Some cryptocurrencies not only stand out for being decentralized and fast, but for the large amount of energy they consume. That is why there has been a ban on cryptocurrency mining in Europe. This activity requires great computational power, especially in PoW or (Proof of Work) models. Therefore, some countries are suggesting changing proof of work to proof of participation, which involves fewer equipment, people and electricity.
The vice president of the ESMA (European Securities and Markets Authority) has formally called for the European Union to end cryptocurrency mining that requires PoW (Proof of Work). This is because the country’s ecological and climate objectives are being deeply affected. In fact, the provisions of the Paris Agreement are not being fulfilled due to the amount of energy used in cryptocurrency mining.
In the Financial Times, Vice president Thedéen stressed that if not acted right now, Bitcoin mining can wreak havoc on the effects of global warming. Carbon pollution is a catastrophic event that is affecting us without realizing it. The financial and technological industry needs to open its eyes to what matters and banning proof of work is one of the measures to be taken. In addition, more and more institutions want to adhere to the cryptocurrency landscape, so the situation could get worse if they did nothing about it.
For example, at the start of Bitcoin in 2009, any computer could mine if it met some basic requirements. However, as the cryptocurrency was gaining popularity and competition stoked, a lot of power was required to be able to solve the complicated algorithms presented. This is how everything became louder, warmer and less eco-friendly.
One of the activities that consumes the most energy is Bitcoin. This is because globally connected computers are solving complex calculations at the same time. There is one device that achieves a new block, while the rest are emitting tons of carbon unnecessarily. Proof of stake would therefore be the best option. This is also called Staking and many innovative projects are already using it. This does not mean that it has no impact on the environment, but electricity consumption is considerably lower.
Proof of stake requires a smaller number of computer equipment participating within the blockchain. Similarly, fewer people are needed to participate. It should be noted that some innovative projects are also offering a third form of mining, where hard drives are used. However, what appeared to be a solution at first has turned into a crisis within Asian countries. This is because many users bought large quantities of hard drives to keep them in their homes for cryptocurrency mining. And this is also pollution.
One of the elements that stood out within the interview is that there is no seeking to ban or regulate cryptocurrencies. It is simply a shift from industry to technologies that are not only more economically efficient, but environmentally efficient. If the planet’s resources run out, there’s nothing more to do. In fact the University of Cambridge published a report in which it is estimated that mining consumed what an entire country could do and generates more than 90 million tons of carbon per year. Unbelievable, but true.
It should be noted that there are countries that have simply banned everything related to cryptocurrencies. In China you can neither mine nor make transactions. To avoid such drastic measures, developers of new projects have changed the forms and are proposing renewable energy mechanisms. In fact, the same Bitcoin makers are also trying to move towards green sources. Ethereum, for its part, moves further away from the PoW protocol every day.
Advertising relating to financial securities, including cryptocurrencies, is being regulated in some European countries. In this way it seeks to avoid commercial practices that lead to deception. It also prevents influencers of dubious origin from promising villas and castles. In fact, any popular character who wants to advertise cryptocurrencies, will have to warn the real risks, declare what they really earn through them and mention to the media the content of their commercial before proceeding.
Due to these regulatory measures from some countries, as well as the precautions being taken regarding mining, the value of Bitcoin and other popular cryptocurrencies has been seen to fall. Throughout this week it has been seen as most popular cryptocurrencies are “down”, producing a number of conflicting opinions on the matter. Losses greater than 10% are calculated in the first 25 days of 2022.
But what will happen? the ban on cryptocurrency mining in Europe is only one of the steps that must be taken to avoid ecological ruin. For some, this is the beginning of the end of cryptocurrencies, because they have always taken them as “a passing game” that will never replace FIAT money. However, for others, cryptocurrencies, NFTs and tokens of various kinds are simply going through a process of re-adaptation to subsequently begin the era of the internet 3.0.
For now, it is suggested to go towards greener practices, review projects that are not working with the PoW and try to look for alternative ways to earn cryptocurrencies. For example, with the advent of NFTs, we have seen the possibility of making money through video games, online sports betting or digital art galleries. Perhaps it is time to change perspectives and move towards cleaner solutions.