European Regulator Calls for Effective Ban on Proof-of-Work Crypto Mining

Thursday, 20/01/2022 | 01:43 GMT by Nicholas Otieno
  • Erik Thedéen calls for a ban on Bitcoin mining.
  • The regulator is advocating for a shift to more efficient technology.
Erik Thedéen calls for a ban on Bitcoin mining
Proof-of-Work Crypto Mining

Erik Thedéen, the Vice-Chairman of the European Securities and Markets Authority, has renewed fresh calls for a widespread ban on Bitcoin mining. In an interview with The Financial Times media outlets, Thedéen raised concerns over the increasing use of renewable energy dedicated to Bitcoin mining. The regulator described Bitcoin mining as a national threat for his native country Sweden and warned that cryptocurrency mining poses a risk to meeting climate change goals enshrined in the Paris Agreement. Thedéen has, therefore, called upon European regulators to consider banning a mining method regarded as ‘proof of work,’ which is mainly used for Bitcoin mining and a few other cryptocurrencies . Instead, he advocates for the use of ‘proof of stake’ as a better energy-efficient alternative.

Both Bitcoin and Ether rely on the ‘proof of work’ method, which requires all participants on the blockchain network to verify transactions. Miners who use sprawling data centers and fast computers to solve complex puzzles are rewarded for recording transactions with newly minted coins. However, that model requires a huge amount of energy than the ‘proof of stake’ method.

Thedéen stated: “The solution is to ban proof of work. Proof of stake has a significantly lower energy profile.”

In November 2021, Melanion Capital, a Paris-based alternative investment firm, echoed the same sentiment, describing ‘proof-of-work’ mining as “completely misinformed.” However, the investment company justified that because of the decentralized nature of Bitcoin. There is no lobby group to defend its interest, which “should not be taken as an opportunity to implement measures making the industry illegal for its lack of defensive powers.”

Can Green Bitcoin Mining Become More Sustainable?

The announcement by Thedéen comes at a time when Bitcoin mining recently faced a lot of resistance from various stakeholders. In May last year, electric carmaker Tesla stopped accepting Bitcoin payments, citing huge amounts of electricity required to mine the cryptocurrency. A few weeks later, China then imposed a ban on the mining of cryptocurrencies such as Bitcoin and Ethereum in the region. In September, China renewed a fresh ban as part of its efforts to eliminate cryptocurrency mining operations from the country. Meng Wei, the spokesperson for China's National Development and Reform Commission, a macroeconomic planning agency, stated that crypto mining is an extremely harmful industry that jeopardizes China’s pursuit of carbon neutrality. However, Elon Musk later hinted at a new sign of hope when he stated that Tesla would rethink accepting Bitcoin payments once 50% of Bitcoin's network’s energy comes from renewable sources. Currently, unlike Thedéen most critics have no issue with the clean energy usage involving Bitcoin mining.

Erik Thedéen, the Vice-Chairman of the European Securities and Markets Authority, has renewed fresh calls for a widespread ban on Bitcoin mining. In an interview with The Financial Times media outlets, Thedéen raised concerns over the increasing use of renewable energy dedicated to Bitcoin mining. The regulator described Bitcoin mining as a national threat for his native country Sweden and warned that cryptocurrency mining poses a risk to meeting climate change goals enshrined in the Paris Agreement. Thedéen has, therefore, called upon European regulators to consider banning a mining method regarded as ‘proof of work,’ which is mainly used for Bitcoin mining and a few other cryptocurrencies . Instead, he advocates for the use of ‘proof of stake’ as a better energy-efficient alternative.

Both Bitcoin and Ether rely on the ‘proof of work’ method, which requires all participants on the blockchain network to verify transactions. Miners who use sprawling data centers and fast computers to solve complex puzzles are rewarded for recording transactions with newly minted coins. However, that model requires a huge amount of energy than the ‘proof of stake’ method.

Thedéen stated: “The solution is to ban proof of work. Proof of stake has a significantly lower energy profile.”

In November 2021, Melanion Capital, a Paris-based alternative investment firm, echoed the same sentiment, describing ‘proof-of-work’ mining as “completely misinformed.” However, the investment company justified that because of the decentralized nature of Bitcoin. There is no lobby group to defend its interest, which “should not be taken as an opportunity to implement measures making the industry illegal for its lack of defensive powers.”

Can Green Bitcoin Mining Become More Sustainable?

The announcement by Thedéen comes at a time when Bitcoin mining recently faced a lot of resistance from various stakeholders. In May last year, electric carmaker Tesla stopped accepting Bitcoin payments, citing huge amounts of electricity required to mine the cryptocurrency. A few weeks later, China then imposed a ban on the mining of cryptocurrencies such as Bitcoin and Ethereum in the region. In September, China renewed a fresh ban as part of its efforts to eliminate cryptocurrency mining operations from the country. Meng Wei, the spokesperson for China's National Development and Reform Commission, a macroeconomic planning agency, stated that crypto mining is an extremely harmful industry that jeopardizes China’s pursuit of carbon neutrality. However, Elon Musk later hinted at a new sign of hope when he stated that Tesla would rethink accepting Bitcoin payments once 50% of Bitcoin's network’s energy comes from renewable sources. Currently, unlike Thedéen most critics have no issue with the clean energy usage involving Bitcoin mining.

About the Author: Nicholas Otieno
Nicholas Otieno
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About the Author: Nicholas Otieno
Nicholas Otieno is a FinTech writer who shares the latest news on financial instruments, forex trading, stock markets, investments, cryptocurrency, blockchain, fiat currencies, financial analysis, as well as commentary analysis about big-name companies which matter to investors.
  • 238 Articles
  • 22 Followers

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