Top Policy Issues Regarding Crypto Mining in the United States

On January 27, a group of eight U.S. lawmakers, led by Senator Elizabeth Warren, letters sent to the six largest Bitcoin mining companie...

On January 27, a group of eight U.S. lawmakers, led by Senator Elizabeth Warren, letters sent to the six largest Bitcoin mining companies in the world, demanding to reveal detailed data on their electricity consumption. This isn’t the first time Sen. Warren has asked a mining operation for this information — last month a similar letter was sent to Greenidge Generation, which uses a natural gas plant to power its facilities.

These measures 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 prove to be an opportunity to align the development of the mining sector with the broader political push for clean energy. Here are some of the key themes around crypto mining that have captured the attention of lawmakers and will likely inform the heightened policy conversation.

Total energy consumption

A cornerstone of any environmental criticism of Bitcoin and crypto in general, the question of how much energy is consumed by cryptocurrency mining was expected at the hearing. In a 2018 paper published in the prestigious journal Nature, a group of researchers predicted that Bitcoin’s growth alone could push global emissions above 2 degrees Celsius in less than three decades – not a good look considering of the declared mission of the international community to prevent the increase in the temperature of the planet in exactly the same way. magnitude.

University of Cambridge Bitcoin Electricity Consumption Index set the tone by comparing Bitcoin’s annual consumption at different national levels – and so far, 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 approximately 73.19 TWh.

None of the most quoted estimates is indisputable, because the recent fact check report by Bitcoin Policy Institute (BPI) suggests. He cited three separate articles from the peer-reviewed journal Nature Climate Change, one of which debunked the 2 degree argument as “fundamentally flawed” and criticized its methodology.

Crypto proponents prefer to compare Bitcoin’s energy consumption not to nations, but to other industries – in this case, according to the BPI report, BTC’s global energy consumption is 0.27% lower to that of gold mining, although the Cambridge index puts the two on a par. .

Fossils vs Renewables

In a context of ever-increasing political pressure on energy consumption, the search for a sustainable energy framework becomes crucial for any industry that wants to flourish in the digital age.

Critics of the crypto mining industry have recently highlighted several examples of mining operations jump-starting existing fossil power plants. The authors of the letter that some 70 NGOs sent to Congress ahead of the crypto-mining hearing drew lawmakers’ attention to several such cases, such as the revival of coal waste processing plants in Pennsylvania by Stronghold Digital Mining and the partnership between Marathon Digital and coal-fired power plants in Montana.

There is also evidence that it’s not the only US companies buying up old ‘dirty power’ plants to power their mining operations – the trend is seen from Texas at Missouri. During the congressional hearing, it was Steve Wright, a former chief executive of Chelan County in Washington’s utility district, who spoke at length about the issue. He explained that miners’ interest in idle fossil facilities is driven by a simple market mechanism: as renewable energy prices (on the West Coast in particular) rise in line with growing demand, coal prices are falling due to investors fleeing ahead of the upcoming 2025 ban on all coal use in Washington state.

As representatives kept coming back to this issue during the hearing, it became clear that the tension between the use of fossil fuels for crypto mining and the industry’s potential shift to energy sources renewable energy is at the center of the thinking of decision makers on the issue. Witness John Belizaire, CEO of green data center developer Soluna Computing, argued that there are scenarios in which crypto mining can shift from a “dirty” energy concern to a vehicle complementing and strengthening the sector. renewable energies.

from Belizaire basic argument is that compute-intensive tasks like Bitcoin (BTC) mining can be powered by the excess reclaimed (or, in industry terms, “reduced”) energy otherwise wasted by clean power plants. According to him, solar and wind farms waste up to 30% of the energy produced due to incompatibilities with old energy networks. Belizaire also addressed the issue of power shortages allegedly caused by crypto miners, pointing out that the type of computations miners perform can be stopped at any time upon demand.

For now, the “dirty mining” problem is here to stay simply due to the US level of electricity generation from renewable sources being below 7.5%. A recent study by the University of Avila’s DEKIS Research group ranks the United States 25th in the world in terms of sustainable mining potential, along with Denmark (65% of energy generated from renewables) and Germany (26%) in the lead.

Nevertheless, America remains a safe area for mining, while the power grids of many other countries are less suited to handle additional load. With a reasonable regulatory framework in place, this could be a huge competitive advantage, laying the groundwork for the United States to become a global mining paradise. Speaking to Cointelegraph, Belizaire explained that there are certain policy measures that can incentivize crypto miners to “go green.” He listed a number of specific measures: “Extended tax credits and special investment tax credits for miners who use green energy and serve as flexible load, as well as a guarantee of loan from the DOE which is extended to encourage the development of green crypto mining.”

PoW versus PoS

Any discussion of a possible alliance between crypto mining and green energy tends to come up against a debate between proof-of-work (PoW) and proof-of-stake (PoS), and the recent hearing did not exception. It was Cornell professor Ari Juels who has repeatedly stated that “Bitcoin is not equal to blockchain” in that the energy-intensive PoW consensus mechanism is not the only way to reap the benefits of crypto decentralization.

And, of course, the number one alternative on the table is the PoS consensus mechanism that will eventually be adopted by the Ethereum ecosystem and is currently being used in a large number of new blockchain projects. It is also central to the development of smart contract-based technologies such as decentralized finance (DeFi) and non-fungible tokens (NFT).

Juels’ statements reflect the general pressure on PoW. Earlier this month, Erik Thedéen, Vice President of the European Securities and Markets Authority (ESMA), offers an outright ban on PoW mining in the EU and called for the transition to PoS due to its lower energy profile.

In the United States, which dominates the global Bitcoin mining market with a 35% share, the problem is far more pressing than in Thedeen’s native Sweden, where only around 1.16% of BTC is mine. However, the real problem lies in the Asia-Pacific region, where, according to the Global Crypto-Asset Benchmarking Study, almost 50% of electricity goes to proof-of-work miners come coal.

None of the three experts who spoke to Cointelegraph about this consider the juxtaposition of the two consensus protocols to be productive. John Warren, CEO of crypto mining firm GEM Mining, noted that there are “slim to nil” chances of Bitcoin moving to PoS. With this fact in mind, and given Bitcoin’s status as the largest cryptocurrency, “the industry should focus its attention on increasing adoption of carbon-neutral energy sources rather than trying to modify the Bitcoin verification process”.

John Belizaire dismissed the idea that the government should support one ballot over another:

Congress doesn’t have enough knowledge to call on the technical architecture of a global platform that powers billions of dollars in assets […] The tech community should be the final arbiter of innovation […] The POW camp will innovate to solve its own problems.

Mason Jappa, co-founder and CEO of mining company Blockware Solutions, noted that both proofs have their comparative advantages, but, echoing Belzaire’s testimony, pointed to the potential for PoW networks to be compatible with renewable energy. . In this sense, Jappa sees PoW mining as a “net positive for society”:

Mining is a perfect complement to the energy grid and repurposes infrastructure that was otherwise unused, while providing a use case for building our energy grid.

And after?

As Jappa noted, “it’s a good thing for the ecosystem that this hearing took place” as once again lawmakers expressed their understanding that cryptocurrencies are here to stay.

Warren particularly liked the part of the discussion that “highlighted the ability of the mining industry to innovate more environmentally friendly solutions.” We still saw many 101 explanations of blockchain technology that were reminders of the long road lawmakers would have to travel in terms of understanding the crypto economy, but, as Warren pointed out:

It is important to recognize that there were a number of positive remarks that came out of the discussion, showing the nation that mining has created many new jobs and that Bitcoin has introduced valuable blockchain technology into the world. This perspective has been largely absent from some of the recent public discourse on cryptocurrency mining.

Besides the obvious need for the general public and lawmakers to be better informed on the issue, there are clear focal points around which the digital mining industry could rally, Belizaire believes.

For example, laws or government programs that encourage the use of renewable energy rather than legacy fossil fuels to power industry, such as “Incentives for job creation in rural parts of the country where mining operations are put in place – both at the state and federal level.”

So, it looks like the green mining card is the one that can make a simple economic and environmental case for the crypto industry, while the PoW/PoS debate is something that should be left to the crypto community rather than to regulators.

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Newsrust - US Top News: Top Policy Issues Regarding Crypto Mining in the United States
Top Policy Issues Regarding Crypto Mining in the United States
Newsrust - US Top News
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