--:-- [Theme music fades out]
--:-- Sean Rameswaram: Support for Today Explained comes from the FIFA World Cup, of all things. The FIFA World Cup 26 is coming to North America next summer. It is the ultimate celebration of sports and culture. You can get closer to the beautiful game with a hospitality package, closer to the action, the best seats, the best suites, closer to match day and that world-class food and that world-class entertainment, closer to the experience of a lifetime. Book a hospitality package at fifaworldcup.com slash hospitality. And listen to The Guardian for free at theguardian.com.
--:-- Sean Rameswaram: I recently saw a good friend who I hadn't seen in a very long time. He's a level-headed guy, measured, a new father of a darling baby girl, but he told me a story that I couldn't quite believe. He told me he was at a deli or something of the sort in New York City, and he couldn't help but eavesdrop on a conversation that was going on next to him. Some day trader in a tracksuit was on the phone with his old man and just would not shut up about cryptocurrency. And the things he was saying kept getting more outlandish. I'm going to be so filthy rich when I cash out on this Bitcoin, you can't lose. I'm going to be a millionaire many times over. And it all culminated in this. The guy said to his father, Pops, you better teach the cats to drive because I'm buying a Range Rover for each one of them.
--:-- Sean Rameswaram: Now, my friend, the new father, the measured guy, upon hearing this claim that this guy was going to get so rich off of cryptocurrency that he was going to teach his dad's cats how to drive Range Rovers, what did my friend do? He immediately went home, set up a Coinbase account and bought $200 worth of Bitcoin. A few hours later, Elon Musk tweeted something about crypto and my friend's $200 vanished into the ether. It feels like every day there's some crazy, confusing news about cryptocurrency. So today on the show, we're going to try and wrap our heads around a wild year of cryptocurrency news and also dig into some arguments about some of the costs of these imaginary coins.
--:-- Sean Rameswaram: For help, we turn to Jen Vietchner. She's a features writer at New York Magazine. It's been a really interesting year for cryptocurrency. That was really different from the last few years. I mean, you had this big run up in 2017, followed by a crash that lasted a couple of years such that people could refer to it as crypto winter. It looks like perhaps we're coming out of the crypto winter and we've entered the crypto spring.
--:-- Jen Vietchner: That's right. And then you started to see some kind of funny things happening in the pandemic where I think people kind of turned back to cryptocurrency. Bitcoin blasting past the $19,000 level on Tuesday. Comes amid a record-breaking run for Bitcoin prices, which broke through the 23,000 mark. 43,000 US dollars. It reached $44,000 earlier in the day. And then this year in 2021, it really just took off. It's an all-time high moments ago. $62,000 have been breached.
--:-- Sean Rameswaram: That gets other investors really excited and they want in too. I mean, doesn't this go even further? Haven't like countries now adopted cryptocurrencies?
--:-- Jen Vietchner: Yeah, you know, we've seen in the past few weeks, there are a few different countries and jurisdictions that are really leaning into it. I mean, you saw this a few years ago with Malta kind of making themselves a Bitcoin and blockchain haven, the mayor of Miami, Suarez, Mayor Suarez, has been really, really outspoken about welcoming cryptocurrency and cryptocurrency entrepreneurs to the city.
--:-- Sean Rameswaram: Now, the iconic AAA, or American Airlines Arena, in downtown Miami will soon be replaced by FTX, named for a new cryptocurrency company. And then lately you've seen, you know, El Salvador and Nigeria making some moves saying, like in El Salvador's case, that Bitcoin is going to be a legal currency of that country. The bill says all shops, individuals and businesses are obliged to accept Bitcoin. President Nayib Bukili has touted its potential to help Salvadorians living abroad to send remittances back home.
--:-- Jen Vietchner: Interesting moves. But clearly, you know, even though in the past few weeks, the cryptocurrency prices have fallen a bit and they have sold off, there's still a lot of excitement and interest and momentum going for it.
--:-- Sean Rameswaram: So the value of various cryptocurrencies, especially Bitcoin, which I believe is the most valuable cryptocurrency, has been on like a bit of a roller coaster. Where does that start?
--:-- Jen Vietchner: So I think, you know, if you go back to the beginning of the pandemic, you kind of see Bitcoin trading around $5,000. And then you start to see something change where there starts to be a little bit more interest in Bitcoin. It's hard to know exactly, you know, where that starts. Maybe it's that they're bored. There's no sports on TV to watch. Maybe they're looking for some other types of investments. Maybe they've got stimulus cash. And so by the end of last year, you've seen Bitcoin, for example, go from about $5,000 at the beginning of the pandemic to almost $30,000 by the end of the year.
--:-- Sean Rameswaram: Is it just Bitcoin that's experiencing this sort of surge in value or is it all the cryptocurrency family as well?
--:-- Jen Vietchner: It's not just Bitcoin. I mean, you see some other cryptocurrencies start to take off as well, such as Ethereum. And then you start to see something else happen at the beginning of 2021. And that when things really start to get crazy. So the first thing that you see starting in late January of this year is the meme stock craze. Remember GameStop and AMC and people on Reddit really pushing up these stocks. But that kind of carries over into cryptocurrency where you have this maybe, you know, millennial, Gen Z or younger generation of traders and investors who are looking for new assets and quite frankly, quick and easy ways to get rich.
--:-- Sean Rameswaram: And so Bitcoin starts really, really taking off. So does Ethereum. And so does Dogecoin, which people call the meme coin or the meme cryptocurrency that's based on the Doge meme, you know, the Shiba Inu dog. And that was made into a joke cryptocurrency. I'm a believer in this. I'm not a believer in Dogecoin because I think that Dogecoin was created as a joke. And it's hard for me suddenly, David, it's hard for me to just say, well, it was created for a joke. But it's real. Right. Right? That's your answer to me? It's a joke.
--:-- Jen Vietchner: Well, I just said that. Yes. So it's hard for you to imagine it's real. That's also what you just said. Could you not mimic me? I'm not mimicking you. Different thesis, Brian? I have no different thesis. This was a joke cryptocurrency that people are suddenly taking quite seriously and looking just as seriously as they are at GameStop, at AMC. They're buying into these things saying, hey, maybe I can make money on this too.
--:-- Sean Rameswaram: But it's not just regular investors. So you also start to see at the beginning of this year, big companies backing cryptocurrencies. PayPal said late last year that they were going to start allowing cryptocurrencies as payment. The news sending Bitcoin soaring more than 7% to its highest level of the year.
--:-- Jen Vietchner: And our next guest is a crypto pro who says PayPal just gave a major stamp of approval for the entire crypto space. They've added cryptocurrency trading, and that makes it much more accessible to many, many more people. And then you have in February, Elon Musk of Tesla. The world's richest man now investing $1.5 billion worth of his company's money in the cryptocurrency. Say that Tesla is going to purchase $1.5 billion worth of Bitcoin. Tesla says it will soon let customers buy its cars using Bitcoin.
--:-- Sean Rameswaram: Why does he do that? Well, it's hard to know exactly why they chose to buy Bitcoin, but it's becoming something that has gone so mainstream that companies want to own it too. And I think it's this idea of diversifying their cash. Of course, by them doing it, it just fuels this frenzy even more. And Bitcoin really goes through the roof. And all this sort of culminates for a moment when there's hype around him hosting SNL and he proposes that he will make sketches about cryptocurrency, right? Right. Ladies and gentlemen, Elon Musk! So it's around April where Dogecoin starts going really crazy.
--:-- Jen Vietchner: I mean, this is a cryptocurrency that last year was worth a fraction of one cent. By January, it's trading around three cents. Then all of a sudden it's going to around 30 cents this spring. Around that time, SNL announces it's going to have Elon Musk host. Thank you very much. It's an honor to be hosting Saturday Night Live. I mean that. And everyone thinks he's going on the show and he's going to be joking about Doge and pumping it and, you know, talking about why it's great. And he does, to a certain extent, on SNL. You know, he jokes about it. He talks about it. He's on Weekend Update. Thank you, Michael. Well, now—
--:-- Sean Rameswaram: The Dogefather. Okay, Dogefather. So—
--:-- Jen Vietchner: You know, saying Dogecoin to the moon, which is the slang that everyone uses for, you know, these cryptocurrencies that are going to go through the roof. Doesn't that whole Weekend Update sketch end with Elon Musk admitting or conceding to Michael Che that cryptocurrency is essentially a hustle?
--:-- Sean Rameswaram: I keep telling you, it's a cryptocurrency you can trade for conventional money. Oh, so it's a hustle. Yeah, it's a hustle. Yeah, he literally calls it a hustle. And that's probably the most honest way to describe it. I mean, people are buying this just simply to get rich right now. There aren't very many places you can spend it. You certainly can't use it to buy a Tesla, as they've said. So, yeah, I mean, right now it is a hustle.
--:-- Jen Vietchner: What happens after Elon calls cryptocurrency a hustle on the weekend comedy program?
--:-- Sean Rameswaram: So the week after Elon Musk appears on SNL is probably the worst week cryptocurrency has had this year and in a while. Bitcoin fell to a low of $32,000, Ethereum $2,000 and Dogecoin $0.22. On average, that's a fall of about 50%. People weren't that impressed with his SNL performance. And then he goes on later that week to announce on Twitter that Tesla has decided that Bitcoin is bad for the environment. And he tweets that Tesla will no longer accept Bitcoin because fossil fuels are being used to produce it. Therefore, you know, its energy consumption is bad for the environment. It's encouraging the use of fossil fuels, which is not something that Tesla as a green energy company and electric car company can stand for.
--:-- Jen Vietchner: Why does he do that? I mean, why does he go from big cryptocurrency champion tweeting about it all the time, making jokes about it on SNL to all of a sudden, oh, this is bad for the environment? I mean, this is a story that's been out there for a long time. We've covered it on Today Explained. I guess he doesn't listen. I guess not.
--:-- Sean Rameswaram: You know, it's interesting because there is evidence that he was fully aware of the issues around Bitcoin's energy consumption well before this. I mean, we'd seen Jack Dorsey, who's the CEO of Twitter and Square, back in April around Earth Day, tweeting a paper that Square had published about how Bitcoin can actually incentivize the use of renewable energy. And Elon Musk had responded to that tweet saying, true. So why did he change his mind? It's not clear.
--:-- Jen Vietchner: But one thing that's interesting is that as Bitcoin has become more popular as you know, in Elon Musk and Tesla being a major contributor to that over the past few months, the consumption of energy to mine Bitcoin, which is how Bitcoins are created, has also gone through the roof. So it's increased dramatically just in a matter of months to the point where the energy required to produce Bitcoin is, you know, several times more than the energy used by all of Microsoft, all of Google combined.
--:-- Sean Rameswaram: combined. This is just to mine Bitcoin. Of course, Bitcoin's not a company. It's a global currency, a global cryptocurrency. So it's hard to compare them. But what is clear is that this year was the year that Bitcoin energy consumption really rose dramatically and very quickly.
--:-- Jen Vietchner: A lot of people think this energy consumption needed to mine Bitcoins is going to kill the planet even faster, but there are some people saying it could help. That's in a minute on Today Explained.
--:-- Sean Rameswaram: Support for today's show comes from Adio. What is Adio?
--:-- Jen Vietchner: Adio is an AI-native customer relationship management system built specifically for the next era of companies. They say it's extremely powerful, adapts to your unique data structures and scales with any business model. According to Adio, Adio takes less than a minute to set up, and within seconds you will have your email and calendars synced. You'll see all your relationships in a fully-fledged platform, they say, all enriched with that actionable data. And they say you can build AI-powered automations and use its research agent to tackle some of your most complex processes to seize so that you can focus on what matters, building your company.
--:-- Sean Rameswaram: You can join industry leaders such as Flatfile, Replicate, Modal, and so much more. You can go to adio.com slash todayexplained to get 15% off your first year.
--:-- Sean Rameswaram: This message is brought to you by Apple Card. Each Apple product, like the iPhone, is thoughtfully designed by skilled designers. The Titanium Apple Card is no different. It's laser-etched, has no numbers, and it earns you daily cash on everything you buy, including 3% back on everything at Apple. Apply for Apple Card on your iPhone in minutes. Subject to credit approval, Apple Card is issued by Goldman Sachs Bank USA. Salt Lake City Branch. Terms and more at AppleCard.com.
--:-- Sean Rameswaram: Jen, before the break, you mentioned this provocative idea, courtesy of Twitter CEO Jack Dorsey. That Bitcoin over time and today does incentivize more renewable energy. Which feels like it runs counter to arguments that have been made on this show and that a lot of people have made against cryptocurrency? Is this for real or is this just some like Jack Dorsey grew a beard and took some psychedelics kind of idea?
--:-- Jen Vietchner: Well, Jack Dorsey does have a beard. I can't speak to his drug use. But yeah, there is a really credible argument. And I think, you know, one that's even gathering steam, no pun intended, you know, for the use of renewable energy to mine Bitcoin and how that, you know, by doing so, Bitcoin and cryptocurrency could actually help incentivize renewable energy, as Jack Dorsey puts it, and accelerate, you know, the use of renewable energy for energy production overall worldwide.
--:-- Sean Rameswaram: So you mentioned in the first half of the show that right now Bitcoin alone is using many times more energy than Google and Microsoft combined. Is that right?
--:-- Jen Vietchner: That's right. What is going on with these cryptocurrencies using so much energy? Remind people who maybe don't know.
--:-- Sean Rameswaram: Yeah. So the way that cryptocurrency is produced, in particular Bitcoin, is you take all of these servers, basically like a data room. There are 1,800 servers in here. These may not look like the servers you're used to, used to those big, bulky servers. These are much smaller. They are doing nothing but calculating those difficult equations that were required in order to mine Bitcoin. And you just have the computers run because they're solving complex math problems in order to mine a new Bitcoin. It's called proof of work.
--:-- Jen Vietchner: So that is the sort of unique mechanism that makes Bitcoin very secure, but also consumes a lot of energy to produce Bitcoin. Right now, at least when Bitcoin was at its peak a few months ago, it was estimated to be using 150 terawatt hours this year. So by comparison, a company like Microsoft and Google use about 10 or 12 terawatt hours, respectively, worldwide for all of their data centers. So by comparison, Bitcoin is very energy intensive.
--:-- Sean Rameswaram: And just to compare this to like the $36 I have in my wallet that are just sitting there. Oh. Quite a different situation in terms of energy consumption. Is that an unfair comparison?
--:-- Jen Vietchner: Well, it's somewhat unfair because, you know, what about all the money printing presses that made that cash? I mean, who knows when the cash was made? The unique thing about Bitcoin is that because it's all in a blockchain, we know exactly sort of the mathematical equation of how much is being produced, which makes it much easier to estimate how much energy it's using. It's really, really hard to do that for anything else unless, you know, a company, for example, discloses it.
--:-- Sean Rameswaram: So it's hard to know exactly how much energy it's using to produce that cash in your pocket, you know, or to run all the ATMs where you get that cash in the banks. It's probably a significant amount. It's just hard to compare to Bitcoin.
--:-- Jen Vietchner: And just to be clear here, all of this energy that's being consumed by cryptocurrency presently is what, majority fossil fuel generated?
--:-- Sean Rameswaram: Actually not. I think that a big misperception for Bitcoin is that just because it's using a lot of energy therefore it's using fossil fuels. The reason that people get this wrong is because the majority of Bitcoin mining today does currently take place in China. Now China is sort of the coal capital of the world. However, because Bitcoin miners do use so much energy, they're constantly looking for the cheapest source of energy. So this is, you know, to the point where the Bitcoin miners, because they're mobile, because you can just pack them up on a truck and move them, will actually migrate to different parts of China depending on flooding seasons.
--:-- Jen Vietchner: Just so they can use cheaper energy. I mean, if you've got a flood and the dam is overflowing and they're producing so much energy you can't even use it, that energy is essentially free.
--:-- Sean Rameswaram: So how does this tie back to this argument that Jack Dorsey's making that cryptocurrency could actually further the renewable energy sector?
--:-- Jen Vietchner: Basically, in order for solar and other renewable sources like wind to be profitable, they want that energy to be consumed at a consistent rate. So the problem with wind, right, is that it's usually windy at night. And so people are consuming less energy at night. You know, if you think about it, you know, it's the morning rush. It's when people are having dinner and getting ready to go to bed that they're using the most energy. So it's inconsistent. But if you can kind of soak up that extra energy, you know, during the hours when, you know, pandemic notwithstanding, people are usually at work or people are sleeping and the lights are off, you can turn on basically flip a switch and turn on those Bitcoin miners, use that energy and makes it much more profitable for energy utilities to put in these wind installations and solar installations.
--:-- Sean Rameswaram: So essentially, you know, what's holding the back right now is just the lack of ability to be profitable. But by making, you know, this energy consumption more consistent, that allows, you know, and incentivizes these utilities to move towards renewable energy. And hey, if they can mine Bitcoin on the side, that can also help pay for it.
--:-- Jen Vietchner: It sounds nice in theory, but is it functional in practice? It's not like Bitcoin miners are only going to run their servers and solve their puzzles that propel their currencies while no one else is using energy, right?
--:-- Sean Rameswaram: Well, you can kind of control that. I mean, you can kind of make that part of the deal of, you know, we only can sell this to you at certain hours of the day when it's not needed. I mean, you saw that in Texas when they had their energy crisis just this year and there was a huge power crunch. The Bitcoin miners actually shut themselves off. In some cases, they sold back that energy to the grid so it could be used to, you know, heat people's homes.
--:-- Jen Vietchner: So you can work this in a way where Bitcoin miners can kind of be that, you know, symbiotic, you know, supplementary tool to make renewable energy more profitable and more consistent, but also be turned off when they're taxing the grid.
--:-- Sean Rameswaram: And I'm sure there's some people out there who just think there just shouldn't be any energy dedicated to cryptocurrency, that all of it should always be used to supply people with, you know, power so they can light their homes, so they can heat their homes, or in the case of Texas right now, maybe even cool down their homes.
--:-- Jen Vietchner: Is Jack Dorsey's argument that, you know, this is going to push us to renewable energies sort of bypassing the argument that maybe there are better things we can be doing with our energy?
--:-- Sean Rameswaram: Yes, I mean, it is. The biggest criticism of, you know, Bitcoin, as far as its energy consumption goes, comes from people who don't think Bitcoin should be around at all. And therefore, why should we expend, you know, even one terawatt hour on producing it? However, I think that ship has sailed. We're talking about, you know, a multi-trillion dollar industry that's out there now. That's also, you know, there's many arguments you could make for why it's worthwhile, you know, such as enabling the transfer of funds more cheaply across borders, allowing people in countries who can't rely on their government currency because it's too unstable to have a place where they can store their assets.
--:-- Jen Vietchner: But I mean, what we should be doing is having a kind of good faith argument about, okay, how can we make these industries greener, not should they exist at all?
--:-- Sean Rameswaram: Can I ask, do you own cryptocurrency? Are you trading crypto?
--:-- Jen Vietchner: I'm not trading it. I own very small amounts that I either received as a gift or bought, you know, like $5 here and there just to test out different platforms.
--:-- Sean Rameswaram: What kind of person in your life gives you cryptocurrency as a gift?
--:-- Jen Vietchner: Oh. Because apparently I don't have people like that in my life. Yeah, you know, there's a cohort of journalist friends that I have who kind of are even more into this than I am. And as a wedding gift, actually, one of them gave me like a tiny bit of cryptocurrency. But we're talking, you know, fractions as in like decimal points. Unfortunately, not nearly enough to make me wealthy.
--:-- Sean Rameswaram: Well, congratulations. Thank you. Good luck with your wedding present Bitcoin. Thank you. Yeah, it's my 0.0001 of Bitcoin, something like that. It might even be more zeros in there. You know what? It's 0.0001 more than I have.
--:-- Jen Vietchner: Hey, it's not too late.
--:-- Sean Rameswaram: Jen Vietchner is a writer for New York Magazine. I'm Sean Ramos from This is Today Explained.
--:-- Sean Rameswaram: As a heads up, there is no show tomorrow. We're off to mark America's newest federal holiday, Juneteenth. If you're confused about America's newest federal holiday, hit the Today Explained archives and look for one called Happy Juneteenth.
--:-- Sean Rameswaram: And another thing before we go, DC's hottest word right now is infrastructure. So later this summer, Today Explained will spend a whole week talking about all things infrastructure. trains, highways, toilets, maybe even childcare. If there's anything you would like to hear us cover, shoot us an email. The address is todayexplained at vox.com.
--:-- Sean Rameswaram: Again, all your infrastructure questions, the stories you want to hear, email them to us todayexplained at vox.com. Thanks. Thank you.
