organizations have the necessary battery storage to manage through the shortages.
But whatever the nature of the contract, it’s clear PPAs allow you to sponsor real renewable energy and claim a strong standard of green energy consumption.
PPAs trickle down
Like many services that were once the preserve of big corporations, over recent years PPAs have been gradually working their way down to smaller and smaller types of organizations.
It’s not uncommon for a company with a much lower turnover than could ever normally qualify for a PPA to become interested in acquiring one. After all, why should only the big companies have the cleanest energy?
Thanks to the advent of blockchain technology, it’s possible to accommodate this.
The process is simple. You take the big contract that is a PPA and you simply split it, or “tokenize” it, into smaller units. This means there’s effectively no limit on how small the units of energy or the length of time can be. And because there’s now a secondary market for PPAs, you can on-sell your power agreement after your company’s circumstances change.
The other development is that the provider of green energy no longer has to be a recognized solar or wind farm. It can be a collection of rooftops in a peer-to-peer energy sharing scheme.
The brewery discussed above can even create a tender with its local neighborhood to supply a micro PPA. There can be benefits in kind, and a variety of bells and whistles that make such an agreement an attractive proposition, even possibly a go-to solution in the future.
While these forms of arrangements are just in their infancy, it’s possible we’ll be seeing much more of it in the coming years.
But a few things are certain. Green energy has come a long way since the days of the platitudes and carbon offset, and the tokenized PPA – for the moment at least – looks set to be the way forward.
Every Friday, Law Decoded delivers analysis on the week’s critical stories in the realms of policy, regulation and law. Law Decoded will be going on a break next week for the holidays but will return in the new year.
As the holidays loom, Bitcoin has been shattering all-time highs. For reasons why, consult Cointelegraph’s markets coverage. I honestly never know. Maybe with the act of Christmas shopping taking place behind the computer, people have turned to Coinbase instead of Amazon. Or maybe the threat of the Treasury demanding reports from exchanges interacting with self-hosted wallets has people trying to move as much fiat into crypto and then off of exchanges as possible.
In broader legal news, we may well be entering a new era of trust-busting in tech. Major names like Amazon, Facebook, Apple and Google have been on thin ice for a long time, but new laws on competition in the EU and new antitrust suits and investigations in the U.S. this past week are the culmination of long-term concerns from lawmakers and regulators.
The relationship between government attitude towards those colossal tech firms and crypto is, as always, an open question. It has always struck me that, particularly on issues of consumer data use and monopolistic practices, the great majority of the crypto industry benefits from lawmakers scrutinizing the huge platforms. Open-source software distributed across nodes avoids such problems using tools that are technological rather than legal.
Coinbase leads the charge to go public
Yesterday, leading crypto exchange Coinbase announced that it was working with the Securities and Exchange Commission to move forward with taking the firm public.
The firm said that it had submitted a draft of the S-1 form required to begin public trading. That form, however, remains confidential, so details are correspondingly limited, and the firm has maintained a notoriously tight ship as far as any informational leaks reaching the public — especially about going public.
One of the biggest names in crypto, Coinbase has long been a major candidate for the first real crypto IPO. In a strange fluke, the Chinese mining firm Canaan Creative managed to go public on the Nasdaq last year, but has not done the industry particularly proud. Coinbase, on the other hand, is in many ways a typical San Francisco tech unicorn, with a longstanding reputation for complying more stringently to U.S. regulations than many figures in crypto would like.
At the same time, the draft registration is currently in the hands of the SEC. Even in the best of times, the commission has been known to stall on crypto decisions. A recent boom in IPOs may have drawn Coinbase into publicizing its work on an S-1, but with the holidays approaching and a number of scheduled change-ups in the SEC’s leadership, a Coinbase IPO is unlikely to sneak up on us.
Robinhood and the not-so-merry SEC
Straddling the line between traditional equities broker and scrappy fintech, Robinhood may have found itself in a legal jam.
This week, Robinhood paid out $65 million to the SEC to settle charges that the firm had misled customers as to how good of a deal they were getting with the “commission-free” platform. As with many SEC actions, those charges relate to old offenses, dating to between 2015 and 2018. The SEC’s enforcement apparatus takes a while to get in motion.
More ominous for Robinhood may be a pending case from Massachusetts securities regulators, which apparently takes issue with how trading is “presented as some sort of game that you might be able to win.”
Robinhood’s appeal has always been in how it makes investing simple and approachable. It markets itself especially to young people, many of whom may have zero experience with investments, but who appreciate the platforms gamification of investments, including equities and cryptocurrencies. A legal objection to making investment friendly seems like a fairly existential threat to Robinhood’s business model. But, then again, nothing has happened yet with that case.
Federal Trade Commission wants answers from social media heavy hitters
The FTC recently sent out a round of orders to nine of the largest social media platforms, demanding answers for what they are doing with user data.
Though the FTC says that the orders are not part of any active case, and the commission has the authority to request information from firms, the action is part of a rising tide of suspicion toward major platforms.
As mentioned above, and as Cointelegraph has reported previously, the mystery behind social media monetization is maybe its most damning feature. During disputes over data moderation practices — which reached a fever pitch around the time of the 2020 presidential elections — revealed a pretty gaping hole in the conversation. Namely, nobody knows how these platforms are making decisions that affect what billions of users see. CEOs can shunt blame off onto algorithms that they can keep confidential under industry protections.
Though the FTC will not be publicizing the results of these orders, there is little doubt that we are witnessing a sea change as to what giant social media can get away with.
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