- The proof-of-work consensus mechanism is under threat from regulators
- Those in power are educating themselves on the different types of blockchain with regard to energy use
- Proof-of-work needs to adapt to these concerns or face extinction
The proof-of-work consensus mechanism, ironically like the planet, is at a tipping point. With commentary and ill-informed opinion on the environmental impact of cryptocurrencies gaining more traction seemingly each day, the distinction is starting to be made between the different types of consensus mechanism in the mainstream media. This spells trouble for the likes of Bitcoin, Litecoin, and Dogecoin, all of which rely on the proof-of-work method to process transactions and secure their blockchains. With talk of bans for cryptocurrencies that operate on a proof-of-work consensus mechanism increasing, proponents of such methods need to up their reform or face extinction.
Mainstream Media Attacks Have Informed Opinion and Action
Proof-of-work was the first consensus mechanism on the blockchain scene, being implemented into Bitcoin at its birth in 2009. Many different consensus mechanisms have arrived on the scene since then, all of them less energy intensive but, many will argue, less secure and less decentralized.
However, the crypto mining arms race has resulted in a slew of negativity towards the entire cryptocurrency space for its environmental cost, most notably in 2021 when mainstream media outlets laid out a barrage of headlines over the environmental cost of cryptocurrencies compared to what they perceived as the spurious benefits.
Proof-of-work Ban Highlights New Direction
Talk of banning the likes of Bitcoin on ideological grounds is of course nothing new, but a new and more dangerous type of ban is now being posited. Erik Thedéen, vice-chair of the European Securities and Markets Authority, recently told the Financial Times that he would support a ban on cryptocurrencies that operate a proof-of-work consensus model, noting that other more environmentally friendly methods of operating a blockchain exist.
This represents a shift in the levels of education of those in power, one which could be troublesome for some of the space’s older coins, including Bitcoin.
Thedéen’s solution to “ban proof of work” may seem draconian, and is unenforceable on a global scale, but it represents a new and troubling threat to cryptocurrency’s old guard. While cryptocurrency enthusiasts will debate the merits and security considerations of proof-of-work versus proof-of-stake, the fact is that regulators don’t care and won’t listen.
They also don’t care that companies worldwide are regularly pouring tens of millions of dollars into new mining equipment every year. If climate change is the issue and they think that banning proof-of-work blockchains is an easy fix, then they will look past in-house concerns and may well take steps to outlaw it.
Advocates Need to Act Now
To counter this growing movement, which actually has its roots back in November last year when Swedish authorities first floated the idea, there is only one thing that proof-of-work blockchains can do – go greener. No other option will satisfy the dissenting voices who only look at the data regarding energy use and carbon emissions. The latest Bitman mining chip with its 5% less energy demands isn’t going to cut it, especially when banning proof-of-work entirely is on the table.
These dissenting voices will only get louder the more that nothing serious is done to tackle the environmental impact of proof-of-work, leaving Bitcoin and the rest to face a potentially difficult choice – change the consensus mechanism or go under. Vitalik Buterin should be praised for seeing the signs early and switching Ethereum to a proof-of-stake system now (whatever the reasons), avoiding the potential hell of a government-imposed deadline years down the line.
Reducing Energy Usage is the Only Answer
Using renewable sources is a very important step in proof-of-work blockchains going green, but more needs to be done to satisfy not just the critics but the governments that listen to them and believe their shonky data.
Intel may be on the verge of a major breakthrough when it demonstrates its ultra low voltage ASIC chip next month, but miners need to prove that they are taking steps to limit the damage to the environment, regardless of their relatively low impact in comparison to, say, influencer videos on YouTube or the meat industry.
Blockchain and cryptocurrency advocates need to realize that environmental regulators and lobbyists don’t give a SHIB about the potential benefits of cryptocurrencies – all they see is the often vastly inflated or even estimated numbers regarding the levels of pollution churned out by proof-of-work blockchains.
The only way to avoid drastic action is to fight them on their own turf and get those numbers down. Only then will the negativity, and threats of a ban, go away.