On January 27, a group of eight US lawmakers, led by Senator Elizabeth Warren, sent letters to the six largest Bitcoin mining companies in the world, demanding to reveal detailed data about their electricity consumption. This is not the first time Senator Warren has requested this information from a mining operation: a similar letter was sent last month to Greenidge Generation, which uses a natural gas plant to power its facilities.
These moves highlight the growing regulatory pressure on crypto mining companies in the United States. But, as last week’s congressional hearing showed, the growing scrutiny could become an opportunity to align mining sector development with the broader political push for clean energy. Here are some of the key topics around crypto mining that have captured the attention of lawmakers and are likely to inform the intensifying of the policy conversation.
total energy consumption
A cornerstone of any environmental criticism of Bitcoin and cryptocurrencies in general, the question of how much energy cryptocurrency mining consumes was, as expected, a prominent topic in the hearing. In a 2018 paper published in the prestigious journal Nature, a group of researchers predicted that Bitcoin growth alone could push global emissions above 2 degrees Celsius in less than three decades, which is not a good thing given the declared mission of the international community to prevent the increase in the temperature of the planet. exactly the same magnitude.
Cambridge University’s Bitcoin Electricity Consumption Index set the standard by comparing annual Bitcoin-powered consumption to levels in various nations, and for now, at 131.1 TWh per year, the most popular cryptocurrency consumes more energy than Ukraine (124.5 TWh) or Norway (124.3). ), according to this source. The current estimate of Ethereum’s annualized energy footprint by Digiconimist is around 73.19 TWh.
None of the most-cited estimates are out of the question, as the recent Bitcoin Policy Institute (BPI) fact-checking report suggests. He cited three separate papers from the peer-reviewed journal Nature Climate Change, one of which debunks the 2 degrees argument as “fundamentally flawed” and criticizes its methodology.
Cryptocurrency proponents prefer to compare Bitcoin’s energy consumption not to nations, but to other industries; in that case, according to the BPI report, 0.27% of global BTC energy consumption is less than that of gold mining, although the Cambridge Index equals the two. .
Fossil vs renewable
In the context of increasing political pressure on energy consumption, the search for a sustainable energy framework becomes crucial for any industry that wants to thrive in the digital age.
Critics of the crypto mining industry have recently highlighted several cases of mining operations relaunching existing fossil power plants. The authors of the letter that some 70 NGOs sent to Congress ahead of the hearing on crypto mining drew lawmakers’ attention to several such cases, such as Stronghold Digital Mining’s relaunch of coal waste plants in Pennsylvania and the association between Marathon Digital and coal- burned plants in Montana.
There is also evidence that these are not the only US companies buying up old “dirty power” plants to power their mining operations: the pattern is seen from Texas to Missouri. At the congressional hearing, it was Steve Wright, former general manager of the Chelan County utility district in Washington, who spoke at length about the problem. He explained that miners’ interest in idle fossil facilities is driven by a simple market mechanism: As renewable energy prices (specifically on the West Coast) grow in line with increased demand, prices for Coal fall due to investor flight ahead of the upcoming 2025 ban on any use of coal in Washington state.
As the Representatives returned to this topic over the course of the hearing, it became clear that the tension between the use of fossil fuels for crypto mining and the industry’s potential shift to renewable energy sources is at the core of the thinking of the representatives. policymakers on the subject. Witness John Belizaire, CEO of green data center developer Soluna Computing, argued that there are scenarios where crypto mining can move from being a “dirty” energy concern to a vehicle that complements and powers the renewable energy sector.
Belizaire’s core argument is that computationally intensive tasks like Bitcoin (BTC) mining can be driven by recaptured (or, in industry terms, “reduced”) excess energy that would otherwise be wasted in plants. of clean energy. According to him, solar and wind farms waste up to 30% of the energy generated due to incompatibilities with the old energy networks. Belizaire also addressed the issue of power shortages allegedly caused by crypto miners, highlighting the fact that the kind of calculations miners run can be stopped at any time on demand.
For now, the “dirty mining” problem is here to stay simply because the level of US electricity production from renewable sources is below 7.5%. A recent study by the DEKIS Research group at the University of Ávila places the United States in 25th place in the world in terms of sustainable mining potential, with Denmark (65% of energy generated from renewables) and Germany (26%) head. graphic.
However, the United States remains a safe zone for mining, while the power grids of many other nations are less adequate to handle additional loads. With a reasonable regulatory framework, this could be a huge competitive advantage, laying the groundwork for the US to become a global mining haven. Speaking to Cointelegraph, Belizaire explained that there are certain policy steps that can push crypto miners to “go green.” He listed a number of specific measures: “Extended tax credits and special investment tax credits for miners using green energy and serving as flexible load, along with extended DOE loan guarantee to encourage green crypto mining development.” .
PoW vs. PoS
Any discussion of a possible alliance between crypto mining and green energy tends to run into a Proof-of-Work (PoW) versus Proof-of-Stake (PoS) debate, and the recent hearing was no exception. It was Cornell professor Ari Juels who repeatedly stated that “Bitcoin is not the same as blockchain,” in that the energy-intensive PoW consensus mechanism is not the only way to enjoy the decentralization advantages of blockchain. the cryptocurrencies.
And of course the number one alternative on the table is the PoS consensus mechanism which is likely to be adopted by the Ethereum ecosystem and is currently used in a large number of new blockchain projects. It is also critical to the development of smart contract-based technologies such as decentralized finance (DeFi) and non-fungible tokens (NFTs).
Juels’ statements reflect the general pressure that is building on PoW. Earlier this month, Erik Thedéen, Vice President of the European Securities and Markets Authority (ESMA), proposed a complete ban on PoW mining in the EU and called for the transition to PoS due to its lower energy profile.
In the US, which dominates the global Bitcoin mining market with a 35% share, the problem is much more pressing than in Thedeen’s native Sweden, where only about 1.16% of BTC is mined. However, the real problem lies in the Asia-Pacific region, where, according to The Global Cryptoasset Benchmarking Study, almost 50% of the electricity for proof-of-work miners comes from coal.
None of the three experts who spoke to Cointelegraph on the subject find the juxtaposition of the two consensus protocols productive. John Warren, CEO of crypto mining firm GEM Mining, noted that there is “very slim to none” chance of Bitcoin making the transition to PoS. With that fact in mind, and given Bitcoin’s status as the largest cryptocurrency, “the industry should turn its attention to further adoption of carbon-neutral energy sources rather than attempting to alter Bitcoin’s verification process.”
John Belizaire rejected the idea that the government should support one bulletin over another:
Congress is not knowledgeable enough to call on the technical architecture of a global platform that powers billions of dollars in assets. […] The technology community must be the final arbiter of innovation […] The prisoner of war camp will innovate to solve its problems on its own.
Mason Jappa, co-founder and CEO of mining company Blockware Solutions, commented that both tests have their comparative advantages, but, echoing Belzaire’s testimony, he underlined the potential for compatibility of PoW networks with renewable energy. In that sense, Jappa sees PoW mining as a “net positive for society”:
Mining is a perfect complement to the power grid and is reusing infrastructure that would otherwise go unused, as well as providing a use case for building our power grid.
As Jappa noted, “it is optimistic for the ecosystem that this hearing has taken place,” as lawmakers once again expressed their understanding that cryptocurrencies are here to stay.
Warren specifically appreciated the part of the discussion that “highlighted the ability of the mining industry to innovate greener solutions.” We still witnessed many 101 explanations of blockchain technology that reminded us of the long way policymakers have to go in terms of their understanding of cryptoeconomics, but as Warren pointed out:
It is important to acknowledge that there were a number of positive comments that came out of the discussion, showing the nation that mining has created many new jobs and that Bitcoin introduced valuable blockchain technology to the world. That perspective has been largely missing from some of the recent public discourse on crypto mining.
Aside from the obvious need for both the general public and policymakers to become better educated on the issue, there are some clear focal points around which the digital mining industry could unite, Belizaire believes.
For example, government laws or programs that encourage the use of renewable energy instead of legacy fossil fuels to power the industry, such as “Incentives for job creation in rural areas of the country where mining operations are established, both at the state and federal. .”
Therefore, it seems that the green mining card is the one that can make a direct economic and environmental argument in favor of the crypto industry, while the PoW/PoS debate is something that should be reserved for the crypto community rather than regulators.
This post Key Policy Issues Around Crypto Mining in the US
was published first on https://cointelegraph.com/news/fossils-vs-renewables-pow-vs-pos-key-policy-issues-around-crypto-mining-in-the-u-s