US House Energy and Commerce Oversight Committee tackles 'The Energy Impacts of Blockchains'
Legislators in the United States are concerned about the amount of energy that some blockchain networks consume. On January 20, the House Energy and Commerce committee held a hearing on “Cleaning Up Cryptocurrency: The Energy Impacts of Blockchains,” to learn more about this issue.
Members of the committee spoke to six witnesses that each do work adjacent to blockchain or digital currency mining: Ari Juels, a professor at Cornell; John Belizaire, CEO of Soluna Computing, Inc.; Brian Brooks, the Chief Executive Officer of BitFury; Steve Wright, former CEO of Chelan County Public Utility District and Bonneville Power Administration; and Gregory Zerzan, shareholder of Jordan Ramis P.C.
The tone of the conversation and overall outlook that the legislators had was positive. Many of the lawmakers believed that blockchain technologies and digital currency were cutting-edge technologies that have a promising future. However, the lawmakers expressed concern about the amount of energy that some blockchain networks consume, if that amount of energy consumption is sustainable, and if node operators and mining farms are searching for clean energy alternatives to power their digital currency operations.
The committee looked to the witnesses for insight on these issues, asked them questions, and expressed their concerns on the topic. Here are the key takeaways from the hearing.
Is the amount of energy blockchain networks consume problematic?
Legislators asked how problematic the energy consumed by block reward mining was. In particular, they wanted to know how sustainable it was for electricity grids in the United States to take on the growing workloads that come from digital currency miners.
Brooks answered by saying that the amount of electricity digital currency mining consumes is less problematic than meets the eye, explaining that we must look at the value that is created in the world as a result of digital currency mining and that the fruits of the labor are something that consumers and investors are willing to pay for.
Zerzan and Belizaire supported the idea that we must look at the value that is created, and went on to tell the lawmakers about the number of jobs that digital currency mining creates and the amount of money invested in publicly traded mining companies.
The only witness that expressed concern with the amount of energy that digital currency mining consumes was Juels. He told lawmakers that even though mining operations are continually becoming more efficient, the overall amount of mining hardware has increased in recent years which has boosted overall energy use.
According to Juels, proof of stake (PoS) mining is a proof of work (PoW) alternative that is much less energy-intensive, yet accomplishes the same goal. This has prompted many of the committee members to inquire about both mining algorithms.
Proof of work vs Proof of stake
During the hearing, many witnesses mentioned PoW mining and PoS mining. Juels suggested that PoS is the leading alternative to proof of work as it accomplishes the same goal as PoW while using much less power.
However, some participants, like Brooks, pushed back on that idea and said that proof of stake fundamentally operates differently and accomplishes a different set of goals than PoW mining. Therefore, Brooks believes that proof of stake is not a proof of work substitute. It was clear that the committee was in the early stages of their proof of work vs proof of stake journey, and ultimately, the committee did not have a clear opinion on this particular debate.
However, this will be a topic that you want to monitor as legislation is created around digital currency mining operations as it could have dire consequences on the blockchain and digital currency industry if one of the two methods was restricted by law. It’s worth noting that many researchers have already analyzed the PoW and PoS models, taking into consideration their profitability, energy efficiency and throughput. As the analysts at Canadian accounting and business advisory service firm MNP have pointed out in their report, titled “The Search for a More Efficient Bitcoin”: “As more businesses and consumers adopt blockchain technologies, and regulatory requirements towards green and renewable energy continue to become more stringent, it is important to understand the impact blockchain has on the environment—especially related to the energy consumption issue.”
Clean energy alternatives
Clean energy alternatives seemed to be the area that the committee was most interested in. Many members of the committee support the growth of blockchain and cryptocurrency and the promise they hold for the future, but lawmakers want the industry to at least make an effort to reduce its electricity consumption. Diminishing the amount of pollution and waste created is never a bad thing. The Committee was very interested in learning about clean energy alternatives that could be used to power mining facilities.
Belizaire told lawmakers that significant amounts of capital are being invested in clean energy mining operations, while Brooks told Congress that compared to other regions of the world, which tend to use fossil fuels to mine, mining operations in the United States are relatively clean.
Where will the Committee go from here?
The “Cleaning Up Cryptocurrency: The Energy Impacts of Blockchains” was more of an information session than it was a serious inquiry for information that would be used to create legislation. Regardless, the blockchain and digital currency industry and the amount of energy that both consume are on the government’s radar.
“There is a significant gap between what researchers, entrepreneurs, and educators understand about [mining] which in turn, limits their ability to inform lawmakers and regulators with sound advice,” said Bryan Daugherty, the North American regional manager of BSV Blockchain.
Investors and speculators mostly have a one-dimensional outlook and understanding on Bitcoin and other digital currency assets, typically viewing cryptocurrencies as some kind of get-rich-quick casino, betting coins going up and down, speculating on volatility, market fluctuations, and investor FOMO.
“On the other hand, entrepreneurs, governments, and businesses understand that blockchain offers the best technology for the necessary security, cost savings, efficiencies, and new business models required to keep pace and stay ahead in this ever-changing digital world, where data is the new oil,” stated Daugherty.
I am curious to see how this committee and others like it will ensure that they are bridging the gap between crypto speculation and blockchain specialization as exchanges, wallets, and crypto-servicing businesses do not have the same motivations as those entities that are utilizing blockchain for utility.
Daugherty stated: “From my perspective, blockchain is not only the catalyst but the infrastructure for a new era of enterprise efficiency, bringing next-generation sustainable digital transformation to every industry. [Bitcoin Association] will be placing additional effort to meet and educate legislators and regulators over the coming weeks and months.”
Watch: CoinGeek New York panel, How to Achieve Green Bitcoin: Energy Consumption & Environmental Sustainability
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