One of the financial regulators of the European Union has raised concerns about the energy-intensive Bitcoin mining system. In an interview with the Financial Times, vice-chair of the European Securities and Markets Authority [ESMA] Erik Thedéen urged for a bloc-wide ban of “proof of work” crypto mining. He noted that the industry’s energy usage was become a “national issue” in Sweden.
“Bitcoin is now a national issue for Sweden because of the amount of renewable energy devoted to mining. It would be an irony if the wind power generated on Sweden’s long coastline would be devoted to Bitcoin mining.”
Bitcoin and PoW
Many in the space have pointed at the energy consumed for mining Bitcoin and some like Tesla CEO, Elon Musk have also stayed away from it owing to this reason. As per the Cambridge Bitcoin Electricity Consumption Index, the largest digital asset currently consumed 0.6 percent of the world’s electricity.
This was mainly due to the process through which miners obtain Bitcoin. The cryptographic proof, known as Proof of Work proved to others that a certain amount of a specific computational effort has been expended. It incentivizes miners to use computing power to validate blockchain transactions and earn tokens in return. This tends to consume more energy.
Thedéen, in November, had called for a ban on PoW crypto mining as the director of the Swedish Financial Supervisory Authority. He had noted at the time that between April and August 2021, the energy consumption of Bitcoin mining operations went up in Sweden by “several hundred percent.”
Thedéen clarified that he was not rooting for a ban on cryptocurrencies, but rather was trying to promote a “discussion about shifting the industry to a more efficient technology.” He said,
“The solution is to ban proof of work.”
Ethereum along with Bitcoin currently uses PoW but it was in the process of making the giant shift to proof-of-stake [PoS]. While PoW encouraged competition between miners to keep the network secure, PoS is less energy-intensive.
As the concerns grow, Bitcoin mining may have to seek renewable energy sources to keep the motor running. A mining ban in China pushed the industry towards this idea and it may take it forward if more awareness was created.