A prominent EU financial regulator has revived recommendations for a bloc-wide ban on the most common kind of bitcoin mining. This has raised concerns about the growing use of sustainable energy for cryptocurrency mining.
According to the Financial Times, Erik Thedéen, vice-chair of the European Securities and Markets Authority, bitcoin mining has become a nationwide problem. Specifically in his home country of Sweden. Also, digital currencies represent a risk to fulfilling the Paris environmental targets.
To reduce the industry’s massive power consumption, European authorities should take into account prohibiting the proof of work mining approach. Also, drive the business toward the less energy-intensive proof of stake approach, according to Thedéen.
BTC and Ether
The two most popular virtual currencies by size, bitcoin (BTC) and ether, both use the proof of work paradigm. It requires all users on the blockchain virtual database to validate transactions. Miners are compensated for logging transactions with newly generated currencies. This is done by using enormous data centers equipped with powerful computers to tackle complex challenges.
This takes a lot more power than the proof of stake approach. Additionally, it has a considerably smaller number of individuals signing off on deals.
Thedéen, who is also the director-general of Sweden’s Financial Services Authority and the chair of Iosco’s sustainable finance committee, said that the idea is to make evidence of labor illegal. The energy footprint of proof of stake is much lower.
Mining Industry
As per Blockchain.com, mining has become a very profitable and demanding industry. With the level of computing power allocated to the operation reaching new highs. China outlawed the technique in May. However, it has since spread worldwide, with some publicly traded organizations, such as Canada’s Hut 8, focusing on it.
We ought to have a conversation about moving the sector towards a more sustainable system, Thedéen said, emphasizing that he is not proposing a blanket ban on cryptocurrency. The financial industry and a number of influential organizations are now participating in cryptocurrency markets. They have ecological, social, and political duties, he continued.
His remarks came after Swedish officials proposed a crackdown on the activity in November of last year. He cited the growing quantity of renewable energy allocated to digital currencies while claiming that the societal value of digital currencies is dubious.
In November, the Swedish financial regulator announced, We call for the EU to adopt an EU-level prohibition on the energy-intensive mining technique proof of work.
Cryptocurrency mining has come under fire recently for its ecological consequences. As per statistics from the Cambridge Bitcoin Electricity Consumption Index, the technique consumes 0.6 percent of the world’s overall energy. Also, it consumes more electricity yearly than in Norway.
EU Miners
Miners have increased the percentage of renewable energy they consume to operate their computers in response to rising condemnation and a prohibition in China and have moved into nations with abundant solar and wind energy, often including Sweden and Norway.
Due to the sheer quantity of renewable energy allocated to mining, Bitcoin has now become a national problem for Sweden, Thedéen added.
He cautioned that if no action is taken, a large quantity of renewable energy will be used to create bitcoin units rather than push conventional operations away from fossil fuel sources of energy.
According to Swedish officials, mining a single unit of bitcoin requires the same quantity of energy. According to estimations from Cambridge University, it was also operating a medium-sized electric vehicle for 1.8 million kilometers. Thedéen added that it would be ironic if wind power provided along Sweden’s vast coastline were used to mine bitcoin.
Ethereum, the second most valuable digital asset, has announced that it will switch to a proof-of-stake architecture in June.
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