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A top European regulator called on European authorities to ban all crypto mining to reduce CO2 emissions.
Vice-chair of the European Securities and Markets Authority Erik Thedéen said that crypto mining is a huge issue for Europe.
In his native Sweden, Bitcoin mining has become a “national problem,” he said in an interview. Mining could pose a risk for the country’s climate change goals written out in the Paris Agreement.
The solution? Steer the crypto industry away from the proof of work (PoW) model, which requires mining. Instead, cryptos should adopt the alternative proof of stake (PoS) model.
The solution is to ban proof of work. Proof of stake has a significantly lower energy profile.
The move would, Thedéen believes, make cryptos more sustainable. He added that he is not in favor of a complete ban on crypto.
We need to talk about moving the industry to more efficient technology.
His comments come after Swedish authorities first talked about a potential ban on mining back in November 2021.
The EU will consider an EU-level ban on proof of work with energy-intensive mining methods.
They also noted that more and more renewable energy goes towards crypto. Moreover, they said that “the social benefits of crypto assets are questionable.”
Due to its low electricity prices, and high internet speeds, Sweden is an attractive place for miners.
PoW vs PoS
Proof of work relies on computing power to solve complex equations to write transactions on the blockchain. That process, known as mining, requires a lot of energy.
The energy demands of this process help secure the network from malicious attacks. In turn, miners get mining rewards for their efforts.
Bitcoin and Ether, the two largest cryptos, both rely on the PoW model. On the other hand, major cryptos that use PoS are Cardano, Solana and Algorand. Moreover, Ether is moving to PoS, with the upcoming Ethereum 2.0. upgrade.
Instead of mining, PoS uses staking as a way to validate transactions. Validators have to put up some cryptocurrency to validate transactions. If they don’t perform the operations right, their stake is “slashed,” or taken away.
PoS seems to be the trend. In the future, even Bitcoin could theoretically shift away from PoW. However, that is very unlikely.
Firstly, miners have a huge influence on the network. They don’t have an incentive to shift, due to their huge investments in mining hardware.
Moreover, many investors consider PoW to be an asset for Bitcoin, especially for its use as a store of value. Most crypto investors still consider Bitcoin to be the most secure and the most decentralized blockchain network.
Bitcoin mining has become a big industry. That’s why it is coming increasingly under fire for its huge energy demands and CO2 emissions.
Miners mostly operate in countries where energy is relatively cheap. Due to its cheap energy, China dominated Bitcoin. That is, until July 2021, when the country banned all crypto mining. Regulators cited China’s CO2 emission targets as a primary reason.
Right now, the U.S. dominates the industry and is responsible for 35.4% of Bitcoin’s hash rate. Oil and gas giants Kazakhstan (18.1%) and Russia (11.23%) follow.
In particular, Texas and Florida lead U.S. states in terms of mining capacity. This is due to low energy costs in these states, as well as a favorable regulatory environment.
Politicians in these states welcome the crypto jobs that come with mining, as well as income from selling electricity.