The White House Office of Science and Technology released a report on Thursday urging the Environmental Protection Agency (EPA) and the Department of Energy (DOE) to take measurable actions to control high energy consumption by crypto mining proof-of-work mechanism.
The report is among the first responses to US President Joe Biden’s executive order on cryptocurrencies.
The document acknowledges that cryptocurrency technologies use a high amount of electricity that contributes to greenhouse gas emissions, additional pollution, noise and other local impacts.
The first section of the report, which serves as an introduction, hints toward banning proof-of-work cryptocurrency mining operations if regulatory action fails to enable the country to achieve its climate goals.
“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,” the report said.
The next part of the document explores the impact of crypto mining on national electrical grids. The White House’s Science and Technology team claims that Bitcoin mining, powered by a proof-of-work consensus mechanism, adds stress on the power grid that results in cases of blackouts, fire hazards, and equipment deterioration. According to the report, Bitcoin mining has raised the average electricity cost for local consumers.
“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 elaborated.
The final section of the report suggested ways in which Bitcoin mining can benefit efforts toward achieving U.S. climate goals. The report advocated for the responsible development of digital assets and solutions to drastically reduce crypto energy consumption.
The report recommended the use of the “less energy-intensive consensus mechanism, called Proof of Stake (PoS), which is considered to consume less than 0.001% of global electricity usage.
The White House also encouraged crypto miners to consider using electricity generated from vented and flared methane at oil and gas wells and landfills as another viable alternative.
Why Is the White House Taking an Interest?
In March, U.S. President Biden signed an executive order, calling on the government to examine the risks and benefits of crypto assets.
The measures focused on six key areas like consumer protection, financial inclusion, financial stability, U.S. competitiveness, illicit activity, and responsible innovation.
The executive order was a kind of a ‘call to action’ that laid out a series of policy statements, such as the need to protect consumers, investors, and businesses in the US, as well as the need to support technological advances that promote responsible development and use of digital assets.
The executive order expected a set of reports coordinated through the interagency process from a broad range of executive branch stakeholders.
Vitalik Buterin, Ethereum’s co-founder, has hinted that the much-anticipated merge might occur around September 15.
The transition from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism called the merge is speculated to be the biggest software upgrade in the Ethereum ecosystem. Nevertheless, it has been quite elusive since it was launched in December 2020.
Despite these revelations by Buterin, ETH developers are anticipated to come up with a conclusive date next week, given that the final test called Goerli was finalized earlier this week.
A recent developers’ call had suggested September 19as the most probable date for the merge.
Once the merge rolls out, the PoS algorithm will enable the confirmation of blocks in a more cost-efficient and environmentally friendly way because validators will stake Ether instead of solving a cryptographic puzzle.
Meanwhile, American multinational investment bank Citigroup or Citi recently disclosed that transitioning to a PoS consensus mechanism would make Ethereum a deflationary asset.
As a result, the second-largest cryptocurrency would become a “yield-bearing asset.”
Citi also pointed out that the merge would slash the overall Ether issuance by 4.2% annually, making it deflationary. Therefore, shifting to a PoS consensus mechanism would enhance Ethereum’s quest to become a store of value.
Therefore, as a “yield-bearing asset,” Citi added that ETH would experience more cash flows. As a result, prompting more valuation methods that were not available before.
On the other hand, Buterin recently acknowledged that MakerDAO’s consideration to depeg its native token DAI from stablecoin USD Coin (USDC) was a risky and terrible idea, Blockchain.News reported.
This decision might have been reached based on tornado sanctions because MakerDAO intends to replace USDC as collateral with Ethereum.
In May 2021, a Nashville couple known as the Jarretts filed a lawsuit against the United States Internal Revenue Service (IRS) over taxes they had paid on unclaimed and unsold Tezos (XTZ) staking rewards. At the beginning of February, news broke that the lawsuit filed by the Jarretts had come to an end, resulting in the IRS issuing the couple a tax refund for $3,793.
Confusion among crypto holders
Not long after this news made headlines, confusion among the crypto community piqued. One crypto media publication sent a tweet from its official account on Feb. 2, 2022, saying, “BREAKING: IRS will not tax unsold staked crypto as income.” The tweet generated over 4,000 retweets and over 18,000 likes, as Crypto Twitter rejoiced over the assumed notion that the IRS would not tax unsold staked crypto.
More confusion resulted as mainstream media outlets proceeded to publish articles implying that the IRS would not tax passive income from staked crypto. For example, a recent Forbes article published by a senior contributor stated:
“This is a huge win for crypto holders in the U.S. In light of this new information, even without this formal court ruling, some taxpayers might decide to follow a bit aggressive approach and not report staking income at the time of receipt.”
Clearing the air: A ruling was never made
Seth Wilks, head of government relations and SME at TaxBit — a platform specializing in cryptocurrency taxation — told Cointelegraph that a slew of misinformation was spread and false conclusions being made regarding the lawsuit:
“In the eyes of the IRS, nothing has changed. Their position on staking income is the same as it has been for the last several years. This case was really more about a legal procedure than anything else. There was no court ruling that another taxpayer could point to as precedent. Settling this case was the only thing in contention here.”
Wilks said that a court ruling is still to be made, as the IRS has only settled the dispute by paying the couple a refund. He added that assuming the plaintiffs don’t come up with an unexpected legal argument to keep the case moving forward, the likely outcome would be for the judge to fully dismiss the case. “From a legal standpoint, I envision the Department of Justice — which is the law firm for the IRS in these matters — will file a motion with the court to have the case dismissed, citing mootness, meaning it’s no longer applicable since a refund was issued.”
On the other hand, Wilks pointed out that the Jarretts may continue to push the case forward, noting that the couple is working with a team of savvy lawyers while also receiving support from the Proof of Stake Alliance (POSA), which is an industry advocacy group. Given this, the Jarrett’s recently released a statement indicating their goal to have the IRS clarify its position on taxing staking and block rewards “for both proof-of-stake and proof-of-work” systems.
This is important since no clear guidance currently exists for taxing unclaimed staking rewards. As of now, the IRS only asks taxpayers whether they have “received, sold, exchanged or otherwise disposed of any financial interest in any virtual currency.”
Alison Smith Mangiero, a member of the POSA board of directors and president and founder of Tocqueville Group — an asset management firm — told Cointelegraph that the Jarretts’ case may represent the first legal opinion to be written on the subject of taxation of crypto staking rewards.
“This is huge, as POSA has been working on this issue since we started almost three years ago,” she remarked. According to Mangiero, many taxpayers are in similar positions as the Jarretts. Therefore, she thinks it’s crucial for legal arguments to be made around this issue. “This is an argument backed by over 100 years of tax law, and it’s important for people to understand this is a viable position,” she said.
Mangiero added that the POSA worked with law professor Abraham Sutherland in 2019 to initially make the argument around taxation for block rewards. As a result, a detailed report was published by Sutherland in the SSRN, formerly known as Social Science Research Network. The report’s abstract notes that Sutherland “concludes that for both proof-of-work and proof-of-stake cryptocurrencies, the best approach is to tax reward tokens only when they are sold or exchanged.”
With this in mind, Mangiero remarked that the IRS does not determine what is taxable income, but rather its job is to enforce the tax code. She further noted that Sutherland is a legal advisor for the POSA, who also serves as a counsel in the Jarretts’ case.
Next steps: Clarification on staking
Even if the case does progress, Wilks said that the IRS must still issue clear guidance around the definition of staking before an official court ruling can be made. As of now, there is no specific IRS guidance on the definition of staking, resulting in added confusion. Wilks said:
“The IRS needs guidance on delegating staking rewards and staking on DeFi [decentralized finance] networks, for example. I’m guessing they are trying to sort this out now, which is why it’s also inaccurate to say that the IRS has just given up on the matter entirely.”
As such, Wilks believes crypto staking rewards and taxation will remain a crucial issue for the IRS, noting that advocacy groups like the POSA will keep pushing for clarity. Indeed, Mangiero noted that the POSA has been working on educating Congress around the issue of how staking rewards should be treated. She explained that the POSA worked with leaders from the Congressional Blockchain Caucus to help write a letter to the IRS in 2020 on issuing formal guidance detailing why staking rewards should be treated as created property. She added:
“We will continue to fire away on all fronts. In terms of defining staking, we are focused narrowly on people participating in securing PoS [proof-of-stake] blockchains and being rewarded for creating those tokens. That is what the focus is for The Jarretts’ case, and this is where we are trying to focus first since it’s one of the least complicated staking situations.”
While educational initiatives from the POSA may help with clarity on the topic, Wilks pointed out that the IRS guidance on mining could also potentially support tax implications for staking activities. He mentioned that this may be likely due to the similarities the IRS perceives between staking crypto rewards and mining.
“It is very unlikely that the IRS would make a policy change on staking without taking into consideration mining,” said Wilks. Although it’s difficult to predict what such a policy would entail, Wilks
Solana (SOL), one of the most active proof-of-stake (PoS) blockchains, appears to be a PoS protocol consuming the lowest amount of electricity per transaction, according to a new report.
The Crypto Carbon Ratings Institute (CCRI), a research startup focused on the environmental impact of cryptocurrencies, released on Wednesday a new report calculating the electricity consumption and carbon footprint of major PoS blockchains.
The CCRI specifically analyzed PoS networks including Cardano, Solana, Polkadot, Avalanche, Algorand and Tezos.
According to the CCRI’s findings, the Solana blockchain consumed 0.166 watt-hours (Wh) of electricity per transaction within the study, becoming the most energy-efficient PoS protocol in terms of energy used per transaction among the six analyzed networks.
Cardano, a PoS network that has the biggest market capitalization at the time of writing, consumes the biggest amount of electricity per transaction, which is 52 Wh, according to the report. However, when it comes to a “per-node” comparison, Cardano uses the least amount of electricity per node, the CCRI found.
Electricity consumption per transaction for PoS systems and Visa. Source: CCRI
“This metric depends on the amount of transactions taking place on the respective blockchain, also the overall electricity consumption per transaction further depends on the number of nodes connected to the respective network. Generally, these numbers are expected to go down with an increase in the transaction rate, regardless which blockchain is in use,” the study reads.
Despite Solana’s low energy consumption per transaction, the PoS protocol still consumes a lot of energy due to the network’s massive usage, compared to other PoS networks. According to the CCRI’s study, the Solana blockchain emits 934 tonnes of carbon dioxide equivalent per year, compared to 33 tonnes for Polkadot.
At the time of writing, Solana is the most-traded PoS protocol, with $2.9 billion in daily trading volumes, while Polkadot has about $900,000 in daily trading volumes, according to data from CoinGecko.
Yearly carbon footprint of PoS networks compared to a roundtrip flight in business class. Source: CCRI
Related:Fossils vs Renewables, PoW vs PoS: Key policy issues around crypto mining in US
Unlike major blockchain networks like Bitcoin and Ethereum, which use mining operations to confirm transactions based on a proof-of-work (PoW) mechanism, PoS blockchains rely on users simply locking up tokens. As PoS blockchains do not need extra energy from miners in order to validate transactions, they are considered as being more energy efficient.
As previously reported, many global financial regulators have used PoW’s high energy consumption rates as yet another reason to ban the use of cryptocurrencies like BTC. They would probably also want to ban global banks as the traditional banking system was reportedly consuming twice more energy than the entire Bitcoin network as of March 2021.
Even Wikipedia fell for the environmental FUD surrounding Proof-Of-Work mining. A proposal to “stop accepting cryptocurrency donations” is currently under discussion. It starts with the same very thin arguments that the whole mainstream media irresponsibly uses. However, it gets better and more interesting. In general, it’s amazing to see both sides of the argument unfolding. Even though there might be some information suppression going on.
Related Reading | Human Rights Foundation Accepts Fully Open Source Bitcoin Donations
Well do our best to summarize the whole thing, but people interested in the topic should take time to read it all. It’s full of twists and turns. The most amazing thing about the document is that real people wrote it. Wikipedia editors are not a sample of the world’s population, but, they’re heterogeneous enough to make the discussion interesting.
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Wikipedia Falls For The Environmental FUD
The original proposal poses three problems with receiving cryptocurrency donations, but, in reality, we can summarize them all in the ESG FUD category. The three points are:
“Accepting cryptocurrency signals endorsement of the cryptocurrency space.”
“Cryptocurrencies may not align with the Wikimedia Foundation’s commitment to environmental sustainability.”
“We risk damaging our reputation by participating in this.”
It’s a shame that, to try to prove their points, the original author uses a questionable source and a discredited one.
“Bitcoin and Ethereum are the two most highly-used cryptocurrencies, and are both proof-of-work, using an enormous amount of energy. You can read more about Bitcoin’s environmental impact fromColumbiaorDigiconomist.”
Counterpoint: That Data Is Compromised
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Even though it’s widely cited, an “employee of the Dutch Central Bank” posing as a neutral journalist runs Digiconomist. That fact alone disqualifies him as a credible source. However, his datais also under questionbecause “Digiconomist Bitcoin Electricity Consumption Index is not being driven by real world metrics and profitability as stated in the methodology.” So, we’re dealing with an intellectually dishonest individual who’s presumably paid to attack the Bitcoin network.
For more information on this shady character, go to the section “The Digiconomist is Disinformation.”
The Columbia report is newer, but it cites outdated data and debunked studies. Like the ridiculous one that doesn’t understand how PoW scales, or even works, and irresponsibly claims that crypto-mining could raise the Earth’s temperature by two degrees. Columbia’s main source, though, is the “University of Cambridge analysis.” That same organization literally said that “There is currently little evidence suggesting that Bitcoin directly contributes to climate change.”
However, they suspiciously erased that part from their report. They changed the wording and nowtheir FAQjust contains a “radical thought experiment” in which “all this energy comes exclusively from coal.” Even under those extreme circumstances, which are far-far away from reality, the energy use would be marginal. “In this worst-case scenario, the Bitcoin network would be responsible for about 111 Mt (million metric tons) of carbon dioxide emissions1, accounting for roughly 0.35% of the world’s total yearly emissions.”
ETH price chart for 01/13/2022 on Poloniex | Source: ETH/USD on TradingView.com
Protecting The Process Or Information Suppression?
Under the whole thread, there’s a section called “Discussion moved from proposal section.” It contains several suppressed pro-cryptocurrencies arguments. The reason is that the accounts that made them had “no other editing records”. What do the people proposing that those opinions should be removed argue? That they “risk that both vote gaming and manipulation of discussion to introduce bias and fake “bitcoin” news.”
Coincidentally, those low-edit accounts are the ones bringing forward the information on how bogus the original poster’s sources are. Someone had to say it and they did. And the administrators removed them from the main thread. Is this really what Wikipedia is about.
Luckily, other Wikipedia contributors managed to say that “Bitcoin is therefore agreen energy stimulus, aligned with the Wikimedia Foundation’s commitment to environmental sustainability. “ Anotheruser urged “everyoneto understand more about Bitcoin as a whole package beyond its energy footprint (negligible when compared to the cost in oil and warfare of backing the US Dollar) as well as the continual exponential progress that has been made in making Bitcoin greener and greener.” Yet another one said “bitcoin core is a FLOSSproject attempting to promote monetary freedom.”
In any case, the crypto detractors trying to game the vote might have a point. Except for the ridiculous “fake “bitcoin” news” claim. The header of the discussion says, “this is not a majority vote, but instead a discussion among Wikimedia contributors”. And the administrator tells them that they can’t remove their opinions or votes. However, “an optimal RfC scenario would not actively silence any voices, but would allow community members to inform each other which participants are not community members, who may have alternative interests.” That’s fair.
What About The Votes? Is Wikipedia Banning Crypto Donations?
The vote doesn’t look good for crypto donations, but that doesn’t mean Wikipedia will ban them. At the time of writing, the “support” votes are approximately double than the “oppose” ones. Plus, roughly 150 Wikipedia persons have voted. Does this mean the ESG FUD worked and cast a shadow over the whole crypto space that will be hard to shake? Absolutely it does.
Related Reading | New Contender Emerges Despite Wikipedia’s Begrudging Listing of Cardano
It also means that people WANT to believe. And are not willing to accept the overwhelming evidence that points to PoW mining being a net positive for the environment.
Fortunately, Bitcoin doesn’t care. Tick tock, next block.
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Green energy powers most of Bitcoin mining and the world might as well face it. And the rest of the cryptocurrencies that use Proof-Of-Work might be right behind, because they follow the same incentives. In their quest for cheaper energy sources, they all reach the same conclusion. Humanity is wasting renewable energy all over the world. And wasted energy is the cheapest of them all.
In today’s story, a hydropower plant that had to pause operations for nine months found cryptocurrency mining and got the dream client they needed.Reuters gives usthe prelude to the story:
“The plant was forced to reinvent itself after 30 years because the government stopped buying electricity during the pandemic due to surplus power supply in the Central American country, where the state has a monopoly on energy distribution.”
How much green energy does a country has to have to just stop buying from a clean hydro plant? Well,according to hydropower.org:
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“At the end of 2016, Costa Rica reached a total installed hydropower capacity of 2.12 GW. The country dominated the headlines for the second consecutive year, achieving 100 per cent renewable electricity production for a total of 271 days.”
[embedded content]
How Did Crypto Mining Enter The Hydro Plant’s Picture?
Every talking head and their grandmas spread ESG FUD through traditional media. And that spills into social media, where everybody is oh-so-sure that crypto mining is boiling the oceans. Because of that, Eduardo Kooper, the owner of the plant, doubted going the crypto mining route. However, they just had to pivot. They tried other ventures, like making frozen food, and none of them work. There was no other choice.
“I was very skeptical at first, but we saw that this business consumes a lot of energy and we have a surplus.”
The hydroelectric company, with its three plants valued at $13.5 million and a three Megawatt capacity, invested $500,000 to venture into hosting digital mining computers.”
Why would miners move their operation to a hydro plant, though? Wouldn’t it be more comfortable doing it at home? They are heavily incentivized to look for the cheapest energy possible, that’s why. And green energy is renewable. Coal is not. The Reuters report quotes one of the hydropower plant’s satisfied customers:
“Installing it in this place is much more profitable than at home,” at almost half the cost, he calculated, after connecting his computer to the network at the river-powered plant.”
Business is business.
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BTC price chart for 01/12/2022 on OkCoin | Source: BTC/USD on TradingView.com
Green Energy And Crypto Mining, A Match Made In Heaven
We at NewsBTC have been telling you this. Bitcoin mining incentivizes the creation of green energy infrastructure. And it can finance green energy plants already in place. Mining provides both a buyer of first resort and a buyer of last resort.Three months ago, wewrote:
“Awhitepaperby the Bitcoin Clean Energy Initiative from earlier this year had explained how bitcoin mining, when using renewable energy, “is especially suited to accelerate the energy transition” towards a cleaner electricity grid.”
And two months ago, in an article onhow Bitcoin mining is helping the Navajo Nationin more ways than one, we told you:
“As the world is trying to phase out coal-powered energy, the Navajo innovate to keep up with the times. According to Walter Hasse, Navajo Tribal Utility Authority president, “I had excess electricity that I still had to pay for and deal with. Now, I want to build renewable energy to replace my lost coal resources that are throughout the nation. I need someone to consume that renewable energy resource.”
And with Bitcoin mining, they have that buyer. And now, the other PoW cryptocurrencies can follow Bitcoin’s example. In Costa Rica, the other side of the world, a power station manager reaches the same conclusion as the Navajo Tribal Utility Authority president. Quoting Reuters again:
“Kooper said international cryptocurrency miners are looking for clean, cheap energy and a stable internet connection, which Costa Rica has plenty of. However, he said Costa Rica’s government should be more aggressive about trying to attract more crypto mining business, although he gave no specifics.”
The Green Energy Future We Deserve
Proof-Of-Work mining is a net positive for the planet. It will lead us to the green energy future that humanity’s dreaming of. It’s the only industry that can do so. And the revolution is already well underway.
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The most popular antivirus, Norton 360, made a miner out of everyone. Even though this has been going on for a while, the Internet recently found it out. And traditional Norton customers are livid about it. One of the most controversial parts of the story is the 15% cut that the company takes. This is a commercial program that you have to pay for, so it’s only logical that people are not ok with it.
Related Reading | Research: Crypto Mining Malware Still Abundant Despite Market Decline
Of course, Norton’s Ethereum mining program is nothing new. Seven months ago, when they were testing it,our sister site Bitcoinist reported on itand said:
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“A select number of Norton 360 customers, who joined the early adopter program, received their invites to mine Ethereum today. The program is expected to expand to include all 13 million Norton customers in the coming months.
In explaining the odd pairing, the firm said cryptocurrency mining is fraught with risk and often involves disabling security and allowing “unvetted code”. This leaves miners vulnerable to skimmed earnings and ransomware. Norton claims to address these issues by enabling users to safely and easily mine cryptocurrency through the user-friendly Norton 360 platform.”
Ok, so it’s for your own good. How could you doubt the fine folks at Norton?
The Internet Discovers The Existence Of Norton ’s Ethereum Program
The mining program went viral when Boing Boing editor Cory Doctorow tweeted, “Norton “Antivirus” now sneakily installs cryptomining software on your computer, and then SKIMS A COMMISSION.”
This is fucking wild. Norton “Antivirus” now sneakily installs cryptomining software on your computer, and then SKIMS A COMMISSION. https://t.co/6s2otyCd78
— Cory Doctorow (@doctorow) January 4, 2022
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Security expert and journalistBrian Krebs took a look at the caseand here’s what he came up with:
“According tothe FAQ posted on its site, “Norton Crypto” will mine Ethereum (ETH) cryptocurrency while the customer’s computer is idle. The FAQ also says Norton Crypto will only run on systems that meet certain hardware and software requirements (such as an NVIDIA graphics card with at least 6 GB of memory).”
That doesn’t sound that bad. Plus, “NortonLifeLock says Norton Crypto is an opt-in feature only and is not enabled without user permission.” Ok, but, is the “accept” button checked from the get-go? And, why can’t people uninstall the program then? In a written statement, NortonLifeLock responded:
“If users have turned on Norton Crypto but no longer wish to use the feature, it can be disabled by temporarily shutting off ‘tamper protection’ (which allows users to modify the Norton installation) and deleting NCrypt.exe from your computer.”
ETH price chart for 01/08/2021 on FTX | Source: ETH/USD on TradingView.com
What Was The Public’s Response To The Fact That They Are Ethereum Miners?
According to Krebs, “longtime Norton customers were horrified at the prospect of their antivirus product installing coin-mining software, regardless of whether the mining service was turned off by default”. This is what the program should protect them from. And they don’t know that this is for their own good and they should trust the Norton corporation blindly.
On the other hand, the ones that were ok with it and wanted to collect their ETH faced another hurdle. Gas fees. If that fact is hard to navigate for experienced Ethereum users, imagine what it was for novices that weren’t even aware of their new profession as Ethereum miners. To help with visualization, just read the Norton FAQ’s explanation:
“Transfers of cryptocurrencies may result in transaction fees (also known as “gas” fees) paid to the users of the cryptocurrency blockchain network who process the transaction. In addition, if you choose to exchange crypto for another currency, you may be required to pay fees to an exchange facilitating the transaction. Transaction fees fluctuate due to cryptocurrency market conditions and other factors. These fees are not set by Norton.”
Even though what they’re saying is correct, how would a civilian react to the past year’s ridiculous Ethereum gas fees?
Summary And Conclusion, The Norton Situation
For a quick assessment of the situation, we turn to resistance.money’s Bradley Rettler, who tweeted. “What?! Norton antivirus now mines Ethereum *by default*. The “accept” button is checked automatically and once installed it’s very difficult to remove. And they take 15% of what you mine!”
What?! Norton antivirus now mines Ethereum *by default* — the “accept” button is checked automatically and once installed it’s very difficult to remove. And they take 15% of what you mine! https://t.co/5OXDE76KEA
— Bradley Rettler (@rettlerb) January 6, 2022
Yeah, that’s about it. For the implications, we go back to security expert Brian Krebs:
“I guess what bothers me most about Norton Crypto is that it will be introducing millions of perhaps less savvy Internet users to the world of cryptocurrency, which comes with its own set of unique security and privacy challenges that require users to “level up” their personal security practices in fairly significant ways.”
Related Reading | Powerbridge Technologies Set To Launch Bitcoin And Ethereum Mining In Hong Kong
That seems to be about right as well.
What would the Proof-Of-Work critics say, now that half of the planet is an Ethereum miner? And what will happen to the program once Ethereum turns to Proof-Of-Stake? Burning questions.
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Will the ESG FUD ever stop? As a Congressional subcommittee prepares to take a good look at Proof-Of-Work mining, “more than 70” national, international, state and local organizationswrote a letter to the “Congressional leadership.” In it, they use old and unreliable data to get their point across. They completely ignore all of 2021’s research and progress on the matter, because it would invalidate their argument.
The question is, will Congress buy their poorly researched, alarmist letter? The ESG FUD hit PoW mining like a ton of bricks in 2021. It might be based on a poor understanding of the subject at hand, but the public in general definitely bought it. And they quote the bogus numbers that their authorities invented left and right on social media.
Related Reading | Despite Crackdown, Bitcoin Mining Is Still Alive And Well In China
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Also, the whole argument completely ignores the main virtue of Bitcoin. The orange coin provides a framework and tools for the world’s transition to a disinflationary system. Paraphrasing “The Price Of Tomorrow’s” author Jeff Booth, in the inflationary system that we live in, there’s a clear incentive for consumption. If your money’s purchasing power decreases by the minute, everybody will logically buy, spend, and consume everything in sight. That is the real monster that the planet’s facing. And Bitcoin fixes it.
In any case, Bitcoin’s resident ESG FUD expert, Nic Carter, took it upon himself to reply to the ESG organizations that sent misinformation to Congress. Let’s see how each part did.
The ESG Organizations Make Their Point, Nic Carter Counterpoints
The ESG organizations come out swinging from the introduction on:
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“We, the more than 70 climate, economic, racial justice, business and local organizations, write to you today to urge Congress to take steps to mitigate the considerable contribution portions of the cryptocurrency markets are making to climate change and the resulting greenhouse gas (GHG) emissions, environmental, and climate justice impacts it will have.”
And their accuracies start from the get-go, also:
“In 2018, scientists writing in Nature warned that Bitcoin’s growth alone could singlehandedly push global emissions above 2 degrees Celsius within less than three decades.”
Those numbers are ridiculous. They “assume” a progression relative to the number of users of the network, and that’s simply not how Bitcoin works. Even if the whole planet adopted the Bitcoin standard, the network would still produce one block every ten minutes. Energy consumption is not directly related to the number of users.
What did Nic Carter respond? That the claim is “false, based on a debunked paper with a completely erroneous model of bitcoin.”
2. bitcoin’s energy consumption will ‘only get worse over time’
most likely will trail off over time, after peaking in the next decade (see https://t.co/8x0koM6nR9 for actually rigorous projections)
— nic carter (@nic__carter) January 6, 2022
Right after that, the ESG organizations even throw Ethereum under the bus:
“The Digiconomist’s Ethereum Energy Consumption Index estimates that the Ethereum blockchain will consume 71 terawatt-hours this year, nearly the same as the energy consumption of Colombia.”
Since the letter is about PoW mining, it makes sense. The Ethereum community seems to have completely ignored the letter, at least over at Twitter.
BTC price chart for 01/07/2021 on Bitstamp | Source: BTC/USD on TradingView.com
Bitcoin Incentivizes Green Energy Infrastructure
The ESG organizations continue their poorly-researched attack with:
“The GHG emissions from this exorbitant and unnecessary energy consumption is staggering.”
It’s not unnecessary at all. In fact, PoW mining is absolutely essential for a decentralized, permissionless system. And the energy consumption is directly proportional to the security of the network. Plus, it anchors it to the real world. Not to mention the fact that Bitcoin actuallyincentivizes and finances green energyinfrastructure.
Then, the ESG crowd accuses Bitcoin of “exacerbating” the global chip shortage:
“Increased demand for these machines are exacerbating a global shortage of semiconductors. A bipartisan bill by Senators Maggie Hassan and Joni Ernst has called for a report on how cryptocurrency mining operations are impacting semiconductor supply chains.“
With ease, Nic Carter counterattacks with: “Bitcoin miners are not tier 1 clients, they don’t compete with Apple/Qualcomm/NVIDIA for space; the shortage is due to money printing and the demand shock. See section on semishere.”
5. Atlas/ greenidge increased power prices in NY.
The Atlas mine brought back online a fallow coal plant (converted to natgas) which now provides energy to the grid (in addition to mining). That’s energy supplied to the grid which wasn’t being produced beforehand
— nic carter (@nic__carter) January 6, 2022
Texas Doesn’t Know What Its Doing, The ESG Crowd Does
Then, the ESG investigators make wild, unbacked assumptions about Texas power:
“Following a crackdown on cryptocurrency miners in China, many miners are moving to Texas, due to its deregulated grid, taking away the power that Texans need.”
This completely ignores the fact that the state of Texas has gone to great lengths to attract those miners. And that, unlike the ESG organizations that signed the infamous letter, power companies in Texas regularly attend Bitcoin meetings. They are making an effort to understand the technology and the opportunities it brings to them. Also, as Carter puts it, “Majority of mining is in west texas where transmission bottlenecks mean prices routinely go negative. Huge overcapacity and limited demand for power outside of mining.”
Miners also participate in demand response, meaning they aren’t online when the grid is overburdened. Their presence dramatically improves economics for renewables and does not compete with households during scarcity events.
— nic carter (@nic__carter) January 6, 2022
The state of Texas knows what it’s doing, they see Bitcoin’s future is bright. These ESG organizations think they know better, though:
“Adding more energy-guzzling crypto mining operations to Texas could exacerbate the sorts of blackouts the state already saw during the extreme cold in February — outages that reporting shows hit communities of color the hardest.”
Wow, playing the race card there. So low. And unrelated. Anyway, answering the claim that miners “could exacerbate” the February blackouts, Carter says. “Miners were/ would have been offline during this time, aswe demonstrate here. They also help alleviate ‘black start’ issues through primary frequency response.”
9. Stronghold mining with coal waste is bad (implied)
The coal waste was going to oxidize naturally. It was going to combust anyway. This is an incentive to clean up a nasty site leeching into groundwater etc. Neutral from a CO2 perspective and ++ from an ecology view
— nic carter (@nic__carter) January 6, 2022
Three Other Prominent Bitcoiners’ Response
Are these direct responses to the ESG organizations’ letter? It’s not clear, but the authors published them in the same timeframe. The first one refers to SHA256, the set of cryptographic hash functions that Bitcoin uses. Nunchuk founder Hugo Nguyen said, “Once you understand that SHA256 is close to being 100% efficient at what it does, you’d stop calling it a “waste”. In fact, 100% efficiency is the exact opposite of “waste”. There’s nothing else like it.”
Once you understand that SHA256 is close to being 100% efficient at what it does, you’d stop calling it a “waste”. In fact, 100% efficiency is the exact opposite of “waste”. There’s nothing else like it. https://t.co/SLuVrAPfU2
— Hugo Nguyen (@hugohanoi) January 7, 2022
For his part, Swan Bitcoin’s Brandon Quittem attacks the concept of energy consumption being inherently bad. “Energy consumption is directly correlated with GDP. Want to help developing countries? Help them harness more energy. Interestingly, Bitcoin acts as a free market subsidy for energy investment.”
3/ Energy consumption is directly correlated with GDP.
Want to help developing countries? Help them harness more energy.
Interestingly, Bitcoin acts as a free market subsidy for energy investment.
Incentivizes developing otherwise uneconomical energy sources. pic.twitter.com/DJ6yYoz6WO
— Brandon Quittem (@Bquittem) January 6, 2022
And Kraken’s Dan Held states that “Bitcoin’s energy consumption is not “wasteful.” Why? Because “It is much more efficient than existing financial systems.” And we’re talking orders of magnitude, here. Not only that, “No one has the moral authority to tell you what is a good or bad use of energy (ex: watching the Kardashians).”
1/ Bitcoin’s energy consumption is not “wasteful.”
– It is much more efficient than existing financial systems
– No one has the moral authority to tell you what is a good or bad use of energy (ex: watching the Kardashians)
Let’s debunk this FUD👇
— Dan Held (@danheld) January 6, 2022
Do you know how much energy American households use for their Christmas lights? As much as the whole Bitcoin network, that’s how much.
Related Reading | Is This The Reason China Banned Bitcoin Mining? Carvalho’s Mind Blowing Theory
Where is the letter to Congress protesting Christmas lights, ESG organizations?
Featured Image by Karsten Würth on Unsplash | Charts by TradingView
