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Ethereum Merge Cut Electricity Use by 99% - Cambridge Report · The Starting Block

3:15
Good afternoon and good morning and
3:17
welcome back to the starting block.
3:19
If you're just joining us for the
3:20
first time, this is the end of week
3:22
two, two weeks already of
3:23
the starting blocks. It's been an
3:25
absolutely fantastic journey since
3:26
we started things off with a
3:28
very special interview with Binance
3:30
founder CZ last week,
3:33
Monday in Abu Dhabi.
3:34
And my producer and Jordan have
3:37
been around the world, really the
3:39
last few months building up to the
3:40
launch of the show and really,
3:42
really proud of where we come in two
3:43
weeks time.
3:44
Um, if you are just joining us for
3:46
the first time, this is starting
3:48
block the blocks new daily show It's
3:50
a segmented show. We've got three
3:51
sections of this show We start off
3:53
with the block briefing which is a
3:55
quick rundown of the biggest news in
3:57
the last 24 hours Then we move
3:59
into the market pulse segment where
4:01
we chat everything markets with
4:03
uh analysts and big names in the
4:05
industry And then we move on to the
4:06
final section of the show the hot
4:08
seat where we dive into
4:10
a longer form interview with
4:12
big newsmakers and and the
4:14
biggest names in the industry.
4:16
It's a great pleasure to have you
4:17
here. If you don't know who I am, my
4:18
name is Gareth Jenkinson, head of
4:20
multimedia at the block and the host
4:21
of the show.
4:23
Today, we have a very interesting
4:25
show ahead of us.
4:26
We've got Coinbase, UK's
4:29
country director joining
4:31
us on Market Pulse, and
4:33
then we'll be moving on to a new
4:34
report into
4:37
Ethereum's electricity consumption,
4:38
which has come out of the Cambridge
4:40
Center for Alternative Finance.
4:42
We'll be chatting to a good friend
4:43
of mine. Alex Neumuller,
4:45
who heads up their research there.
4:48
So really looking forward to the
4:49
show, but first things first, we'll
4:50
start off with the block briefing
4:51
and get into the top news of
4:53
the last 24 hours.
4:56
First off, this is quite a big one,
4:57
a big personal news out of Coinbase,
5:00
Chief Legal Officer Paul Gruel is
5:02
stepping down after roughly six
5:04
years at the exchange.
5:06
Gruel was the man in the trenches
5:07
during Coinbase's multi-year
5:10
courtroom battle with the SEC.
5:11
Which sued the exchange back in
5:13
2023, a fight which
5:15
Coinbase ultimately won.
5:17
He also helped take the company
5:19
public in 2021, steered
5:21
its move from Delaware to Texas
5:22
and pushed for the genius and
5:24
clarity bills.
5:25
Per an SEC filing, he's
5:27
out effective July 31,
5:29
moving into a three month advisory
5:31
role and will stay on the board
5:33
of the Coinbase National Trust.
5:35
In his words, now is time
5:37
for some new adventures.
5:39
If you missed it, we actually sat
5:41
down for a really great interview
5:42
with Paul during Consensus
5:44
in Miami a couple of months ago.
5:46
If you're interested in going back
5:47
and watching that interview, we had
5:49
a really fascinating conversation
5:50
about all things policy in the US,
5:53
everything from prediction markets
5:55
to his overall thesis on
5:57
Bitcoin and the
5:59
future of the industry.
6:01
You can find that on the Blocks
6:02
YouTube channel.
6:03
Just scroll a little bit down the
6:05
video timeline there and you can
6:06
find the interview. Otherwise, I
6:07
will share it a little bit later
6:08
this afternoon.
6:09
And if you don't already, please go
6:11
ahead and subscribe to the
6:13
Blocks YouTube channel.
6:14
We're putting out as much content as
6:16
we can daily.
6:17
Moving on to our next headline this
6:19
afternoon.
6:20
Polymarket wants to bring leverage
6:22
to prediction markets in the U.S.
6:24
And fully regulated.
6:26
Filings in the National Futures
6:27
Association's basic system
6:29
show Polymarket affiliated entity
6:31
Coming Home GBA has applied
6:33
for futures commission merchant
6:35
registration through PM Derivatives
6:37
LLC.
6:38
With the main paperwork submitted
6:40
on the 3rd of July.
6:42
If all goes through, users could bet
6:43
on real world events with only a
6:45
fraction of the usual capital
6:47
upfront.
6:48
There is one catch, fully enabling
6:50
leverage trading still needs sign
6:51
off from the CFTC.
6:53
The block has reached out to
6:54
Polymarket for comment here, but the
6:55
direction of travel here is clear.
6:57
Prediction markets are going
6:59
institutional.
7:01
Then onto our next story.
7:03
Mara Holdings caught a serious bid.
7:05
Shares jumped around 14%.
7:07
After the NASDAQ listed minor
7:09
unveiled plans for a massive new
7:11
campus in Texas.
7:12
This was a story we also spoke about
7:13
yesterday before this big
7:16
jump in share price.
7:17
The company is acquiring a 1200
7:19
acre powered land site with
7:21
up to two gigawatts of grid capacity
7:23
earmarked for both high performance
7:25
computing and Bitcoin mining.
7:27
And note the structure, it's not an
7:29
upfront purchase, but up to
7:31
$600 million in milestone
7:33
based payments tied to regulatory
7:35
approvals.
7:35
Power access and crucially signing
7:38
a data center tenant.
7:39
It's the latest sign of miners
7:41
pivoting hard into the AI
7:42
infrastructure story with the market
7:44
clearly rewarding that
7:46
move.
7:47
And staying in the U.S.
7:48
In Washington, the fight over empty
7:50
seats at the CFTC
7:52
is now tangled up with crypto
7:54
legislation.
7:55
The White House has pushed back
7:57
against Senate Democrats.
7:59
You say the administration is
8:00
refusing to appoint commissioners to
8:02
key regulatory agencies.
8:04
A dispute that's become a real
8:05
hurdle for the landmark crypto
8:06
market structure bill.
8:08
In a letter to Senate leaders,
8:10
Toon and Schumer,
8:12
White House officials said they
8:13
wanted to set the record straight
8:15
claiming Democrats have obstructed
8:17
every civilian nominee while Trump
8:18
has still put Democrats forward for
8:20
key posts.
8:21
Bottom line for crypto here, until
8:23
the CFTC standoff eases,
8:25
the bulls path stays complicated.
8:28
Then a big check in crypto
8:30
infrastructure, Gauntlet, the crypto
8:31
yield curator, founded by
8:33
Tarun Chitra has raised
8:35
$125 million in a
8:37
Series C with Japan's SBI
8:39
holdings, the sole investor
8:42
through its US subsidiary.
8:44
And SBI is on a spree.
8:45
Earlier this week, it was also the
8:47
sole back of EDX Markets
8:49
$76 million Series C.
8:52
Gauntlet plans to use the fresh
8:53
capital to push stable
8:55
coin coverage, rather, beyond the
8:57
dollar and the euro, adding the
8:59
Mexican peso, Japanese yen,
9:00
and more.
9:01
Plus new on-chain offerings and a
9:03
bigger global team with AI-supported
9:06
operations.
9:08
Then fresh this morning, Revolut is
9:10
jumping on the Agentech trading
9:11
wave. The FinTech has connected its
9:13
standalone crypto exchange, Revolut
9:15
X, to third-party AI
9:17
assistance, including Claw, Gemini,
9:20
OpenClaw, and Cursor, letting
9:21
customers analyze markets, monitor
9:23
portfolios, and place trades using
9:25
plain natural language prompts.
9:28
There's no coding required.
9:29
Users can pull real-time market
9:31
data. Set custom price alerts,
9:33
place market and limit orders, and
9:35
even subscribe a whole trading idea
9:37
like a grid strategy and have
9:39
the assistant handle it all
9:41
without opening the Revolut X
9:44
app.
9:45
AI agents talking directly
9:47
to exchanges, this trend is
9:49
definitely accelerating fast.
9:51
If you wanna catch up with more
9:52
news, you can go to the
9:54
Blocks website, that's theblock.co,
9:56
and you can find all of these
9:58
stories and more.
9:59
On our website.
10:00
We're going to take a very short
10:01
break and then we're going to be
10:02
moving on to the Market Pulse
10:04
segment.
10:05
Don't go away, we'll be right back.
13:04
Welcome back to the starting block.
13:06
We are moving into the
13:08
market pulse.
13:09
And today we have Keith Gross,
13:12
who's the Senior Country Director at
13:13
Coinbase UK.
13:15
And there's been some big news out
13:16
of the UK and
13:18
Coinbase as they secured a license
13:20
to offer derivatives and equities
13:22
trading. So that's really why I've
13:24
got Keith on the show today.
13:25
First things first, Keith, thanks so
13:27
much for joining us.
13:28
How are you today?
13:29
Great. Gareth, I'm excited to be
13:30
here. Thanks for having me on the
13:31
starting block. It's awesome to be
13:33
you. I'm joining you from London as
13:35
well, in case folks didn't know.
13:37
Yeah, beautiful.
13:38
Give us a TLDR on this story.
13:40
You guys have got a license to offer
13:42
derivatives and equities.
13:44
How much does that change for
13:45
Coinbase in the UK?
13:47
Yeah, I mean, so I think this is
13:48
a much bigger deal that people who
13:50
don't follow regulatory details
13:52
would understand MIFIs
13:54
all around financial instruments,
13:56
traditional financial instruments.
13:57
So this is basically Coinbase
13:58
saying, hey, we can open up our
14:00
offering in the UK to
14:02
include much more instruments,
14:04
particular derivatives and equities.
14:06
And so we'll be offering derivatives
14:07
for professional users and we'll
14:09
bring equities to both professional
14:10
and retail users.
14:12
And part of the reason for this is
14:14
right now in the UK, when you talk
14:15
to the average person on the street,
14:17
they have typically traditional
14:18
banking app, maybe a video bank,
14:21
a brokerage app, then a crypto
14:23
app. And we're trying to become the
14:24
everything exchange and bring more
14:26
and more of that into Coinbase.
14:27
And I think it's a great way for
14:28
people that are, you know, to get
14:30
their first introduction to crypto
14:31
while also touching traditional
14:32
financial instruments as well.
14:37
Yep.
14:43
So we've been building all the time
14:44
that we've been applying for the
14:45
license. So I think you'll see,
14:47
you'll watch this space in short,
14:49
you'll be seeing these products roll
14:50
out very, very soon.
14:52
I think you're moving into a
14:53
territory that the likes of eToro
14:55
have been kind of playing in for
14:57
some time, muscling into
14:59
a very competitive
15:01
landscape.
15:03
Obviously, Coinbase has size and
15:05
scale and experience building up
15:06
these services, I guess, in the
15:08
US as well.
15:10
How quickly do you want to be
15:12
chasing on the heels of your
15:13
competitors in that market?
15:15
Well, I mean, I think the reality is
15:17
whether you're starting in crypto
15:18
and moving into traditional finance
15:20
or going the opposite direction,
15:22
just the range of features that
15:23
consumers want now means that you
15:25
have to widen your product strategy.
15:26
And so I do think you're seeing this
15:27
convergence is coming at it from
15:28
different angles.
15:30
We want to be really competitive.
15:31
Ultimately, we want to the best
15:32
place for you to do things around
15:34
crypto.
15:35
And that means for us things like
15:36
equities, we're going to launch them
15:38
fee free, start with as low as one
15:40
pound, 24 or
15:42
five trading hours, like we're gonna
15:44
try and Really.
15:45
Offer a great off out of the bat
15:47
offer.
15:48
And part of that is because our goal
15:49
here is to offer a whole range of
15:51
products not to make as much money
15:52
as possible in any one product like
15:54
we want to be the place where users
15:55
start to build their financial
15:56
lives. So in short, yeah,
15:58
we're here to compete.
15:59
It's going to be a fun, fun few
16:00
years.
16:02
I'm sure it will be.
16:03
When it comes to actually like
16:04
custodying these equities and stuff,
16:06
what does that look like in the
16:07
background? I mean, I know the end
16:09
user using your app or the
16:12
actual web browser app
16:15
might not really care too much,
16:17
but at the end of the day, people do
16:18
wanna know if I'm buying some Tesla
16:20
stock, is that actually
16:22
representative of the stocks
16:23
themselves?
16:25
Yeah, a hundred percent.
16:26
These are not any sort of
16:27
representation or derivatives.
16:29
You're buying from a licensed U S
16:30
custodian.
16:31
You own the shares.
16:32
They are in your, your account name.
16:34
Um, and so, yeah, this is just like
16:36
any other sort of fully licensed
16:38
Hargreaves lands down or interactive
16:40
brokers type of offering.
16:42
You've been at Coinbase, you were
16:43
telling me all fair. Coinbase for
16:44
two years now, and the
16:46
UK is a very interesting place.
16:48
My folks are from the UK, they live
16:50
in the UK.
16:52
And my mom was actually dealing with
16:53
moving some assets off
16:55
Luno, which has decided to leave
16:57
the market in the U.K.
16:59
I do get the sense from
17:01
people in the u.k.
17:02
That the environment there
17:04
is still fairly difficult
17:06
for out and out crypto service
17:09
providers to operate.
17:12
What's your general experience now,
17:14
having been there for a while, and
17:15
what do you think of the
17:17
directionality here?
17:18
So I think you just have to learn
17:20
how to operate in the local market.
17:22
UK has very strong consumer
17:23
protections, things like consumer
17:25
duty and the financial promotions
17:26
regime don't exist anywhere else.
17:28
And so you do have to really build
17:30
local presence, build a product that
17:32
fits the local market.
17:33
But I think the advantage here, and
17:35
we're on that journey as well,
17:37
is the UK is going to be one of the
17:38
first places to offer a full crypto
17:40
license. This is going to like
17:41
Clarity Act in the U.S.
17:43
It's coming out October of this
17:45
year. The final rules have been
17:46
released.
17:47
We're looking forward to going through
17:48
that process early.
17:49
The UK is taking crypto seriously.
17:50
And so I think it is still a really
17:52
important market.
17:53
It's a great place to be an
17:54
operator, but you can't dip your toe
17:56
in or operate from outside of the
17:57
market. It's just not going to work.
17:58
You have to build a UK product that
18:00
fits UK users.
18:01
Um, and I do think it's, there's a
18:03
lot of opportunity if you do that,
18:04
right, because the UK as a
18:06
population is still early on its
18:07
journey in crypto.
18:08
Only about 7 million Brits have ever
18:10
purchased crypto or used crypto out
18:12
of a population of close to 70
18:14
million.
18:15
So you're talking about 75, 80% of
18:17
the population that I think over the
18:18
next decade is going to touch crypto
18:20
for the first time.
18:21
And so I think that's the opportunity
18:22
you're playing for.
18:23
But yeah, it is a place where you
18:25
have to take really seriously how
18:26
you operate given the rules and
18:28
regulations here.
18:29
We've got you on the market pulse.
18:30
I definitely want to get a sense of,
18:32
you know, like the retail consumer
18:34
appetite for crypto in the
18:36
UK right now.
18:37
What is your data on
18:38
platform kind of telling you
18:40
are volumes down?
18:43
Is it reflecting the kind of
18:45
state of the market at the moment
18:46
with Bitcoin sort of hovering just
18:48
above the $60,000 mark?
18:51
Yeah, it's interesting.
18:52
I mean, I think definitely the
18:53
average trading volume matches asset
18:55
prices. So you do see trading volume
18:57
suppressed as asset prices go down.
18:59
But that is very split between
19:01
really advanced traders and average
19:02
consumer traders. On average,
19:04
consumer traders volume is down
19:05
advanced traders are
19:07
trading like crazy because they will
19:09
figure out strategies to make money
19:10
in both up and down markets.
19:12
And the UK I think actually in terms
19:14
of the types of assets users are
19:16
looking for very much mirrors the
19:17
U.S. Right a lot of blue chip
19:19
trading.
19:20
Up and coming platforms.
19:22
There's also long tail access via
19:24
DEXs and other types of product
19:26
offerings. And so I think you're
19:28
seeing that whole range be touched,
19:29
but a lot of users still focus on
19:31
the blue chip assets.
19:32
And then you do see trading volumes
19:34
vary with asset prices more
19:35
generally.
19:36
But I think we're all going to see
19:37
where the market goes going from
19:38
here, right?
19:40
Yeah, I mean, I've been speaking to
19:41
lots of experts and analysts over
19:43
the last few months and some people
19:45
have been saying maybe we'll see a
19:47
true bottom by October, but
19:49
obviously that's not any sort of
19:51
proper advice or anything.
19:53
That's just the anecdotes that I'm
19:54
getting from people.
19:55
My final question to you,
19:57
Paul Grewal is
19:59
stepping away from Coinbase.
20:00
That was big news.
20:01
We sat down for an interview with
20:02
him about close
20:04
to two months ago in consensus
20:06
in Miami.
20:08
It's a bit of an end of an era.
20:09
He's done so much for not only
20:11
Coinbase, but I think the crypto
20:12
industry in general, especially in
20:14
the U.S., fighting the good fight,
20:17
you know, upstairs in the halls
20:18
of government.
20:20
What's the general sentiment at
20:21
Coinbase with his departure?
20:23
I think the general sentiment is
20:25
people standing up to salute a
20:26
legend. I mean, Paul has done
20:28
amazing things in the six years.
20:30
And I think as you say, he's become
20:32
like a very serious and well
20:34
respected spokesman for the
20:35
whole industry.
20:36
And I Think a lot of people don't
20:38
give both Coinbase as an
20:39
organization, but people like Paul
20:41
as an individual credit for what
20:42
they did in going to battle with the
20:43
SEC and really getting regulations
20:45
passed. And they're a big reason why
20:47
the crypto ecosystem has turned
20:48
around in the US.
20:50
And so I'll let Paul share more
20:51
about what his next plans are.
20:53
But I think, you know, he's still
20:54
going to be a loud voice on X.
20:56
He's still gonna be fighting for the
20:57
industry. And so, I think Coinbase
20:59
is sad to see him go, but we're also
21:00
sort of signing off a legend as
21:01
well.
21:02
Yeah, definitely.
21:03
Keith, thanks so much for taking the
21:05
time to chat to us on The Market
21:06
Pulse. We will definitely have you
21:08
back. I hope you'll oblige us.
21:12
If you're not following Keith,
21:14
you can find him on X.
21:15
It's KMGross,
21:17
G-R-O-S-E,
21:19
if you're looking to follow him.
21:21
And of course, go ahead and follow
21:23
Coinbase if you are interested in
21:24
some product updates or anything
21:26
like that. Because...
21:27
Obviously they'll be rolling out
21:29
these new services that they've
21:30
obtained this license for in the
21:32
UK. So Keith, thanks so much for
21:33
taking the time.
21:35
We're gonna take a short break.
21:36
We'll be right back with the hot
21:38
seat. Don't go away.
25:37
Welcome back to The Starting Block.
25:39
We're finishing up the show, as we
25:40
always do, with the hot seat.
25:42
It's a great pleasure to have a
25:44
friend of mine from the industry,
25:45
Alexander Neumiller, who's the
25:46
research lead at Cambridge Center
25:48
for alternative finance.
25:51
Quite famously, he's done most
25:53
of their reports on Bitcoin's
25:55
mining consumption, which
25:57
in recent years has done a lot to
25:58
combat the overall fad
26:00
out there that Bitcoin was bad for
26:02
the environment or it was using
26:04
majority fossil fuels, when
26:06
his research has...
26:07
Very much proved the opposite
26:09
to be true.
26:10
So first things first, Alex, it's
26:12
good to have you on the show.
26:13
I'm good to chat to you again.
26:14
It's been a while, how are you
26:15
doing?
26:16
Thanks, Gareth, and yeah, really a
26:18
pleasure to be on the show again.
26:20
And yeah, very excited to talk with
26:21
you a bit about our latest research
26:23
on Ethereum.
26:25
Yeah, sure.
26:25
So I mean, pretty much every other
26:27
time I've spoken to you, we've been
26:28
talking about Bitcoin.
26:29
So here we are talking about
26:30
Ethereum.
26:32
It's very interesting that this
26:33
report has come out because
26:34
obviously, the merge is a
26:36
few years ago.
26:37
But a big stat that jumped out for
26:39
me is the
26:42
merge cutting electricity
26:43
consumption by basically 99%.
26:45
But you were telling me, Orfea,
26:47
that you have reworked
26:49
some of the methodology for
26:51
this latest report that was
26:53
published today.
26:54
But give us the TLDR on this
26:56
report, what people should know.
26:58
Yeah, absolutely.
26:59
So essentially, as you already
27:00
stated, the merge is a couple of
27:02
years in the past.
27:04
But ultimately, it's important to
27:05
keep things current.
27:07
So.
27:08
Given we had a lot of network
27:10
upgrades from Dancun with block
27:12
transactions to Petra and all the
27:13
Petra to all these kind of updates
27:15
it is just important to
27:17
you know occasionally make this test
27:19
to make sure that to
27:22
see whether for instance
27:24
any of those upgrades in terms of
27:25
software leading to different
27:27
resource utilization of the hardware
27:29
which means kind of essentially
27:30
higher or lower electricity
27:31
consumption then you
27:34
know there is also more
27:36
activity to some extent as
27:38
well when it comes to the number of
27:39
nodes. So we found it quite
27:42
prudent to do an update.
27:44
We also... For more information.
27:47
So for instance, we had some
27:48
theoretical more assumptions, for
27:49
instance in terms of how nodes
27:51
are distributed from
27:54
residential use to commercial
27:56
use, right, so for instance cloud
27:57
usage and we got actually
27:59
empirical data now on this so we
28:01
thought okay well after all
28:03
these years and thankfully,
28:05
really thank to the theorem
28:06
foundation for supporting us with
28:08
this work and were able to
28:10
create essentially a new estimate.
28:12
As you said basically
28:14
In terms of electricity consumption,
28:16
we still see this very large drop
28:18
by about 99.98%
28:21
or 99.96%
28:23
electricity usage essentially
28:25
as compared to the
28:27
pre-merge level.
28:29
If you want to
28:31
visually illustrate this a bit,
28:33
you can imagine the pre-merge
28:35
consumption of Ethereum as the
28:37
height of the Statue of Liberty,
28:39
and now at the size of
28:41
a gold ball.
28:43
So just to give you a bit of context
28:44
here, it's really a significant
28:46
drop. We had about 7.9
28:48
gigawatt hours per year, which is
28:50
about a megawatt of a continuous
28:52
power consumption.
28:53
We talk a lot about Bitcoin, right?
28:55
It's pretty much like one container.
28:57
When we think about Bitcoin with
28:58
ASICs.
29:00
So yeah, or about in terms
29:02
of households, about 2000 UK
29:03
households, essentially, to give you
29:05
a listen as a bit of an idea of what
29:07
we're talking about in terms of the
29:09
electricity kind of
29:11
consumption.
29:13
Very similar picture emerges
29:15
when it comes to emissions.
29:16
Very interestingly,
29:18
the sustainable power usage
29:21
in Ethereum has increased, so
29:23
we are now above
29:25
actually 56 percent,
29:27
so that's quite
29:29
notably above the world average
29:31
of 43 percent.
29:33
So that's I think quite interesting
29:34
as And there's a lot
29:36
of, I think, other nitty-gritty
29:37
details that I would love to
29:39
discuss in more detail, specifically
29:41
when it comes to our new insights
29:43
on where nodes are located
29:45
geographically, but also when it
29:46
come to hosting providers.
29:48
But yeah, I don't want to monolog
29:50
now the entire session,
29:52
so if you have any questions or
29:54
if you've any ideas, let me
29:56
know.
29:57
Yeah, sure. I mean, I just
29:59
found the report now.
30:00
So if anyone out there is watching
30:02
the show and are interested in
30:03
looking at this, you just need to go
30:04
to the
30:08
University of Cambridge Judge
30:09
Business School,
30:12
go to Alternative Finance
30:13
Publications, and then you will find
30:15
a list of the latest publications in
30:16
this document.
30:18
This publication is called Ethereum
30:20
After the Merge, and then, you can
30:21
look at the reports itself.
30:24
And like you were saying, I think
30:25
the... Cool data point here
30:27
is having the Burj Khalifa on
30:29
one side in terms of what
30:31
the energy consumption was
30:33
beforehand and then now
30:35
it being a golf ball in comparison.
30:38
I love real
30:40
world comparisons so people can
30:42
actually visualize the
30:44
difference in what it is.
30:46
You were mentioning to me the
30:48
a geographical, you know,
30:52
actual dispersion of nodes in the
30:54
Ethereum.
30:56
Network.
30:57
There's some insights here that you
30:59
have gleaned. Tell us a little bit
31:00
more about this because I think it
31:02
is very interesting if there is some
31:03
sort of a centralization risk that
31:05
people don't realize.
31:06
Yes, absolutely.
31:07
I think this is one of very
31:09
interesting insights, possibly for
31:11
some, not something
31:13
too out of expectations,
31:15
but basically, when we look at the
31:17
distribution of Ethereum nodes, it's
31:19
quite Western centric, so with
31:21
about 31% of the
31:23
node activity we see in the United
31:24
States.
31:25
And if we just think about the
31:27
EU without the UK and other
31:30
places, just from the EU
31:31
perspective, we have about
31:33
39% of nodes,
31:35
so it's kind of centralized,
31:38
not in a specific country, so it is
31:40
not monolithic, but still
31:42
it has some sort of
31:43
concentrations among the Western
31:45
hemisphere and the Western region.
31:47
Why this is important,
31:51
and interestingly, in I think
31:52
it was 2022.
31:54
Where there was a case
31:56
with the SEC where essentially
31:59
they were arguing that
32:01
about jurisdiction
32:03
right so whether for
32:05
instance the United States have
32:06
actually jurisdictions over Ethereum
32:08
essentially or SEC and
32:10
whether there is some this is
32:11
implications on the
32:21
I think we may have lost
32:23
Alex there.
32:24
We'll try our best to bring him back
32:26
up. I think he's going to be back
32:28
with us very shortly.
32:30
Yeah, we can hear you, Alex,
32:32
but we lost your video.
32:33
So maybe just rejoin the stream,
32:36
and we'll bring you back up on
32:38
camera.
32:39
You can drop off the browser
32:41
and come back in, and we will come
32:42
up. If you've just joined us for the
32:44
show, we're busy talking to Alex
32:45
Neumiller, who's a
32:48
research lead at Cambridge's Center
32:49
for alternative finance.
32:52
We're talking about their latest
32:53
report titled Ethereum
32:55
After the Merge, which
32:57
revisits some of the methodology
32:58
that they had applied to
33:01
understand the actual
33:03
electricity use of Ethereum,
33:05
the network, before and after the
33:07
merge, and some of the interesting
33:08
data insights that have
33:10
come out of that.
33:12
There we go. I think we've got Alex
33:13
back.
33:17
Alex, can you hear us?
33:18
There we
33:19
I apologize.
33:20
There was some quick internet
33:23
outage.
33:24
So yeah, apologies for
33:26
that.
33:27
It's not a problem.
33:28
Luckily, I'm good
33:30
at talking in circles for a
33:32
while.
33:33
But yeah, we were busy
33:35
talking, obviously, about the
33:38
geographical dispersion of the nodes
33:39
and where they are and
33:41
the important implications
33:43
of them perhaps being too
33:45
centered in one portion
33:47
of the world, especially given
33:49
AWS outages
33:51
and these kind of things.
33:52
So I'll let you continue from there.
33:54
Absolutely and again apologies for
33:56
my quick dropout.
33:57
No, not at all.
33:58
So essentially why does this, I
34:00
think there are two issues
34:02
here. One is more kind of when it
34:03
comes to restrictional risk and
34:06
the other more to counterparty
34:08
risk. But basically, when we speak
34:10
about jurisdictional risks, it is,
34:12
for instance, when, for example,
34:14
in the United States happened in
34:15
2022, where, for instance,
34:17
a regulator says, well, we have
34:19
jurisdiction essentially over
34:20
Ethereum because most of the nodes
34:22
are hosted in our jurisdiction.
34:24
So essentially, transactions need to
34:25
follow our securities laws.
34:28
And naturally, this becomes a bit of
34:29
an issue. If we have a two-star
34:31
concentration in one specific place,
34:33
I don't see this not necessarily in
34:34
Ethereum, but that is specifically
34:36
why kind
34:40
of a healthy geographical
34:42
distribution is,
34:44
I think, something desirable for a
34:45
network.
34:46
When it comes, on the other hand,
34:48
more to the counterparty risk, so
34:49
one of our reports
34:52
also shows a bit about how,
34:53
for instance, their nodes are
34:55
distributed by provider.
34:58
Then we see a lot of nodes being,
35:00
I would say, concentrated around
35:02
Hetzna, AWS,
35:05
and OVH.
35:07
Essentially what has happened also
35:09
at some point, I think it was
35:11
Hetzner actually, that
35:12
has in the T-Sensees or had in
35:14
the T-sensees, possibly they changed
35:16
it now, that it is not allowed
35:18
to run, for instance, blockchain
35:19
nodes.
35:21
Like overall, this was the term I
35:22
think they used.
35:23
So essentially what that means is
35:25
that, you know, if there's a stark
35:26
concentration in those specific,
35:29
you know, cloud providers that
35:31
goes above, I mean,
35:33
for Ethereum, right, you don't need
35:34
every 50% to, for instance,
35:36
have a risk of some disrupt,
35:38
a life-ness disruption, essentially,
35:39
you just need to have more than one
35:41
third, then, then
35:44
you know it might cause some issues,
35:45
right? If, for instance, or
35:47
for instance, the service is stopped
35:49
to a lot of folks simultaneously.
35:52
Where suddenly the checkpoints
35:54
cannot be finalized anymore, if
35:56
this happens really to more
35:58
than one third of
36:00
all the validity.
36:01
So we need to differentiate here as
36:02
well between nodes and validators,
36:04
right? So I don't, no one knows
36:06
exactly like what node is
36:08
running how many validators.
36:10
So it's basically,
36:12
there's a bit more to it, but
36:14
generally I think those kind of
36:16
research shows us as well that
36:17
currently I think it's quite
36:18
healthy, frankly, but it's my
36:20
personal opinion. But, you know, if
36:21
we at some point see some very stark
36:23
concentration among a specific
36:25
provider or among a jurisdiction,
36:27
I mean, I think kind of something
36:28
that might be interesting for the
36:30
community to address.
36:32
Yeah, for sure. It's an important
36:33
consideration. You were mentioning
36:35
before that the Ethereum Foundation
36:37
supported you in
36:38
the publishing and production of
36:40
this report.
36:41
When you come out with stats and
36:43
insights like this,
36:45
I would be curious to know if
36:47
they look at it and they're like,
36:49
wow, we should be addressing
36:51
some of these things more directly.
36:53
Because I remember in the past, this
36:54
has been spoken about, when all
36:56
these big AWS artists just happened
36:58
and people were like, people in
37:01
the Ethereum community should be
37:02
worried because there's so many
37:03
people that are running nodes and
37:05
validators on AWS services.
37:09
So, do you think the Ethereum
37:10
Foundation should be talking a bit
37:12
more about this?
37:13
Because you did kind of say that you
37:15
think that it is actually still
37:17
a fairly healthy situation,
37:19
but at some point it could become
37:21
some element of risk.
37:24
Yes, overall, I have not talked
37:26
with the theorem foundation about
37:27
these things specifically, right?
37:28
But I do think in theorem, one of
37:30
those things for a theorem, and this
37:31
is basically my perception of
37:33
the entire communication, not
37:35
necessarily what I talk with them,
37:36
but overall, right, from all the
37:38
information, whether it's on X,
37:39
whether it is general communication,
37:41
I think it plays a very strong
37:42
emphasis on decentralization.
37:44
One of the big areas as well that we
37:46
touch not too much because it would
37:47
go into a bit too much detail
37:50
is, for instance, stateless
37:51
verification that would actually
37:53
allow to address this,
37:55
I would say to some extent at scale,
37:57
where you would shift, you would
37:59
really reduce the hardware flow,
38:01
right? Where you could even run a
38:02
node on a commodity device like a
38:04
smartphone at some point.
38:05
There's a bit more to it, right,
38:07
because at that point, you would not
38:08
need to re-execute all transactions.
38:11
That you would essentially just
38:13
kind of verify as extinct, you
38:17
know.
38:17
Zero knowledge proof.
38:18
Yeah, essentially, it's extinct
38:19
proof.
38:20
But I think this is still ongoing.
38:23
But these kind of initiatives,
38:25
I think, show that this theorem
38:26
places a very strong emphasis
38:29
on decentralization.
38:30
I think is also very much a
38:33
core of their communications that
38:34
they do.
38:36
And yeah, so I think it's quite
38:37
interesting. As I said before, it is
38:39
my personal opinion that.
38:42
It doesn't seem currently that
38:44
there's a lot of issues in terms of
38:45
centralization, but it's definitely
38:47
something to monitor.
38:48
Another point is also when it comes
38:49
to clients, right?
38:51
Specifically, this was also at some
38:52
point a discussion
38:54
where you also do not want to
38:56
see too much concentration in
38:58
specific software
38:59
clients, whether that's
39:01
Lighthouse and
39:03
all of those.
39:05
Because ultimately, you might run
39:07
into kind of similar risks where if
39:08
there is a bug or whatnot, this
39:10
might actually then propagate to
39:12
the, and actually this would then be
39:14
an issue for those validators who
39:16
are running those sort of clients.
39:17
So you also want to have a healthy
39:19
client distribution too.
39:20
We have mentioned this in the report
39:21
as well and show some data here
39:23
for the consensus clients as well as
39:25
execution clients.
39:27
So we have some, for those who are
39:28
interested in this sort of
39:29
information, we have a lot of
39:30
details. In there too and
39:32
a lot of smaller insights as well
39:34
that are quite interesting I think
39:35
kind of some I would say fun facts
39:37
essentially when it comes to
39:38
emissions for instance where
39:41
if you would use high
39:43
quality nature-based removal
39:45
credits if we think about Ethereum's
39:47
current entire emissions it
39:49
would cost to offset though it would
39:51
costs about the same as the car so
39:53
we talk about somewhere between 25
39:54
and 55 000 pounds so
39:57
that I think quite a quite this was
39:59
one of the, I think,
40:00
most kind of
40:02
interesting things for me because I
40:04
never personally thought about this.
40:05
It was at some point thinking about,
40:06
Hey, this might be quite interesting
40:07
to see kind of if we can put a
40:09
quantitative value on,
40:11
on the emissions, right here.
40:14
And actually the, even, even
40:16
using high quality removal credits,
40:18
you would end up with spot the value
40:20
of the car. So that was, I think one
40:21
of the most interesting findings for
40:23
me personally out of the report.
40:26
Yeah I
40:28
need to digest the entire report
40:30
myself, and I'm sure we'll
40:32
chat a little bit more or fair about
40:34
the finer details of the report.
40:36
So once again, if you're interested
40:37
in finding that, you can find it on
40:39
the Cambridge Center for Alternative
40:41
Finance, the
40:43
publication.
40:44
When it comes to, obviously, the
40:46
talk of the emissions and just the
40:47
difference between proof of work and
40:49
proof of stake, you've done so much
40:51
fantastic research into Bitcoin
40:54
and mining consumption in the
40:55
Bitcoin network.
40:57
What's the biggest sort of dichotomy
40:59
here in your mind between proof of
41:01
work and proof of stake?
41:02
And do you still think that the
41:04
security of
41:08
the Bitcoin network is
41:12
infinitely better than
41:15
proof of stake networks like
41:16
Ethereum because it does require
41:18
us to actually expend electricity?
41:20
Because for me, that's the most
41:22
important thing is you would have to
41:23
redo all the which
41:25
not only, you know, it takes
41:26
computation, but it takes
41:27
electricity.
41:28
And that's what fundamentally makes
41:30
Bitcoin as secure as it is.
41:32
It's a very interesting question.
41:34
And I do not want to go into
41:36
details about what is better, what
41:37
is worse. I don't think I have an
41:38
answer to that. I think we talked
41:39
about two very different
41:42
networks with very different
41:44
kind of value proposition
41:45
essentially.
41:46
If you think about Ethereum, right?
41:48
You have this massive multi
41:49
hundred billion dollar ecosystem
41:51
built on top of Ethereum.
41:52
You have smart contracts, you have
41:54
all those features.
41:55
So you have a life economy
41:56
essentially built on top off the
41:58
network.
41:59
And...
42:00
Whereas for Bitcoin, I
42:02
think there is still, I
42:04
don't think, full consensus
42:06
on what Bitcoin is actually, but I
42:07
think most people see this as
42:10
a digital store of value,
42:12
where security
42:14
is a
42:16
very strong proposition.
42:17
And particularly, not just security,
42:20
because Ethereum is also a very
42:21
strong security, the economic
42:23
security of Ethereum is very
42:25
strong. It's not so much.
42:26
Backed by electricity in this case
42:28
anymore, right? But we have this
42:29
strong economic security where
42:32
to, you know, disrupt or
42:33
even try to finalize an
42:36
invalid or malicious state, it would
42:37
take a lot of money.
42:38
And we have written in the report
42:40
about this as well.
42:42
So, but when we
42:44
talk about, but it's still a bit of
42:46
a more a time and monetary question
42:47
because ultimately I think
42:49
the governance is different, right?
42:51
So for instance, in Bitcoin,
42:53
you have a very, I think when we
42:54
think about the governance of the
42:55
network, you have very, it's more
42:57
vibrant, right. You have miners,
42:59
you'll have Bitcoin holders, you
43:00
have users, you've all of those.
43:03
And for instance owning a Bitcoin
43:04
does not give you the right to for
43:06
instance create a block.
43:08
So you have this kind of
43:09
disentanglement of essentially
43:11
the mining community who is
43:14
really just hoping to prove work,
43:15
right? Trying or trying to find a
43:17
block and then, you know, kind of
43:19
propagate the block across the
43:20
network and the holders
43:22
and naturally both
43:23
are relevant, right.
43:24
Because they kind of need each
43:26
other, but it's not the same person
43:28
in one, essentially.
43:30
Where owning Bitcoin does not
43:32
essentially give you the right to,
43:33
you know, build a block.
43:36
I mean, you can build it, but
43:37
everyone can build the block, but,
43:38
you know, the network will not
43:39
accept it because you still need to
43:41
find the valid block hash.
43:43
So while it's in Ethereum, it's a
43:44
bit different, right?
43:45
So you have essentially where
43:48
um your token ownership allows
43:50
you to for instance run validators
43:52
but ultimately i don't think this
43:53
necessarily means it less secure the
43:55
security itself is just different
43:57
when bitcoin you still have as you
43:58
said for right you have this strong
43:59
physical anchor so it's not just
44:01
economic means to accumulate tokens
44:03
that give you that
44:05
give your essentially if i might
44:07
call it simply voting rights you
44:09
need to build the entire
44:11
infrastructure and i think that's
44:13
where that My feed.
44:15
It's very hard to calculate.
44:17
We are looking into this to some
44:18
extent, but it's very tough to
44:19
calculate, right? Because you then
44:20
need to go down this entire supply
44:22
chain. What would it take to
44:23
realistically amass, for instance,
44:25
51% of the hash rate?
44:27
This goes down to hardware, right,
44:29
purchasing the hardware, like
44:30
building the data centers and all
44:32
these sort of things.
44:33
So the kind of,
44:35
I would say difficulty or the
44:37
threshold to sensibly
44:39
execute an attack
44:41
that has a reasonable chance
44:43
of succeeding.
44:45
It's just extraordinarily high
44:46
because you have this massive
44:47
physical layer.
44:48
It's kind of this type of the
44:49
physical world, but it, but if not,
44:51
it's kind of a different, um,
44:54
uh, a different security
44:55
perspective, I guess, in my opinion,
44:57
I don't want to say one is more
44:58
secure than the other, I think, um,
45:00
for Bitcoin specifically, security
45:02
is very much tied to this
45:05
security being the
45:07
connection to the physical road, I
45:08
think, um.
45:10
Whereas for Ethereum it's really
45:11
kind of economic security.
45:13
There is also mechanisms in a
45:14
protocol you can't just stake,
45:16
you can just run X amount of
45:18
validators or start them up, right?
45:20
There is execute, there's entry
45:21
queue, so the protocol is quite
45:23
smart in dealing with those things
45:24
as well.
45:26
It's just a different way of
45:28
thinking about security, I guess.
45:30
Yeah, yeah very well answered and I
45:32
wasn't meaning to ask you a sort of
45:34
leading question there and ask you
45:35
to sit on us on the side, but
45:37
it's always something that I think
45:39
about quite deeply because I
45:40
fundamentally understand, you know,
45:42
the the security
45:45
of That Bitcoin gets
45:46
out of the proof of work and I kind
45:48
of always had question marks around
45:50
Ethereum once had moved to proof of
45:51
stake But I think you've you've
45:52
actually kind of answered a question
45:54
that I had sitting in my mind
45:56
for for quite a long time They're
45:57
two different ways of getting
45:59
to that point
46:02
We're probably ending the nearer the
46:04
end of the show now, Alex,
46:06
so I want to say thank you so much
46:07
for taking the time.
46:10
Going forward, do you have any plans
46:11
for any new sort of
46:14
reports on the Bitcoin ecosystem
46:16
or Ethereum ecosystem, what's
46:18
coming up next for you and
46:21
the Cambridge Center for
46:23
Alternative Finance in this
46:25
regard?
46:25
Yes, thanks, Gareth, for having me
46:27
again. It's always a pleasure to be
46:29
on your shows.
46:30
Something very interesting is coming
46:32
up. So basically we have already
46:34
collected data for a new for
46:36
our second edition of the Cambridge
46:38
essentially digital mining industry
46:40
report. It's the you know edition
46:41
after our first edition that I think
46:43
was quite well received
46:45
particularly getting all this data
46:47
directly from the from the community
46:49
and what
46:51
I can already say I can't say too
46:53
much but when we look at
46:54
participation metrics for our second
46:56
edition, all, whether
46:58
it's number of participants,
47:01
whether it's hash rate, whether its
47:03
number of countries covered, I think
47:05
all of those metrics, we exceeded
47:07
by 100% or even more, a
47:08
bit less and a bit more in some.
47:11
So the next report will, I think,
47:12
have a much, much stronger
47:14
sample and show some very, very
47:16
interesting insights, I believe.
47:17
I can't say too much already.
47:19
I will be soon in
47:21
Texas at the Energy Investors Forum
47:23
where I'll give us a short teaser.
47:25
But I think that is definitely
47:26
something I personally look very
47:27
much forward to.
47:30
Fantastic.
47:32
Yeah, once again, Alex, thanks so
47:33
much for coming and
47:34
to our viewers out there, keep an
47:36
eye out for any of
47:38
Alex and the Cambridge team's
47:40
research reports into the industry,
47:42
because I definitely think
47:44
I've read pretty much all of them,
47:46
barring the Ethereum one today, I
47:48
need to dive into it, but they are
47:50
best in the industry reports.
47:52
So definitely worth following.
47:54
And if you don't already, you can
47:55
follow Alex on X as well.
47:57
It's at Alex Neumuller.
47:59
I'm gonna spell it out very quickly,
48:00
A-L-E-X-N-EU-M-U-E
48:04
double L-E R.
48:06
Keep an eye out on his ex account.
48:08
He'll share out their reports and
48:10
any insights coming from his team.
48:12
But Alex, thanks so much for coming.
48:13
And thank you, the viewers out there
48:15
for joining us today for The
48:17
Starting Block. It's the end of week
48:19
two of the new show.
48:20
If you've missed any of our previous
48:22
shows, you can go and find them on
48:24
The Block's ex account and
48:25
we are uploading some of our
48:27
interviews onto the Block's
48:29
YouTube account as well.
48:32
So if you want to go onto our
48:33
YouTube channel, you can find our
48:34
interview with CZ, you can our
48:35
interview with Mike Belshi from
48:36
BitGo yesterday.
48:38
I do think we'll have Stanley
48:39
Kulikov, who joined us on the show
48:40
yesterday to talk about the launch
48:42
of stable vaults in
48:44
DeFi.
48:45
Please go ahead and subscribe to the
48:46
Block YouTube page.
48:49
And if you're looking for more news
48:50
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48:52
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48:53
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48:55
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48:56
Please go in bookmark
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49:00
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49:04
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49:21
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49:23
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49:24
Until then, have a fantastic weekend
49:26
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