US warns cryptominers must cut power use to avoid busting US carbon goals
Datacenters or digicash - what's the bigger boon to society?
A White House report on the energy costs of cryptocurrency mining in the US is recommending swift policy actions to avoid disrupting the country's efforts to reach carbon neutrality by 2050.
The report [PDF] from the White House Office of Science and Technology Policy (OSTP), crypto asset mining in the US uses the same amount of energy as all home computers or residential lighting. The White House claims that's around the same amount as "the annual electricity usage of all conventional data centers in the world," and let's face it, which is more useful?
That amount of consumption equates to between 25 and 50 million metric tons of carbon dioxide released per year, roughly the same amount emitted by diesel fuel-powered railroad operations across the US.
In other words, get ready for a conflict between what some see as an economic innovation and the need to fight climate change.
The OSTP report was called for in March when President Biden signed an executive order calling for the development of a new cryptocurrency regulatory framework. Democratic lawmakers have also started making moves for a crackdown on crypto mining, saying that it's difficult to ever truly understand its energy impacts, something the OSTP report also concluded.
Per the report, crypto mining operations have become more energy efficient in recent years, but continue to use more electricity as block difficulty grows.
OSTP concluded that approximately 52,560 blocks are added to just the Bitcoin blockchain per year. Because total global energy estimates exist for the Bitcoin blockchain, it said it could calculate per-block energy consumption - about 1.7 to 2.7 million kWh - but said that only accounts for a fraction of total Bitcoin-related energy use.
"With Bitcoin, as with other crypto-asset transactions, centralized crypto-asset trading platforms typically use off-chain transactions … The result is crypto-asset platforms only send a portion of transactions to a blockchain, and electricity usage from off-chain activity is unlikely to be captured in estimates," the OSTP said in its report.
- Biden issues Executive Order to tame digital currencies
- Global financial stability regulator signals crypto rules are coming soon
- DARPA study challenges assumptions about distributed ledger (and Bitcoin) security
- Intel ships crypto-mining ASIC at the worst possible time
Lost energy usage data aside, the report also concluded that Visa, MasterCard and American Express credit card transactions used less than 1 percent of the total energy that Bitcoin and Ethereum have consumed over the course of a year "despite [card issuers] processing many times the number of on-chain transactions."
Along with eating electricity, the OSTP concluded that cryptocurrency operations affect noise levels, disrupt the environment and create electronic waste that "can exacerbate environmental justice issues for neighboring communities, which are often already burdened with other pollutants, heat, traffic, or noise."
To stave off further negative impacts of cryptocurrency mining, the OSTP said government agencies should develop environmental performance standards that are revisited annually, assess how digicash mining may impact the energy grid reliability and adequacy, and create a reporting standard for energy usage that miners are required to follow and encourage them to publicly report that data.
Proof of stake to the rescue?
The numbers reported by the OSTP focus on Bitcoin and Ethereum, which it said accounts for more than 60 percent of the total cryptocurrency market share, and between 80 and 99 percent of its energy usage.
According to the report, "proof of stake could dramatically reduce overall power usage to less than 1 percent of today's levels." That's great timing, given Ethereum's long-promised shift to proof of stake (PoS) has actually started happening. While it hasn't been entirely smooth, if successful it could dramatically reduce the energy consumption.
Under PoS, cryptocurrency holders stake their own coins on a blockchain. By having a "stake" in the future of said blockchain, stakers are assumed to have an interest in only validating legitimate transactions.
The larger the stake, the bigger the say, meaning those willing to front a larger investment get a larger say in the system. Block writers are ultimately decided at random, but a larger stake increases a validator's odds of being chosen. If improper data is validated, the stake can be lost.
Per the report, proof of stake would reduce total blockchain energy consumption from as much as 1 percent of global energy usage to less than 0.001 percent. With multiple mentions of Ethereum 2.0 - the PoS version of the coin - throughout the report, the White House may be watching, waiting and preparing to mandate proof of stake once its impact on Ethereum's bottom line becomes clear. ®