August 21, 2023
It's Monday! We know a lot of you are skeptical of bitcoin mining. Let's hear your reaction to this firm's argument for why its rigs help clean up the land.
- 🙋 Do you think it's better to fund land restoration in coal country by incinerating fossil fuel waste in a controlled way? [email protected]
Today's newsletter is 1,255 words, a 5-minute read.
🗑 1 big thing: An argument for green bitcoin mining
Stronghold's CEO Greg Beard believes that the market is undervaluing his company versus other bitcoin miners, but he thinks its thesis will be proven in 2024, Brady writes.
Why it matters: Stronghold is a publicly traded bitcoin mining firm operating in Pennsylvania that represents its work as "environmentally beneficial," because it powers its data centers by burning waste coal and reclaiming land for humans and wildlife.
How it works: Stronghold describes itself as vertically integrated.
- The two pieces of the bitcoin mining equation are electricity and mining rigs. Stronghold can generate its own power and directly owns most of its own bitcoin mining machinery (the specialized computers that make guesses to decrypt blocks of bitcoin transactions).
On one level, all bitcoin miners are the same: Who can throw the most power at the problem of decrypting bitcoin blocks?
- Stronghold's differentiating thesis is that large capital investments are worthwhile if it gives a miner flexibility over its cost of power.
What they're saying: "Our whole model is based on the idea that if power prices are high [from the grid], we will generate our own power," he tells Axios.
- "If you buy machines and you're paying a third party to run them and you're buying your power from another party, what's your operational advantage?"
The intrigue: Its claim of environmental benefit is based on where it gets that power from.
- It operates two coal ash sites for a combined capacity of 165 MW, burning the waste left over from coal-burning power plants and converting it to detoxified ash that can be reused in a variety of ways.
Beard presented in front of the Pennsylvania legislature arguing that bitcoin mining has been the best way to fund land reclamation and retire piles of toxic coal ash.
- Coal ash also pollutes waterways. As such operations diminish those piles, Beard argues, pollution decreases.
The other side: Environmental groups agree that coal ash is a problem, but they have been opposed to burning it as a solution.
- "These sorts of operations threaten to increase pollution where we have seen decreases," Charles McPhedran, an attorney at Earthjustice, told Fox56 in Pennsylvania.
The bottom line: Early next year, each block of bitcoin won will earn half the subsidy in fresh bitcoin it earns now. "At some point, those that have access to a cheaper source of power ought to be differentiated in terms of margins," Beard says.
- Have a look at another bitcoin mining facility.
🍊 2. Another bitcoin miner with green claims
Speaking of bitcoin in the shade of green, another 8 MW of power will go into mining in North Sweden as part of the expanding footprint of Genesis Digital Assets, according to a statement today, Brady writes.
What we're watching: The press release said GDA "expects to utilize sustainable energy sources."
- And that it has been operational since June.
What they're saying: "We aim to lead the bitcoin mining industry by setting an example for other players by minimizing our environmental impact." Abdumalik Mirakhmedov, a GDA co-founder, said in the statement.
- Most power in Sweden comes from hydro and nuclear, giving it overall low carbon emissions.
Be smart: This Genesis is not the one that's part of the Digital Currency Group (that Genesis is a trading and lending company).
- That Genesis has a large claim on the FTX estate.
- We only mention this because GDA also has links to Sam Bankman-Fried's fallen empire: It was one of the boy billionaire's largest venture investments. Small world!
By the numbers: GDA reports it has over 400 MW of bitcoin mining capacity.
🇰🇵 3. North Korea's hacks: report
North Korea is doing a bang-up business in cyber theft, according to a report from TRM Labs, Brady writes.
- The nation's agents seem to have taken about $2 billion from investors globally (maybe more).
Details: The attackers are opportunistic and innovative. In 2022, the country's primary targets were cross-chain bridges.
- TRM estimates that North Korea has broken $200 million in cryptocurrency assets stolen so far this year, slightly more than what it took in all of 2021.
- Last year, it managed around $800 million.
The big picture: North Korea is the single-biggest thief, by far, by TRM's reckoning.
Threat level: The nation's thieves are not resting on their laurels. This year, one of their biggest exploits was against Atomic Wallet, a mobile cryptocurrency wallet that had not open-sourced its code.
- Around $100 million worth of cryptocurrency was stolen from over 4,100 individual addresses in the June 3 attack, the report states.
- Be smart: Security pros caution against using wallets that aren't open source. Open-sourcing wallets enables lots of experts to have a look at the code and find weaknesses.
After stealing the funds, hackers used a sophisticated laundering process to break the link between the stolen funds and the blockchain addresses that would later try to turn them into usable funds.
- After running the assets through a series of obfuscating transactions, they swapped them to wrapped Bitcoin on chain, sent that to the Avalanche blockchain and then redeemed that for real bitcoin on the original blockchain.
- Bitcoin is the most liquid cryptocurrency in the world and the easiest to sell for fiat funds.
- In other cases, the hackers traded through a few cryptocurrencies before settling on tether (USDT).
The bottom line: Attribution in cybercrime is always tricky. One must be very careful about claiming to know who did which exploit.
- That said, the U.S. Treasury itself has corroborated the attribution of North Korea for one of last year's biggest breaches, the theft of $620 million in assets on Axie Infinity's Ronin bridge.
🦈 4. Catch up quick
🌪️ A federal judge affirmed the Tornado Cash sanctions, setting up an expected review by the Fifth Circuit Court of Appeals. (Blockworks)
🌅 NFT platform Recur is shutting down, citing "unforeseen challenges." (The Block)
💪 The SEC moved to appeal the Ripple ruling. (Bloomberg)
😱 Be smart: When bitcoin falls a bit, meme coins fall a lot. (Decrypt)
🤬 5. Culture hash: Beware real names
The hosts of this new podcast are warning followers that SIM swapping is on the rise again, Brady writes.
Be smart: SIM swapping is when cyber criminals— by tricking or conspiring with insiders at a mobile provider — steal someone's mobile phone number as a way to go after their crypto assets, and maybe even their bank account.
- I was SIM swapped in 2019 but I had crazy passwords and two-factor authentication on everything, so they got nothing.
What they're saying: "In 2023, if you work in crypto and you use your real name and you are on T-Mobile, I find it hard to feel bad for you," Evan Van Ness, one of the hosts of Web3 Builders, says in the clip above. "You are almost to blame at this point."
- Reader, I was on T-Mobile when I got hit (I still am).
- Of note: T-Mobile does offer SIM protection, and reportedly added a new protection feature in December.
Flashback: Twitter started as a service that allowed people to post updates about their lives to the internet using text messages (true story!). In fact, even as hardly anyone still used SMS to tweet (I still did sometimes), the feature stayed active.
- That is until then Twitter CEO Jack Dorsey got SIM swapped.
Be smart: SIM swapping is bad but to a certain extent it's not really the mobile provider's fault.
- Telecoms set up a very nice communication network. It's your banks and other service providers who decided to use it as an identity layer.
Zoom out: Web3 Builders is a new podcast on people trying to make "the new internet economy of tomorrow" work for folks.
This newsletter was edited by Pete Gannon and copy edited by Carolyn DiPaolo.
⚠️ This veteran trader told us not to worry about the long-term bitcoin bull market unless the price falls below $25,000 for seven to 10 days, but we are getting close to hitting Day One! —C & B