Expert Opinion Series on Banning Crypto Mining
The concept of making individual blocks added to the blockchain by solving complicated mathematical problems is known as crypto mining. The goal of mining is to validate cryptocurrency transactions and provide proof of work by adding this data to a block on the blockchain, which serves as a log for mining transactions.
This method employs a node that is operated on a device with exceptionally high processing power known as a mining rig or a Bitcoin mining software. Miners are rewarded in cryptocurrency for each block contributed to the chain as an incentive. This reward is how new cryptocurrencies are created and circulated. Depending on the kind of cryptocurrency, crypto mining employs a variety of proof mechanisms. Mining is distinct from central banks and the generation of fiat due to the blockchain’s decentralized nature.
For the third edition of UniFarm’s Founder Opinion Series where several industry leaders and investors come together under one roof to give a candid take on what they feel, we present you with views on a common question that revolves around what we just talked about – Crypto Mining.
Here is the question we asked from founders, CEOs, and core team members of various projects and this is what they had to say.
Top EU regulator urges ‘ban’ on crypto mining with claims that it is sucking up renewable energy. Is this claim true?
Callum Mitchell-Clark, CEO – Plethori
It’s no secret that blockchains that rely on Proof of Work (PoW) mechanics are extremely energy-intensive. Global Bitcoin mining uses more energy than most individual countries. It’s a real issue and is something that PoW chains will need to address in the very near future as the space becomes increasingly regulated.
It is one of the several key reasons why the industry is now moving away from PoW, with many Proof of Stake (PoS) chains starting to take hold and make a name for themselves. Aside from being eco-friendly, PoS is also significantly quicker and cheaper for users and developers alike. Plethori has chosen Avalanche as its new home, thanks to their <2sec time to finality and ability to process 4500 TPS. Bitcoin is still the king, for now, but there will come a time when the king grows old and obsolete and is replaced by a successor. My money is on Avalanche.
Ashim Dash, Entrepreneur and Web3 Explorer
We crypto natives very well know that crypto mining, especially Bitcoin & Ethereum, has been attracting growing criticism for its huge impact on the environment. The practice accounts for 0.6 percent of the world’s total energy consumption and burns more energy than what some countries utilize to put together, which is alarming. Hence, a country like China banned mining entirely from their geography which was a welcome call. The miners acted upon by choosing other safe alternative sources of energy to keep the mining ON, which has now started slowly eating away the share of clean energy-producing and consuming countries especially the countries in the EU like Sweden, Finland, and Norway. Hence the backlash, which is clearly expected. The only logical approach to this situation is to stop proof of work dependency, thanks to the ‘proof of stake’ (pos) methodology which has a significantly low energy profile. The push from the EU regulators is absolutely on point but this switch is not as easy as it sounds with various technical problems being cited recently by the Eth team especially, although the claims are that pos should be available towards the mid of this year.
All in all the rising amount of renewable energy being devoted to cryptocurrencies is a huge pain and it is a clear warning to the crypto miners to answer this problem at the earliest. Else, it would be an irony if the wind power generated on Sweden’s long coastline would be devoted to bitcoin mining, as quoted aptly by an EU regulator.
Murali Thakur, Co-Founder – Superbonds.finance
I mean I can’t comment on the veracity of such a claim since I haven’t actively looked into it, but I’d say such a move would be misplaced. Crypto mining is pivoting towards sustainable energy as there is both an economic and environmental incentive for it. If you delve into Proof of Work mining, it actually helps in the management of extra electricity produced in power plants. Moreover, this is a nascent sector, still evolving, so a ban will be like trying to ban cars in the 1940s, I mean you need to let crypto have its EV moment like the automobile industry is having. I am positive that in the coming years, crypto mining will not only be sustainable but also be at the heart of many sustainable energy usage and management operations.
Tanmay Sirwaiya, Indra Crypto Capital
Proof of work is the oldest form of mining so that makes it the most secure with the downsides of having more energy consumption compared to POS and it is slower but it’s a trade-off worth having in my opinion.
Pamela Tatam, Porch
It has been claimed that ‘proof of work’, which is one of the main methods of confirming cryptocurrency transactions, relies heavily on renewable energy, and thereby poses a threat to climate-change goals. The method uses a competing method of confirming transactions, which involves several miners trying to solve cryptographic problems. An alternative has been suggested i.e. “proof-of-stake” method, which uses fewer, randomly selected miners.
There has been a considerable amount of renewable energy solely devoted to mining, more so the electricity consumption has increased significantly during the pandemic period. Bitcoin’s electricity consumption alone can dwarf that of individual countries by some measurements.
I feel sad and unfounded because these claims are once again for policymakers and officials to call for reckless decisions that penalize an industry that may be critical to enabling the energy transition in the EU. These claims are lack understanding of crypto, as Bitcoin mining uses an insignificant amount of energy—bitcoin mining is becoming increasingly more efficient and greener. Crypto space is the industry with the highest clean energy mix and the issue is not about bitcoin’s energy consumption. The European energy problem is driven primarily by an inefficient grid design and distribution that drives electricity prices up in some areas and very little in others, where bitcoin miners are connected.
Vikram Shankar, Co-Founder – Catax
Crypto mining has become like an arms race and if not controlled today, will have bigger repercussions with time. It’s a zero-sum game where if barriers are not created today then there could be 1000x growth in the next decade which is something no regulator (nation-state) would want. Impact on nature and sucking up renewable energy is debatable as that system already facilitates trillions of dollars of payments on its own.