Sweden’s government is urging the European Union to prohibit energy-intensive cryptocurrency mining techniques such as those employed by Bitcoin.
Indeed, according to documents obtained through a freedom of information request, EU officials discussed the planned ban on Bitcoin trading with their Swedish counterparts during a recent debate on the legislation to abolish Proof of Work mining.
According to officials, such practices cannot be accepted at a time when all states must urgently reduce their energy usage in order to battle climate change.
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Form Bitcoin POW To POS
An unnamed forum participant stated that bitcoin should be encouraged to migrate to a more ecologically friendly proof-of-stake (PoS) protocol, as rivals such as Ethereum have already done, and that he did not “see the necessity to ‘defend’ the bitcoin community.”
Cryptocurrency mining relies heavily on proof of work, both to verify transactions and to create new tokens.
Because of proof of work, peer-to-peer cryptocurrency transactions can be conducted safely without the involvement of a third party.
With each additional miner, the amount of energy needed to do proof-of-work increases exponentially.
Image credit: Medium
Proof of Stake (POS) was one of a number of innovative consensus techniques developed as a replacement for proof of work.
‘Economic Damage’ From BTC Mining
Björn Risinger and Erik Thedéen, directors of the Swedish Environmental Protection Agency and the Swedish Financial Supervisory Authority, respectively, wrote an open letter to the EU in early November to warn of the country’s severe economic damage from crypto mining.
Between April and August 2021, energy usage associated with crypto mining surged “several hundredfold” in Sweden. According to officials, this currently equates to the energy consumption of 200,000 households.
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BTC total market cap at $775.42 billion on the daily chart | Source: TradingView.com
According to the University of Cambridge’s Bitcoin Electricity Consumption Index, BTC consumes around 130 terawatt-hours of electricity every year.
They anticipate an increase in that figure. By comparison, Germany as a whole utilized approximately 488 terawatt hours of electricity in 2020.
While this is an imprecise estimate, few experts deny that Bitcoin and other cryptocurrencies require enormous quantities of electricity.
When asked about the effect of an outright Bitcoin ban on investors and retail traders, officials expressed a general lack of worry, noting that all Bitcoin investors are fully aware of the downside risk.
A Contentious Subject
Certain sections of the report have been deleted to protect individual privacy or as part of a “ongoing decision-making process,” implying that a policy on the subject is still being created.
Swedish authorities have already expressed their desire to eliminate proof-of-work for environmental grounds.
These records, however, provide unprecedented insight into the lengths to which some EU authorities are willing to go in order to rein in mining-related energy consumption.
While PoS cryptocurrencies look to be immune to broad regulatory action in the near term, Bitcoin mining will remain a contentious subject in the EU.
Featured image from DZone, chart from TradingView.com