Bitcoin spikes 10% on news of potential ban
President Joe Biden and his administration capitalized on a major threat to cryptocurrencies that operate on the energy-intensive protocol known as “POW” or proof of work. Pursuant to an order signed in March, the White House is demanding that cryptocurrencies like Bitcoin become “greener” or more environmentally friendly or face an outright mining ban in the United States.
With oversight and assistance from the Environmental Protection Agency (EPA), the Department of Energy (DOE) and other federal agencies, the White House Office of Science and Technology Policy said crypto miners should reduce greenhouse gas emissions or face penalties.
Think of Bitcoin mining as gold mining, the act of extracting an asset, but instead of extracting it from the earth and causing far more destruction and a far greater environmental impact, Bitcoin is mined from a digital network, and just like gold mining, it requires resources such as advanced computers, specialized asic chips, human time and effort, and most importantly electricity – enough to run a small country. (Note, however, unlike gold, Bitcoin is limited to 21 million coins, while gold appears to be infinite, meaning that one day Bitcoin mining will cease to exist as an industry.)
Contrary to popular belief, Bitcoin operates in an extremely transparent nature, which makes it unsuitable for criminal activity, money laundering and other illegal activities, but fortunately, this transparency also makes it very clear and transparent regarding the amount of energy consumption which is used by the Bitcoin network, making it a target for environmentalists.
Many market players in the crypto industry have already started to find ways to use renewable energy to mine Bitcoin through the use of solar energy, wind, in some places nuclear and even volcanic energy as seen in El Salvador. Another method would be to make a similar move from Proof of Work to Proof of Stake (POS) as is currently done with the Ethereum network.
Proof of Work is much more decentralized in nature as it requires multiple participants across the network to review and approve transactions through the use of specialized mining rigs and solving complex math problems to decipher the cryptography used to secure the network, a very energy intensive operation. Proof of Stake on the other hand is a newer consensus protocol where users of the network stake their own coins to delegate control over the network (far less energy intensive). That means those with more coins gain more control, which some argue could lead to less decentralization, the antithesis of the original purpose of cryptocurrency.
Markets reacted well to the news, with the price of Bitcoin rising 10% in 24 hours of trading at around 21,000.
