It’s Much Too Soon to Regulate Bitcoin, Says Deloitte Exec

Bitcoin Magazine
It’s Much Too Soon to Regulate Bitcoin, Says Deloitte Exec

Jon Watts, director of enterprise services at Deloitte, has weighed in on Bitcoin regulatory issues with clear and cogent arguments. Watts’ thesis is that Bitcoin is at the crossroads, and the race to regulate it could be happening much too soon.

Deloitte is a professional services firm headquartered in New York. Considered one of the Big Four auditory firms along with PwC, Ernst & Young, and KPMG, Deloitte is the second-largest professional services network in the world by revenue and largest by the number of professionals. The company provides audit, tax, consulting, enterprise risk and financial advisory services with more than 200,000 professionals in more than 150 countries.

Watts, based in the New York office, is a core member of Deloitte’s Capital Markets Technology practice and a national leader of the U.S. Foreign Account Tax Compliance Act (FATCA) service offering. The reputation of Deloitte should ensure that Watts’ advice on Bitcoin regulation is taken into account by regulators and policymakers.

“The Bitcoin ‘blockchain’ is a fundamental breakthrough in computer science that solves what seemed to be an unsolvable problem: how to ensure that a digital transaction happens only once,” notes Watts. “Yet there is a critical question that is hanging over Bitcoin, potentially slowing the pace of innovation, and adoption, i.e., how will Bitcoin be regulated​?”

Watts argues that global policymakers and regulators should consider giving Bitcoin more time to develop before insisting on regulation. Other key technology innovation such as the telephone, airplanes, radio, mobile phones, and the Internet, were given much more time to develop before coming under serious regulatory supervision.

“In fact, serious efforts to regulate disruptive technologies have traditionally been a function of the technology achieving mass adoption,” says Watts. Overwhelming regulatory supervision of Bitcoin is happening much too soon, only six years into the development of Bitcoin and “a long way away from the time it has typically taken for new technologies to achieve mass adoption in the past.”

In fact, Bitcoin is still very far from mass adoption, and represents but a very small fraction of the global economy. Though Bitcoin is all over the press – albeit often with shallow and sensationalist coverage – and venture capital investments in the Bitcoin space are taking off, only a tiny minority of people own bitcoin and use it to pay for goods and services.

“The highest daily dollar volume for Bitcoin transactions globally in February 2015 was less than $57 million, which is less than 1 percent of the average daily transaction volume for credit card platforms as measured in 2012,”notes Watts. Therefore, Bitcoin adoption is not yet skyrocketing with such a disruptive speed to warrant panic regulatory interventions.

Another important argument is that we could be still very far from real products that can generate true demand for Bitcoin-related services from mainstream consumers.​ In fact, Bitcoin’s most valuable and important uses may have yet to be invented. Watts notes that Bitcoin is much more than just digital money – its real value is the ability of blockchain technology to establish trust between parties who don’t know each other.

That, Watts notes, may very well change how people live and interact. “Bitcoin is likely to follow a path where one innovation leads to another and ultimately, the very products, services, and capabilities that were once difficult or impossible to imagine, become necessities in our daily lives,” he said.

Watts worries that policymakers and regulators, in looking to protect the public from all of the bad outcomes we might anticipate today, could “end up stifling the myriad (as yet) unimaginable capabilities that could potentially change the world for the better.”

His concluding recommendation is that American industry groups, policymakers and regulators should collaborate and consider whether the United States should be the country that provides the most supportive environment for Bitcoin-related innovation.

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BitFury Looks to Go Green With 3M’s Novec 7100 Engineered Fluid

In an attempt to further decrease energy costs and its impact on the environment, BitFury announced that it was launching the world’s largest two-phase immersion cooling (2PIC) project at its new data center in the Republic of Georgia.

By using the technology from Allied Control, bought in January, and the Novec 7100 Engineered Fluid from industrial giant 3M, the company is hoping to optimize its operations and make them more green. The firm intends on using 3M’s fluid to cool more than 40 megawatts of processing power.

“The maintenance cost of traditional low-cost air cooling systems is quite high compared to immersion cooling, and it is very problematic to use low-cost air cooling systems in the areas with hot weather, it becomes very costly,” said Valery Vavilov, CEO of BitFury, in an interview with Bitcoin Magazine.

Vavilov explained that the utilization of immersion cooling allows for a reduction in maintenance costs. Further, it opens up the possibility of the company launching mining operations in parts of the world that would otherwise not provide efficient cooling.

“In addition, we are able to deploy it in the areas with hot weather climate which opens possibility to operate literally in any location in the world. Also, for chips, this fluid is ideal exploitation environment and it allows to run them with maximum possible efficiency that just cannot be achieved using low-cost air-cooled systems,” he explained.

2PIC works by placing hardware in a specially designed tank with a liquid coolant such as the Novec 7100. What makes this fluid particularly useful is that it has a low boiling point, which means that as it heats, it starts to evaporate much more quickly. That pulls the heat away from the hardware in the device, allowing them to operate at a higher rate for much longer. When the vapor hits a water-cooled condenser coil, it becomes a fluid again and falls back into the tank, thus reducing the amount of fluid loss significantly.

“One of the primary limitations for computer performance is the thermal environment. Two-phase immersion cooling with Novec fluids provides tight coupling between device temperatures and the fluid boiling temperature. This means that these devices operate in a narrower temperature band,” explained Michael Garceau, 3M Business Development Manager, Data Center Markets, in an interview with Bitcoin Magazine. “This is true not just for the processors, but for the circuits and devices delivering power to them. This, in turn, allows the hardware to be driven harder on average than would be possible in air and “overclocked” as is often done in the most profitable early stages of a mining deployment.”

Garceau also explained that because these 2PIC-specific boards don’t require heat sinks and cold plates, the processing hardware can be more densely packed with the 2PIC boards. This enables improved overclocking capacity.

“500-watt ASICs have been successfully overclocked to well over 750 watts. 2PIC with a Novec fluid will enable BitFury to lower operational costs by allowing them to run ASICs more efficiently,” Garceau explained.

The Environment is Key for BitFury

According to Garceau, “The streamlined system can deliver as much as 95 percent cooling energy savings with minimal fluid loss.” The cost of cooling hardware is an additional expense that many miners don’t consider when first starting out. Big scale fans require electricity.

“Green transaction processing is a significant and important part of our business strategy. With our acquisition of Allied Control, we have been able not only to utilize renewable energy sources like hydropower in our datacenter located in the Republic of Georgia, but also achieve a very energy-efficient cooling despite hot daytime temperatures,” explained Vavilov.

The Novec Engineered Fluids are nonflammable, have zero ozone depletion potential, have a low global warming potential, are Hazardous Air Pollutant-free, and are U.S. EPA SNAP-approved. And because the majority of the fluid condenses and drops back into the tank, replenishment isn’t needed for multiple hardware generations.

All told, BitFury is focused on delivering blockchain transaction processing in an efficient and green environment.

“We strive to ensure low carbon print and high efficiency of all our operations and already rely on renewable energy – thermal and hydropower – for all our operations,” Vavilov said. “We are also in the process of developing low-cost wind turbine technology that will provide another affordable and effective energy solution. We plan that by next year our data centers will be powered by the low-cost renewable energy generated by our new wind turbines. This will allow to further significantly lower our electricity cost and secure a long-term access to cheap electricity on a predictable basis.”

With electricity being the primary outlier that separates the profitable miners from the unprofitable, taking control of the supply of that power ensures that BitFury can remain profitable while also doing its part to reduce the significant carbon footprint found in bitcoin mining.

Jacob Donnelly is a full-time product manager and freelance journalist covering stocks, business and bitcoin. He runs a weekly digital currency and blockchain newsletter called Crypto Brief.

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