The White House Office of Science and Technology Policy today issued a report that highlights the negative effects of cryptocurrency production.
The report has expressed concern that the mining of cryptocurrencies may have a negative effect on the environment, which might thwart the efforts by the United States to address climate change. The Biden administration has been involved in a heated debate over the carbon footprint of virtual assets. Critics have for some time now been raising concern over the amount of power used in crypto mining operations. Although it did not propose any specific rules, the report did, however, suggest that the U.S. must take measures to reduce emissions associated with cryptocurrency mining. The White House report also said that the federal government should collect data on electricity usage and collaborate with states and the cryptocurrency sector to establish guidelines.
Depending on the energy intensity of the technology used, crypto assets could hinder broader efforts to achieve net-zero carbon pollution consistent with U.S. climate commitments and goals, the report said.
Government institutions such as the Environmental Protection Agency “should provide technical assistance and initiate a collaborative process with states, communities, the crypto-asset industry, and others to develop effective, evidence-based environmental performance standards for the responsible design, development, and use of environmentally responsible crypto-asset technologies,” the White House suggests.
The report further states:
Should these measures prove ineffective at reducing impacts, the Administration should explore executive actions, and Congress might consider legislation, to limit or eliminate the use of high energy intensity consensus mechanisms for crypto-asset mining.
Proof-of-Work Continues Despite Energy Concerns
According to statistics cited by the White House report, the U.S. is responsible for 38% of the world’s Bitcoin mining, compared with 3.5% in 2020. Additionally, blockchains that support crypto assets now use up more energy than many countries, including Argentina and Australia. Crypto asset operations use between 0.9 and 1.7% of the U.S.’s total electricity consumption.
Although the report includes cryptocurrencies, NFTs, and other tokens using blockchain technologies, the report made specific reference to one particular technology that is driving most of the energy consumption issues: the proof-of-work consensus mechanism which underpins the two largest cryptocurrency networks: Bitcoin and Ethereum.
Proof-of-work uses most of the energy that the crypto sector consumes. Fortunately, there are newer blockchains that have found different methods that use a fraction of the energy compared to Bitcoin and Ethereum. Ethereum is however taking responsibility for its carbon footprint and is expected to switch over to a proof-of-stake consensus mechanism later this month. The highly anticipated Merge is supposed to cut Ethereum’s energy consumption by up to 99.95%.
But as long as Bitcoin continues with the proof-of-work consensus mechanism, and continues to be the dominant cryptocurrency, crypto mining could continue to pose problems for energy consumption.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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