Key questions surrounding crypto mining in the US

On January 27th A group of eight US lawmakers, led by Senator Elizabeth Warren, sent letters to the world’s six largest bitcoin mining companies, urging them to disclose detailed data on their electricity consumption. This isn’t the first time Senator Warren has requested this information from a mining company: a similar letter was sent last month to Greenidge Generation, which uses a natural gas plant to power its facilities.

These moves underscore the growing regulatory pressures on crypto mining companies in the United States.. But as last week’s congressional hearing showed, the increased scrutiny could become an opportunity to align mining sector development with the broader policy push for clean energy. Here are some of the top crypto-mining issues that have caught the attention of lawmakers and are likely to inform the intensifying political talks.

total energy consumption

As the cornerstone of any environmental criticism of bitcoin and cryptocurrencies in general, how much energy is used to mine cryptocurrencies was, predictably, a prominent topic at the hearing. In a 2018 article published in the prestigious journal Nature, a group of researchers predicted that Bitcoin growth alone could take global emissions above 2 degrees Celsius in less than three decades, given the international community’s stated mission to prevent it , not well, the planet’s temperature rise is of exactly the same magnitude.

Key questions surrounding crypto mining in the US
Key questions surrounding crypto mining in the US

The University of Cambridge’s Bitcoin Electricity Consumption Index has set the standard by comparing annual consumption of Bitcoin to levels in different countries, and currently the most popular cryptocurrency consumes 131.1 TWh per year, more energy than Ukraine (124.5 TWh) or Norway (124.3)., according to this source. The current estimate of Ethereum’s annual energy footprint from Digiconimist is around 73.19 TWh.

None of the most cited estimates are out of the question, as the Bitcoin Policy Institute’s (BPI) recent fact-checking report 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.

Cryptocurrency advocates prefer to compare bitcoin’s energy consumption not with nations but with other industries; In this case, according to the BPI report, 0.27% of global BTC energy consumption is less than that of gold mining, although the Cambridge Index equates the two.

Fossil vs renewable energy

With increasing political pressure on energy consumption, finding a sustainable energy framework is becoming crucial for any industry that wants to thrive in the digital age.

Critics of the crypto mining industry have recently highlighted several instances where mining operations have restarted existing fossil power plants. The authors of the letter, which some 70 NGOs sent to Congress ahead of the crypto mining hearing, drew lawmakers’ attention to several such cases, such as Stronghold Digital Mining’s restart of coal waste facilities in Pennsylvania and the partnership between Marathon Digital and facilities burned for charcoal in Montana.

There’s also evidence that these aren’t the only US companies buying up old “dirty power plants” to power their mining operations: the pattern can be seen from Texas to Missouri. At the congressional hearing, it was Steve Wright, former general manager of Washington’s Chelan County Public Utilities District, who spoke at length about the issue. He explained that Miner interest in idle fossil assets is being driven by a simple market mechanism: as renewable energy prices (particularly on the West Coast) rise in line with increased demand, coal prices fall as investors anticipate the imminent ban on all coal use in 2025 flee Washington state.

As representatives returned to this topic during 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 heart of policymakers’ deliberations on the issue. Witness John Belizaire, CEO of green data center developer Soluna Computing, argued that there are scenarios where crypto mining can evolve from being a “dirty” energy company to a vehicle that complements and empowers the energy sector.

Belizaire’s core argument is that computationally intensive tasks like Bitcoin (BTC) mining can be fueled by excess energy recovery (or, in jargon, “reduced”) that would otherwise be wasted in clean power plants. according to him Solar and wind farms waste up to 30% of the energy generated due to incompatibilities with the legacy power grids. Belizaire also addressed the issue of power outages allegedly caused by crypto miners, emphasizing the fact that the type of calculations miners are performing can be stopped at any time upon request.

First of all, the problem of “dirty mining” has to be solved. it’s here to stay simply because US renewable electricity generation levels are below 7.5%. A recent study by the DEKIS research group at the University of Ávila ranks the United States 25th in the world in terms of sustainable mining potential, with Denmark (65% of energy produced from renewable energy sources) and Germany (26%) leading the chart .

But still, The United States remains a safe zone for mining, while the power grids of many other nations are inadequate to handle additional loads. With a sensible regulatory framework, this could be a huge competitive advantage and lay the groundwork for the US to become a global mining paradise. Speaking to Cointelegraph, Belizaire explained that there are certain policy moves 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 cargo, along with the DOE loan guarantee being extended to encourage green cryptomining development.”

PoW vs Pos

Any discussion of a possible alliance between crypto mining and green energy tends to lead to 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 the sense that the energy-intensive PoW consensus mechanism is not the only way to enjoy blockchain’s decentralization benefits.

And of course, The first alternative on the table is the PoS consensus mechanism, which is likely to be adopted by the Ethereum ecosystem and is currently being 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).

Juel’s comments reflect the general pressure building on PoW. Earlier this month, European Securities and Markets Authority (ESMA) Vice-President Erik Thedéen proposed a total ban on PoW mining in the EU, calling for a move 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. The real problem, however, lies in the Asia-Pacific regionwhere almost 50% of the electricity for proof-of-work miners comes from coal, according to The Global Cryptoasset Benchmarking Study.

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 company GEM Mining, noted that the chance is “very slim to none” that Bitcoin is making the transition to PoS. Given this fact, and given Bitcoin’s status as the largest cryptocurrency, “rather than trying to disrupt Bitcoin’s verification process, the industry should focus its attention on further adopting carbon-neutral energy sources.”

John Belizaire rejected the idea that the government should prefer one bulletin to the other:

Congress does not have enough knowledge to review the technical architecture of a global platform powering billions of dollars in assets […] The tech community must be the final decision maker for innovation […] The POW field will innovate to solve its own problems.

Mason Jappa, co-founder and CEO of mining company Blockware Solutions, commented that both tests have their comparative advantages but, echoing Belzaire’s statement, emphasized the potential for renewable energy PoW network compatibility. In this sense, Jappa sees PoW mining as a “net positive for society”:

Mining is a perfect complement to the power grid, reusing infrastructure that would otherwise go unused and providing a use case for building our power grid.

What’s next?

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 particularly appreciated the part of the discussion that “highlighted the ability of the mining industry to develop greener solutions.” We were still witnessing many 101 statements on blockchain technology, reminding us of the long road legislators would have to go in understanding cryptoeconomics., but, as Warren pointed out:

It is important to acknowledge that a number of positive comments emerged from the discussion, showing the nation that mining has created many new jobs and that Bitcoin has introduced valuable blockchain technology to the world. This perspective has been largely absent from some of the recent public discussions about crypto mining.

Aside from the obvious need for both the general public and policymakers to be better informed on the issue, there are some clear priorities around which the digital mining industry could unite, Belizaire believes.

For example, Government laws or programs that encourage the use of renewable energy in place of obsolete fossil fuels to power industry, such as ??.

Therefore, it seems that the green mining card can be a direct economic and environmental argument in favor of the crypto industry, while the PoW/PoS debate should be reserved for the crypto community rather than regulators.

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