A number of Bitcoin community leaders and industry leaders sent a letter to the Environmental Protection Agency to clarify confusion and educate the public regarding Bitcoin’s power consumption. MicroStrategy CEO Michael Saylor and Jack Dorsey, “Block Head”, are among the 55 signatories.
The proof of stake is not the answer
The Bitcoin Mining Council shared the letter. It was created in response to a congressional request to examine the compliance of mining facilities with the Clean Air Act, and the Clean Water Act.
The request claims that proof-of-work mining facilities “poison communities” by producing massive greenhouse gas emissions, electronic trash, and “noise polluting”. The request also states that the consensus mechanism is inherently energy inefficient and suggests proof of stake as an alternative to it.
However, the Bitcoin industry has deemed several of these claims misleading. It first corrects the mistake made by Congress in conflating data centers and power-generation facilities. Datacentres hosting miners buy pre-produced energy from the open market just like Amazon, Apple and Microsoft.
It also discusses the problems surrounding proof of stake consensus mechanisms in detail:
It states that Proof of Stake is not an “mining technology”. It is a technique that determines authority over a distributed ledger but does not allow for decentralized distribution.
Proof of work, at its most basic level, requires network users spend energy trying to build Bitcoin’s next block. Proof of stake, on the other hand, grants block creation rights to those who stake the most crypto holdings. This is done without the need for users to consume power.
Many in the crypto industry, including co-founders of Ripple, Solana, and others, believe that Bitcoin should adopt this mechanism because it is more efficient.
The letter from the council states that proof of stake has no proven track record and can fail “single times” and is not reliable to “govern global, apolitical money systems”.
The members, however, claim that proof of work’s energy consumption isn’t as severe as they make it out to be. One, Congress stated that coal and natural gas facilities were being reopened for mining Bitcoin. However, the letter clarifies that the overall trend in the industry is towards renewables.
Patently False Claims
Although much of the initial letter was “misleading”, they deemed the claims made by congress about Bitcoin’s ewaste to be “straightforwardly falsified”. The letter cited a paper written by Alex de Vries, an economist at Deutsch Central Bank. It estimated that mining ASICs depreciate every 1.3 years. The theoretical estimate was that miners produce 30,700 tons of electronic garbage each year.
There is a market for older Bitcoin mining machines. Bitmain’s s7 and S9 ASICs are visible on the blockchain, accounting for large amounts of Bitcoin’s hashrate. These machines were made available in 2015 and 2016.
Also, the council corrected the assertion that one Bitcoin transaction could power a US household for a month. Bitcoin transactions are much more efficient than Google searches and do not have the potential to be redeemed for energy.
To compete for new coins and transaction fees, those who consume energy on the network do this to gain access to it. The majority of Bitcoin’s current revenue comes from the former, which makes the analysis of Bitcoin’s energy costs per transaction deeply flawed.
The letter concluded by stating that Bitcoin mining doesn’t raise environmental concerns, but rather is “the most significant financial, economic and accounting innovation in human history.”
Marla Brooks – Financial Analysis
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