Key policy issues around crypto mining
A recent Capitol Hill meeting highlighted several vital debates that will shape the mining industry’s development in the coming years. On January 27, a group of eight US lawmakers, led by Senator Elizabeth Warren, demanded that the world’s six largest Bitcoin mining companies reveal detailed data on their electricity consumption. It is not the first time Senator Warren has requested this information from a mining operation.
These developments highlight the growing regulatory pressure on cryptocurrency mining operations in the United States. However, as evidenced by last week’s congressional hearing, the increased scrutiny may turn out to be an opportunity to align the mining sector’s development with the broader political push for clean energy. Some key themes surrounding cryptocurrency mining have piqued lawmakers’ interest and will most likely inform the escalating policy debate.
The total amount of energy consumed
The question of how much energy cryptocurrency mining consumes is a cornerstone of any environmental critique of Bitcoin and crypto in general.
In a 2018 paper published in the prestigious journal Nature, a group of researchers predicted that Bitcoin’s growth could single-handedly push global emissions above 2 degrees Celsius in less than three decades.
According to the Cambridge University Bitcoin Electricity Consumption Index, the most popular cryptocurrency consumes more energy than Ukraine (124.5 TWh) or Norway (124.3) per year, with a yearly consumption of 131.1 TWh. Digiconimist currently estimates Ethereum’s annualized energy footprint to be around 73.19 TWh.
According to a recent fact-check report by the Bitcoin Policy Institute (BPI), none of the most widely cited estimates are beyond dispute. It cited three separate articles from the peer-reviewed journal Nature Climate Change, called the 2 degrees argument “fundamentally flawed,” and criticized its methodology. Crypto supporters prefer to compare Bitcoin energy consumption to other industries rather than nations; in this case, according to the BPI report, BTC’s 0.27 percent of global energy consumption is less than that of gold mining, despite the Cambridge Index’s equalization of the two.
Fossils vs. renewables
With ever-increasing political pressure on energy consumption, the search for a sustainable energy framework becomes critical for any industry seeking to thrive in the digital age.
Crypto mining critics have recently highlighted several mining operations restarting existing fossil power plants. The authors of a letter sent to Congress by 70 non-governmental organizations (NGOs) ahead of the crypto mining hearing drew legislators’ attention to several such instances, including Stronghold Digital Mining’s relaunch of coal waste plants in Pennsylvania and Marathon Digital’s partnership with coal-fired plants in Montana.
As Representatives returned to this topic throughout 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 forefront of policymakers’ minds. There are scenarios in which crypto mining can transition from a “dirty” energy concern to a vehicle that complements and empowers the renewable energy sector.
Nonetheless, America remains a haven for mining, whereas many other countries’ electrical grids are less prepared to handle increased demand. With a reasonable regulatory framework in place, this could provide a significant competitive advantage, laying the groundwork for the United States to become a global mining haven.
PoW vs. PoS
Any discussion of a possible alliance between crypto mining and green energy inevitably leads to a debate over Proof of Work (PoW) versus Proof of Stake (PoS). The recent hearing was no exception.
The issue is far more pressing in the United States, which dominates the global Bitcoin mining market with a 35% share, than in Thedeen’s native Sweden. However, the real issue is in the Asia-Pacific region, where coal provides nearly half of the electricity to Proof-of-Work miners.
