Jamie McNeill
A recent report from The White House has shocked the Bitcoin community. The report states that mining activities are directly at odds with the US administration’s goals to reach their net zero targets.
The Biden administration’s views on climate change
The Biden administration has been very clear that climate change is one of their top priorities – they have already shown that they are willing to prioritise the environment over all sorts of other objectives. For example, the Biden administration appears relatively content for petrol prices to rise in the US as long as there isn’t more drilling domestically.
In March of this year, Biden commissioned the White House to investigate the environmental effects of cryptocurrencies, and the results very clearly condemn Proof of Work, and advocate for a changing regulatory framework around it.
Proof of Work functions in such a way that mining rigs are rewarded roughly proportionally to the amount of hash power that they add to the network. It is very important that Bitcoin miners are able to operate in order to be able to preserve the Bitcoin network and ensure that it is secure – an attack on Proof of Work is an attack on Bitcoin itself.
The White House report should put Bitcoin’s energy use in context
The idea that Bitcoin, which currently uses just 0.1% of the world’s total energy output, is something that could completely destroy the planet is ludicrous.
When the figures are contextualised in terms of input and output, the White House ought to have recognised that Bitcoin’s energy usage makes it one of the best-value uses of energy in the world, in that the current energy consumption, which is paid for only in newly mined Bitcoin (there are less than two million still to be mined), supports a network that has, in the past, eclipsed $1 trillion in market cap.
When one considers that the network can be the home of so much capital, it is clear that a lot of people really value what is being produced, and the Proof of Work nature of Bitcoin is hugely important for this.
In the appropriate context, the White House could have also said that the streaming platform YouTube uses over ten times as much electricity as Bitcoin, and therefore should be far more concerning when it comes to reaching net zero targets. Either the White House doesn’t understand the context of Bitcoin’s energy use, or they are willfully ignorant and simply disapprove of Bitcoin itself and see the energy consumption as an attack vector.
Central planning committees for energy consumption are a bad idea
The idea of centrally planning energy consumption and dictating who is allowed to use energy and for what purpose, is not a good idea.
The White House ought to consider the Misesian view, that they are falling into a trap of interfering with the free market and causing unintended consequences that aren’t optimal.
Not only is it morally questionable to place certain types of bans on activities and not others (for who is to determine what energy consumption is or isn’t worth it, if not for the free market?), but it is an example of the government picking and choosing winners.
A potential ban on Proof of Work mining in the US would have a series of very direct negative consequences for American citizens.
Is Proof of Stake a better alternative?
Those who favour other forms of consensus mechanisms, such as Proof of Stake, ought to be aware of the extreme risks associated with a consensus mechanism like this, and the ease with which Proof of Stake can be interfered with.
Unlike Proof of Working mining, whose participants are incentivised to be spread across the globe because energy prices are not evenly distributed,
Whilst Proof of Stake may be more compatible with ESG goals on the surface level, it does not offer the same degree of consistency and security that Bitcoin has on Proof of Work. Having functioned since 2009 with only very few issues, Bitcoin has become the most established cryptocurrency and the monetary energy stored in Bitcoin has grown to be extremely significant.
All is not lost for Bitcoiners
The report wasn’t all doom and gloom and did take note of many of the positive aspects of Proof of Work, such as the ways that the consensus mechanism can actually help to improve the environment.
For example, the report covered the ways in which mining Bitcoin can help to improve the efficiency of energy grids across the US. This was showcased in Texas in 2021, when a series of floods caused extreme property damage in the area, and many people were left without electricity. Bitcoin miners chose to voluntarily turn off their miners and plug into the national grid in order to help provide more electricity to the people of Texas.
It seems highly unlikely that the US government would want to ban Bitcoin mining, even though it may play a small role in counteracting their net zero targets. As the Bitcoin community continues to grow, Bitcoin is becoming more of a political issue in the US, and by 2024 it is quite possible that Bitcoiners will be the largest single-issue voting block.
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This article was written for Business 2 Community by Jamie McNeill.
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