Lawmakers Take on Environmental Damage from Proof-of-Work
US lawmakers are turning their eye toward proof-of-work crypto and its environmental impact:
The House Energy and Commerce Committee sent letters to Core Scientific, Marathon Digital Holdings, Riot Blockchain, Inc. and Stronghold Digital Mining on Wednesday. The committee is studying the impact of proof of work and how it relates to emissions and “excess electronic waste.”
“While we understand that blockchain technology holds immense promise that could make our personal information more secure and economy more efficient, the energy consumption and hardware required to support PoW-based cryptocurrencies may, in some instances, produce severe externalities in the form of harmful emissions and excess electronic waste (e-waste),” reads the committee letter to Stronghold Digital Mining.
The committee requested information on how much energy each company's mining facilities used in 2021, what energy sources the facilities use and the proportion of energy used that is offset by renewable energy credits. The lawmakers also asked how many days companies curtailed crypto mining to support grid stability in the last 12 months, along with the average cost per megawatt hour and the per megawatt-hour profit at each facility.
The environmental impact of proof-of-work could be lower than you might think:
… Estimates for what percentage of Bitcoin mining uses renewable energy vary widely. In December 2019, one report suggested that 73% of Bitcoin’s energy consumption was carbon neutral, largely due to the abundance of hydro power in major mining hubs such as Southwest China and Scandinavia. On the other hand, the CCAF estimated in September 2020 that the figure is closer to 39%. But even if the lower number is correct, that’s still almost twice as much as the U.S.
But, even if BitCoin’s power consumption isn’t very green, that’s not ultimately the problem with proof-of-work. The problem is that BitCoin can’t scale because it uses the difficulty of mining to provide security. That makes BitCoin inherently slow. It also creates a perverse incentive where BitCoin miners are better off refusing to scale their total transaction throughput, because using more bandwidth for transactions doesn’t produce more earnings.
In this day and age, it’s de rigeur to criticize any industry on its environmental impact, but in fact that problems with PoW networks are far more fundamental. We need decentralized cryptocurrency protocols that people can use for day-to-day commerce. That means they need to be highly scalable, easy to use, and with ultra-low fee structures.