The vice-chair of Europe’s securities and markets authority has said that proof-of-work crypto mining should be banned.
Erik Thedéen warned that crypto mining poses a risk to meeting climate change goals outlined in the Paris agreement in comments to the FT. He said that regulators across Europe should consider a ban on “proof-of-work” mining, a highly energy intensive method for creating new coins which is used by the world’s two largest crypto projects – Bitcoin and Ethereum.
“The solution is to ban proof of work,” Thedéen told the FT. “Proof of stake has a significantly lower energy profile.”
Under the proof-of-work consensus mechanism all the miners on the network compete to solve the same algorithmic puzzle to verify transactions being added to the block chain. The method is highly energy intensive compared to proof-of-stake which selects a small group of miners at random to sign off transactions.
Cambridge’s Bitcoin energy consumption index estimates that the mining process uses 134.8TWh of energy per year, more energy than entire countries including Norway, Sweden and the Ukraine. Developers for Ethereum estimate that moving the project to proof-of-stake will cut the network’s carbon footprint by 99.95 per cent.
“We need to have a discussion about shifting the industry to a more efficient technology,” Thedéen said, stressing that he was not calling for an outright ban on crypto assets.
“The financial industry and a lot of large institutions are now active in cryptocurrency markets and they have [environmental, social and governance] responsibilities,” he added.