Since that fateful day, there has been a river of ink written about every aspect of cryptocurrency Bitcoin white paper publishedYet one issue that has repeatedly been in the spotlight (and rightfully so) surrounds energy and environmental sustainability.Now the White House itself is adding fuel to the fire Through the DAME tax proposalwhose purpose is to “make cryptominers pay for the costs they impose on others.”
how do you ask? By phasing in a further 30% tax penalty on the energy cryptocurrency mining companies consume in the process. It is an example of the President’s commitment to address, in this case the economic and environmental costs of current practices for mining crypto assets.” The idea is simple. Bitcoin mining consumes a lot of electricity. This consumption pushes up electricity bills. This is bad for everyone unfortunate enough to share a grid with a cryptocurrency mining company.
The White House’s hand appears to have been forced by their own reports. Estimate The total energy consumption of bitcoin mining in 2022 is a staggering 50 billion kWh (in fact, estimates put consumption somewhere between a low of 30 billion kWh and a high of 60 billion kWh). are available). That’s more power consumption than all computers operating in the United States combined, and within the margin of error of national power consumption for basic necessities such as lighting.
It also consumes more energy than Americans consume on television. This is illustrated by a nice graph.
Let’s get this right off the bat: public and private lighting is arguably (and arguably) more important than Bitcoin mining.
However, some of the arguments in favor of the proposal appear to be in conflict. When Intel unveiled its Bonanza Mine cryptocurrency mining chip, we took a closer look at Bitcoin’s global power consumption and the utility it already derives from it. Anyone who sells something to someone and gets paid in Bitcoin can prove its usefulness. So do those who cross difficult borders with hidden wealth, as well as citizens of El Salvador, where bitcoin is legal tender. I would like to know what process the White House used to quantitatively analyze the social benefits of cryptocurrency applications before concluding that the social benefits of cryptocurrency applications are “not yet realized.”
There is also the question of how much of Bitcoin’s energy consumption actually comes from carbon-intensive sources. According to the Bitcoin Mining Council (BMC), a global forum of mining companies representing 48.4% of the world’s Bitcoin mining networks, renewable energy sources will be used for Bitcoin mining in the fourth quarter of 2022. It is estimated to account for 58.9% of electricity. Estimated 36.8% in Q1 2021.
It will be interesting to see what the outcome of this legislative push will be. For one, imposing a 30% tax on cryptocurrency mining companies would put most of them out of business, leaving the hash in the hands of a few with enough financial strength to stay above water. Power will be concentrated. This is scary for Bitcoin, where network security assumes that processing power is distributed rather than centralized. The developers of Bitcoin Core moved Bitcoin’s security model from proof of work (which is responsible for huge energy consumption) to proof of stake (Ethereum made this transition through a merge, essentially reducing the energy consumption during transaction validation to 99%). % reduction). But Ethereum is not Bitcoin, and Bitcoin is not the only proof-of-work cryptocurrency.
