EU regulator has warned that the main form of bitcoin mining is doing harm to the environment and is against E.U.’s climate goals
The Vice Chairman of the European Securities and Markets Authority (ESMA) – Erik Thedéen has warned that the main form of bitcoin mining is doing harm to the environment and is against the European Union’s (E.U.’s) climate goals.
Crypto miners use sophisticated computers to solve complex mathematical problems. The miners who are the first to solve the problems are awarded the next block of bitcoins. But the mining process known as “proof of work,” whereby miners compete against each other to crack the code of an algorithm using high-powered computers, is more energy-intensive than its alternative, “proof of stake.”
As per research carried out by researchers at the Cambridge Center of Alternative Finance (CCAF) in 2020, 62% of global miners rely on hydropower, 38% use coal and 39% used some combination of wind, solar or geothermal energy. But it is estimated that only 39% of bitcoin’s energy consumption is carbon neutral.
The mining of cryptocurrencies including bitcoin introduces new digital coins into circulation and safeguards transactions that ensure their validity.
Speaking on the occasion, Thedeen said, “Proof of stake has a significantly lower energy profile. We need to have a discussion about shifting the industry to a more efficient technology.”
According to Blockchain.com., the amount of energy being used to mine new coins is at an all-time high. One of the largest Russian cryptocurrency mining companies – BitRiver exploits excess hydroelectric power to maintain the largest network of data centres and offers them for hosting computing machinery.
Several countries including China, Kazakhstan and Kosovo have cracked down on bitcoin mining due to the strain it places on the local power grid. Bitcoin miners in Kosovo were forced to sell their equipment after the Government banned mining in the wake of blackouts and soaring energy prices.
Kazakhstan enacted strict limits on crypto mining after the country suffered an electricity shortage.
The central Asian nation had attracted miners who were kicked out of China, which had been previously known as the world’s epicenter of mining before authorities cracked down on the practice. Recently, the United States (U.S.) has become the world hub of digital currency mining, overtaking China.
Despite not being like by the regulators, crypto mining is still a lucrative business. Some of the top firms such as Hut 8 and Marathon Digital Holdings boast 10-digit valuations. The energy demands of mining have become a major point of criticism for the crypto.
