Bitcoin a climate killer? : Ethereum as a pioneer: EU apparently continues to work on banning proof of work for Bitcoin | news

Bitcoin a climate killer
De facto Bitcoin ban rejected
Bitcoin mining and trading ban still on the table

Bitcoin is energy-hungry, something critics have long complained about. For example, the University of Cambridge has determined that bitcoin miners now use more energy than the Netherlands, a country of over 17 million people. This problem became public awareness no later than May 2021, when Tesla CEO Elon Musk announced just weeks after the start that the electric car maker would again stop payments with bitcoins due to high electricity consumption during mining.

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In the EU, therefore, MEPs from the Greens, Social Democrats and Left had called for a ban on crypto services based on “ecologically unsustainable consensus mechanisms”. This would have meant a de facto ban on the “Proof of Work” consensus and protection process used by Bitcoin. Ultimately, however, a majority of MEPs in the Economic and Monetary Affairs Committee voted against an amendment corresponding to the Rules for Cryptographic Services (MiCA). Nevertheless, the critics do not seem defeated: “So the last word has not yet been said,” assured Green MEP Rasmus Andresen to “”.

Thorough bitcoin mining

The criticism is aimed in particular at the complex generation of Bitcoin, which is based on the Proof-of-Work (PoW) algorithm: the coins are generated by solving cryptographic tasks that protect the most popular cryptocurrency in the world. world against manipulation. In exchange for their computing power, the so-called “miners” receive a certain amount of newly generated bitcoins for each block generated. In the meantime, however, the arithmetic tasks involved in mining have become so complex that they can hardly be mastered with a PC at home. Therefore, huge power-hungry server farms are used. However, the resulting increase in energy consumption also increases environmentally harmful CO2 emissions, especially when fossil fuels such as coal are used to generate electricity.

Ethereum, the second largest cryptocurrency in the world, is already working on a switch to the much more economical proof-of-stake method, in which the participants with the greatest computing resources are no longer rewarded, but in principle each participant in the network. proportionally. The more coins you own, the more chances you should have of placing a new entry in the blockchain and being rewarded for it. But with Bitcoin, such a change is extremely unlikely, as its decentralized structure makes updates very difficult.

EU continues to work on bitcoin ban

However, the huge energy hunger could be fatal to Bitcoin. While environmental awareness has already grown in recent years, the problem has become even more urgent given the explosion in energy prices triggered by the war in Ukraine. “” has now reported, citing never-before-seen documents, that government officials from Sweden and Germany, as well as envoys from the European Commission, were intensively discussing possible restrictions on Bitcoin behind closed doors. The demands go as far as a ban on cryptocurrency mining and trading in the EU. While the former would have little impact as there is little mining activity within the EU, a Bitcoin trading ban would have a major impact on the crypto community.

For example, “” cites one of the documents available: “If Ethereum is able to switch, we could legitimately do the same from [Bitcoin] Craving. We need to protect other sustainable cryptocurrencies. [Wir] don’t see the need to protect the bitcoin community,” said a participant in a virtual meeting between Swedish and European officials in November 2021.

Another European Commission videoconference followed in February 2022 with German and Swedish participation. It turned out that officials don’t believe a key bitcoin fan argument, which is that “surplus” electricity is used primarily for sharpening, such as that produced when wind or solar systems produce more. what the network can absorb. However, this is hardly the case in reality, explained one of the participants in the discussion. Because “there is no excess energy”.

Although the de facto ban on Bitcoin was rejected in March 2022 in the Economic Committee, the documents available to “” suggested that a possible ban on mining or even trading Bitcoin was on the table, says Alex de Vries. “The language is pretty clear,” says the University of Amsterdam economist.

Policy still reserved

Such talks have so far only taken place at the official level, but according to “”, such plans could also find support at the political level. So far, however, people have been rather hesitant: according to the internet portal, the German federal government, for example, has not officially committed to taking concrete action against crypto mining. Questioned by “”, the European Commission did not obtain anything more concrete either. The Commission is aware that authorities in Sweden and Germany are discussing a possible ban and will continue their regular discussions on the subject with member states, a spokesperson said.

But at least a first small step is emerging: in 2021, the European Commission proposed a new directive on energy efficiency, according to which member states should collect and publish data on the energy consumption of data centers. This could be the first step towards the energy labeling of these installations.

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