In Europe, there have recently been requests to ban Bitcoin mining.
What is presented as an ecological cause may actually have other connotations.
Erik Thedén, Vice President of the European Securities and Markets Authority (ESMA), calls for a ban on mining Bitcoin (BTC) and other cryptocurrencies. The justification is the already trite —and also refuted— ecological argument that says that the environmental footprint of this practice would be disproportionate, compared to its benefits.
Thedén does not say he opposes Bitcoin, but only its mining. The official has advocated replacing it with proof of participation (PoS) which has lower power consumption.
It is worth clarifying that changing the Bitcoin consensus algorithm is not possible. Even if BTC were agreed to work with PoS, nodes that disagreed could still validate the original protocol and drop the forked chain.
But, let’s assume the unlikely event that a massive and unequivocal consensus was reached on the matter and Bitcoin became a protocol that works with proof of stake. Perhaps the main beneficiary of this change is not the environment, but the States.
The proof of participation facilitates the control of the network by whoever issues the money
Cryptocurrency networks that use the PoS algorithm (as expected, for example, with Ethereum in the near future) are easier for governments to control.
To understand this, it is first necessary to spend a few paragraphs to understand very basically the difference between mining (PoW) and staking (PoS). In the first of them, as explained by Criptopedia, an educational section of CriptoNoticias, considerable but feasible work is required (a computational puzzle) to process the information. This implies acquiring hardware and consuming electrical energy.
Instead, in staking, the probability of validating a new block is determined by how much money a participant has staked. For the aforementioned case of Ethereum, those who have at least 32 ethers (ETH) can become validators of version 2.0 of the network. By validating a block rewards are earned (new coins that are issued)
Taking this into account, and because the States have a monopoly on the issuance of fiat money, they could buy cryptocurrencies that use PoS to have all the validators they want under their control.
The same is not true for protocols that require specialized hardware. This is the case of Bitcoin, whose mining is carried out with certain chips and electrical circuits (ASIC). With these teams the blocks are mined and, as a consequence, the new BTC that go as a reward to the miners are issued.
The scarcity of these specialized devices creates a much higher barrier to entry, even for States (it is always much easier to print money to solve problems and governments around the world know this well).
With these considerations, it is not unreasonable to think that mining makes States uncomfortable, and not precisely for ecological reasons. Controlling the nodes of Bitcoin (or any other network) grants enormous power. At the level of monetary sovereignty, it is even more important than mining.
A node is a computing device connected to others that follows rules and shares information. In the case of Bitcoin, a full node is a computer that hosts and synchronizes a copy of the entire blockchain.
Those who run a Bitcoin node ultimately have the voting power to define Bitcoin and decide its characteristics. For example, no improvement proposal (BIP) can be implemented if the nodes do not make the corresponding software update to run a client compatible with the change.
Bitcoin: an attack against the state monopoly on money
Knowing this, it is consistent to think that the ecological argument against Bitcoin mining is nothing more than a Trojan horse by the States to make it easier for them to have control over the network.
No matter how friendly governments are on issues such as “crypto” or “blockchain technology”, the truth is that —with very few exceptions— the state narrative about Bitcoin is not usually on good terms.
And it is natural that like it is. Bitcoin, by definition, as stated in the White Paper written by Satoshi Nakamoto, is a peer-to-peer electronic cash system. Let us also add that it is decentralized and private money. That is to say, Bitcoin is an attack against the state monopoly on money.
How could the governments of the world make their massive highly inflationary money issues if they did not have the power to issue money without any backing at will? How could the debt system that controls a large part of humanity and with which the fractional reserve banking system?
How could wars, salaries of public officials, subsidies at close range and other customary practices be financed if only scarce money and with a predefined issue, such as Bitcoin, were used?
As such, bitcoiners know that bitcoin is valuable. And that value is largely due to proof of work. It is she who provides security and computing power to the network. The States, possibly, also know it and that is why they seek to attack Bitcoin from its bases.
Interestingly, governments are more interested in attacking Bitcoin mining than promoting cryptocurrency networks that already employ (or plan to employ) proof-of-stake. Apparently, neither Solana, nor Cardano, nor Binance Smart Chain, nor Ethereum 2.0 generate much interest for them. Perhaps they have understood what many investors still do not: that It is Bitcoin that is on its way to being the global standard, and not its pre-mined or highly centralized imitations.
Economist Saifedean Ammous says in his book “The Bitcoin Pattern”:
No currency, except Bitcoin, can credibly claim to be outside of anyone’s control. (…) There is nothing original or difficult in copying the design of Bitcoin and producing a somewhat different imitation, something that thousands of people have already done to date. (…) That all [las altcoins] have decided to imitate the rituals of Bitcoin under the guise of solving something else does not inspire confidence that they will achieve something more than enrich their creators.
Saifedean Ammous, economist and author of “The Bitcoin Pattern.”
Bitcoin mining consumes a lot of energy and it’s okay that it is
Faced with the ecological argument against mining, Bitcoin advocates often respond with a memorized series of comparisons with other industries: that Visa spends more, that household appliances spend more, that the transportation system spends more…
Bitcoin consumes so much energy that, if it were a country, it would be in 27th place, surpassing Argentina, Switzerland, Norway, Venezuela and Colombia, among others. Source: CCAF.
But comparing apples to oranges is usually not a good argumentative device. Bitcoin is not a credit card, or a hair dryer, or an airplane. Bitcoin is peer-to-peer, decentralized, open, non-state, unconfiscatable, sovereign and uncensorable electronic cash.
For that reason, I like the politically incorrect but empirically verifiable answer better: Does Bitcoin mining consume a lot of energy? Yes, and it is good that it is so. There is no reason to deny it. The benefits make that expense justified. And, having said that, it can be clarified that, although Bitcoin does not have to be eco friendly, possibly it already is.
Disclaimer: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of CriptoNoticias.