Chinese Crypto Leader Li Xiaolai Suddenly Retires 2 548

One of China’s most prominent Bitcoin investors has announced his retirement from the crypto world. Billionaire Li Xiaolai is the founder of BitFund, a crypto venture capital firm that has fostered a slew of Bitcoin-related startups.

Li’s announcement of his decision to withdraw from cryptospace—and investing otherwise—came unexpectedly via his page on Chinese social media site Weibo.

“From this day on,” his post reads, according to TechNode’s translation, “I, Li Xiaolai, will personally not invest in any projects (whether it is blockchain or early stage). So, if you see ‘Li Xiaolai’ associated with any project (I have been associated with countless projects without my knowledge, 99% is not an exaggeration), just ignore it.”

Li is a former school teacher, and claims to be the first person in China to openly trade Bitcoins, rather than hiding behind its famous anonymity. Now, retired from both teaching and investing, he says he’s not sure where to go next. “I plan to spend several years to contemplate on my career change. As for what I’m doing next, I’m not sure just yet.”

Li closed his post by expressing that he still maintains a long term optimism about the blockchain.

Li’s Ventures Grew Crypto Capital, Controversey

Through BitFund, Li has incubated a number of blockchain related startups, including an off-chain wallet called Bitfoo, the crypto exchange YUNBI, and HashRatio, a miner manufacturing company. Li organized 2014’s Global Bitcoin Summit in Beijing, back when you could get a BTC for as little as $440, and years before China instated its full ban on cryptocurrencies.

Earlier this year, Li also acted as managing partner of Hangzhou Xiong’An Blockchain Fund, a billion dollar fund backed by the Hangzhou government. Li stepped down after fellow venture capitalist Chen Weizing introduced a series of accusations against him.

Included in the eleven accusations, which Chen broke on social media and messaging platform WeChat, were a supposed debt of 30,000 BTC that Chen says Li failed to pay on time. Li published a point-by-point response to Chen’s accusations, addressing the 30,000 BTC debt by saying “it’s not true… Chen is just muddying the water.”

Though Li called them “defamations,” and Chen did not offer supporting evidence for his allegations, Li said Chen’s antics “brought material and negative impacts on the reputation of Xiong’An Blockchain Fund” and that his resignation would “let the Hangzhou government continue its push for blockchain development.”

Li was the subject of controversy on another occasion when, in a candid conversation he did not know was being recorded, he outed several influential organizations as scams and said that the best way to succeed in blockchain, even if your project is worthless, is to get famous and build consensus.

The State of Crypto in the People’s Republic

All crypto and blockchain related websites are blocked by the Chinese government, and citizens are forbidden from engaging in crypto transactions. The People’s Bank of China released a statement on August 24th warning against ICOs, which they consider to be “illegal fundraising, pyramid schemes, and fraud.”

But the rules have been difficult to enforce, and crypto still enjoys an active user base in China. Beijing Sci-Tech Report, China’s oldest technology publication, is now the first Chinese publication to accept BTC as payment from its subscribers. Chinese crypto channel cnLedger announced in a tweet on September 25th that Ethereum Hotel, China’s first hotel to accept ETH as payment, is open for business in Sichuan Province.

A Crypto Landscape Without a Leader

The sudden exit of Li Xiaolai from the Chinese crypto scene could have caveats, or greater implications. Weibo users expressed their support and gratitude following his announcement, but some also speculated that his choice of words leaves room for Li to continue investing in crypto indirectly, perhaps through funds or corporate entities. Whether that will be the case or not, for many, his resignation marks the loss of a public blockchain leader.

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I grew up in the Silicon valley under the technological mentorship of Steve Wozniak. I'm a proud member of the Choctaw Nation, I've lived, worked and traveled all over the world, and I now write in the Pacific Northwest.

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Bitcoin Uses As Much Energy As Austria, Could Add 2°C to Earth’s Atmosphere 2,182 10458

Bitcoin mining, it turns out, damages the earth more than more traditional environmental assaults like actual mineral mining.

According to a paper published Monday in Nature Sustainability, the power-hungry Bitcoin mining process consumes more than triple the amount of energy needed to mine the equivalent amount of gold, more than quadruple what’s needed for copper, and more than double what it takes to mine platinum.

Other coins didn’t fare much better. By their measurements, Ethereum and Litecoin consume 7 megajoules of electricity to produce the equivalent of $1, the same energy expenditure as copper mining but more than that of platinum or gold. Monero eats up 14 megajoules to produce $1.

Naturally, these measurements refer to the notoriously variable dollar valuations of such tokens. “While the market prices of the coins are quite volatile,” write researchers Max J. Krause and Thabet Tolaymat, “the network hashrates for three of the four cryptocurrencies have trended consistently upward, suggesting that energy requirements will continue to increase.”

Bitcoin’s Growing Electricity Bill is Bigger Than Some Countries

We’ve long known that Bitcoin is unsustainable. In a 2015 article for Motherboard, Christopher Malmo pointed out that a single Bitcoin transaction used 5,033 times as much energy as a Visa swipe, and could power 1.5 American homes for a day.

The electricity used to crunch Bitcoin code—and its environmental cost—has been growing with its increasing popularity. Digiconomist’s Bitcoin Energy Consumption Index shows Bitcoin currently consuming 73.12 terawatt hours (or 263.232 billion megajoules) of electricity annually. To put that in context, it’s comparable to the amount of energy it takes to power Austria for a year.

That means there are 175ish countries on earth using less energy than Bitcoin (to say nothing of crypto on the whole), while 66 countries consume less energy per capita than one Bitcoin transaction (it takes 94 thousand kilowatt hours of electricity to mine a single Bitcoin).

Iceland, a major hub of Bitcoin mining farms, spends nearly as much energy on Bitcoin as it does powering its residential homes. In this case, the damage is mitigated because most of Iceland’s power comes from renewable energy.

Canada’s Bitcoin emissions are also on the lower end due to renewable energy sources. They’re using this to court mining companies from China, where mining emissions are about four times that of Canada’s. Montreal International attracts foreign investment by calling Quebec the land of “green bitcoin”. This has caught the eye of some Chinese mining companies looking to go overseas as the Chinese government has discouraged expansion and shut down some mining operations altogether.

Depending on Bitcoin’s growth, some have projected that it could use as much energy as the entire world by 2020.

Digital Currency Has a Real Carbon Footprint

Krause’s and Tolaymat’s research reminds us of the sobering reality that all this invisible wealth has real world costs.

For the 30 months they measured between January 2016 and June 2018, they estimate their four featured tokens collectively belched out at least 3 million tons of CO2 emissions, possibly as much as 15 million tons.

These findings follow another study, published last month, which determined Bitcoin alone could add two degrees Celcius to global warming within the next three decades. That’s enough to raise ocean acidity by 29 percent.

Solving Bitcoin’s Energy Consumption Crisis

So what is the solution? If the world were to switch to 100 percent renewable energy overnight, the problem would be moot. But we can’t hold our breath for that. There could be ways of incentivizing clean energy so greener mines reap more coins, or of implementing clean energy in other ways.

It’s also possible to adopt less computationally intensive mining algorithms so the mining computers don’t guzzle as much juice. This would disappoint a lot of old school Bitcoiners who have invested in hardware, but their feelings don’t really outweigh that 2 degrees celcius that everyone will have to live with (or die by).

Whatever the best solution turns out to be, something needs to change soon. Bitcoin is growing up, and it’s time for it to mature into something more sustainable.

Crypto is Big Now. How Do You Pay Your Taxes? 6 663

There are 2070 kinds of tokens in circulation, with a total market cap of $209.5 billion. Bitcoin tokens alone account for $112.4 billion of that.

And while it’s been a bearish year for Bitcoin, a recent survey of fintech leaders anticipates its value to rise 220 percent by the end of 2019. Research by Stasis also supports a promising future for cryptos, projecting a trade volume growth of 50 percent through next year.

Cryptos are more popular than ever. A survey of the intersection between crypto enthusiasts and reddit users found first timers have tended to adopt crypto in step with valuation booms. “The peaks unsurprisingly follow the growth of the cryptocurrency market,” the results read, “with the two biggest years being 2013 and 2017 by a significant margin. Within 2017 the same trend shows, with most people entering crypto May through to August which coincided with the end of Ethereum’s big bull run up to $400 and Bitcoin’s run up to $5000.”

Those surveyed, overwhelmingly college educated males with a median age between 26 and 30, are confident in their knowledge about blockchain and tend towards crypto evangelism. About 40 percent said they check the price of their coins over ten times per day, with 94 percent checking at least once daily.

All This Interest in Crypto Has Alerted the Old Guard

With crypto values rising, and public interest along with it, the federal government has lumbered to life and started investigating cryptospace to the best of their ability. Which apparently means paying others to do it for them. Paying a lot. According to research by Diar, public records show US government agencies like the FBI, ICE, the SEC, and of course the IRS, have cumulatively spent $5.7 million hiring blockchain analysis companies. Two thirds of that spending has been in the last year, since Bitcoin’s big surge.

Perhaps all that analysis will help the IRS to finally clarify how they intend to tax cryptocurrencies. As of now, the only information they’ve released is a brief notice from 2014 mumbling to the public that the IRS is “aware” of “virtual currency,” and they consider it “property.” It’s very little to go on, but their silence and their heavy spending on analysis suggests they’re trying to catch up.

Investors Are Wondering How to Fulfill Their Tax Obligations

Meanwhile, we’re in the fourth quarter of crypto’s most popular year yet, and investors are looking back at the fiscal year wondering what they can do to stay in good standing. But bookkeeping gets complicated with crypto, because transaction data isn’t standardized.

With thousands of cryptos being traded across many different exchanges and every exchange reporting differently, not to mention wallet-to-wallet transactions that don’t involve an exchange, there’s no consistency in how to keep crypto books. If there were industry standards for recording and reporting transactions, that would be another story. But crypto is still young, and let’s be honest, nobody really knows what they’re doing.

So squaring up with tax responsibilities is no simple task. In fact, it’s a bit of a mystery at this point.

Who’s Solving the Problem?

While the fed scratches its noggin, champions of the private sector are stepping in to deliver solutions for companies and investors who need crypto bookkeeping. Libra is one that offers real time blockchain auditing tools “to automate and optimize middle and back office processes and reporting, while improving operational and financial analysis and control.”

Another SaaS to look into, one that’s optimized for the single investor while still useful to a company or a fund, is Profitstance. Their tools are designed to keep you up to speed on the tax consequences of every crypto transaction, again in real time. They say they guarantee the 100 percent accuracy of their calculations, and they’ll pay your IRS fines and interest if they’re wrong. With someone else taking on that much responsibility for your numbers, hopefully you can sleep (and trade) a little bit easier.

Alternatively, you can hire a team of CPAs who know crypto, like those at Camuso, and just let them handle everything for you. For the DIY types, you can use utilities like CryptoTrader.Tax to autofill your 8949 (it’s under development, but you can sign up to get the latest release when it’s ready).

So don’t stress about taxes, even if you’re among the many newcomers to the ever-expanding crypto game. We’re making this up as we fly forward into it, but there are plenty of people offering support to make sure you don’t get caught in a wrestling match with the IRS.

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