Crypto Mining Won’t Survive Another Round of Environmental Laws

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It was only a matter of time before China banned Bitcoin (BTC) mining, trading and crypto services. To do anything with Bitcoin anywhere in the People’s Republic requires a special exemption. The Chinese government’s reason for cracking down on bitcoin is to reduce its well-documented climate impact. Regardless of how much truth there is in this explanation, one thing is clear: China’s just anger at energy-guzzling, carbon-spewing cryptocurrencies in service of Earth’s climate is just the first shot in the arm. looming global showdown against bitcoin and other crypto projects. that rely on proof of work (PoW), the complicated cryptographic security mechanism that we subsume under the term “mining”. It doesn’t seem like a battle crypto can or will win.

For many cryptocurrency enthusiasts who hold Bitcoin, this is a difficult realization to face. Fortunately, there is a useful parallel, and it even bears the same name: coal mining. Coal is on its last legs as there are cleaner, cheaper, more efficient and more technologically advanced alternatives.

Related: Carbon Neutral Bitcoin? New Approach Aims to Help Investors Offset BTC’s Carbon Emissions

Certainly, the coal is not flowing without a fight, backed by wealthy corporate lobbies and powerful politicians often receptive to generous campaign donations. Even then, if your financial adviser told you that he really wanted to invest in coal, you would probably have a new financial adviser. For similar reasons, it might be time to come to terms with the fact that mining, from coal to crypto, may soon be a relic of the past.

Short-term effects of China’s Bitcoin ban

A combination of inertia and reluctance to quit mining temporarily cushioned the full impact of China’s war on Bitcoin. After the initial shock, the US jumped at the opportunity created by China’s ban to become the world’s new mining hub. In Asia, Kazakhstan and Malaysia are stepping up their mining operations, as are Germany and Ireland in Europe and Iran in the Middle East, according to recent statistics. The effort to advance cryptocurrency mining creates some very strange geopolitical ties.

Such a colorful and diverse “Bitcoin mining coalition” might reassure some investors, but in truth, it will not stand the test of time. The United States cannot match China’s low energy prices, and it cannot hold the title of mining champion for long. Germany and Ireland are in a similar boat. Iran is currently in the throes of mass protests over a severe water shortage, so boasting of having a stake in the world’s least sustainable cryptocurrency is politically undesirable and socially untenable, even for a theocracy. Malaysia is also exposed to extreme weather conditions and rising sea levels that would not allow it to sustain its cryptocurrency mining effort in the medium to long term. Taken together, these developments significantly limit the future prospects of the mined cryptocurrency.

Commitments to climate action push mining to the margins

It certainly doesn’t help the Bitcoin miners’ case that a majority of the world’s states and virtually all-powerful industrial nations have entered into the Paris Climate Accord. This comes with a strong commitment to limiting carbon emissions and preventing the planet from overheating further. Bitcoin mining is contrary to this promise. In addition to the Paris Agreement, the European Union is pursuing its own action plan on climate change, the European Green Deal. These large-scale, multinational deals push energy-intensive projects such as Bitcoin mining to the fringes.

Related: To the Roots of Mining: Bitcoin is Going Green Faster Than Ever

As the tide turns in favor of carbon neutrality, the task of mining cryptocurrency is left to a handful of states that either don’t take their climate goals seriously or simply forge long-term plans . It is no coincidence that many of the countries making a last ditch effort to mine Bitcoin right now are authoritarian states facing growing international pressure alongside growing internal conflict and discontent. Few, if any, serious investors can stake their crypto portfolio on the political stability of a water-strapped dictatorship or autocracy violently suppressing public dissent. It’s bad for optics, bad for the climate and bad for business.

A cryptocurrency that has been pushed to the political and geographic periphery can hardly claim to be truly decentralized and democratic. Even if we put aside the climate problem, how can we consider cryptocurrency mined in tyranny as a token and tool of economic liberation? From a finance, climate, and appearance perspective, the sun is setting on Bitcoin and other mined cryptocurrencies. It’s just a matter of time.

The power of inertia and the pain of letting go

So what drives the mining train? Above all, the power of inertia and entrenched habits should not be underestimated. Bitcoin was revolutionary when it was released in 2008. It paved the way for a new digital economy. Proof of work was a revelation in terms of decentralization and security, but its lack of efficiency presented us with a ticking time bomb. This bomb explodes now.

Letting go of the mining will be painful and its immediate replacement is not obvious. Powerful players around the world have amassed technological and energy resources to continue mining cryptocurrency for the foreseeable future, and they can pull enough political and economic leverage to maintain the status quo for a bit longer. When institutional repression eventually arrives, some mining operations will go underground and fall into the realm of organized crime as long as they remain profitable.

Related: Crypto Mining Needs Rethinking Before You Just Dismiss It

However, without legal on- and off-ramps for free trade and mass adoption, the respective cryptocurrencies will recede into obscurity and the sidelines with their valuations permanently devastated. Eventually, the mining project market and law enforcement will render mining obsolete. The question to investors and crypto enthusiasts is, why wait for this to happen?

Abolition of mining can jump-start the crypto-economy of the future

If we invest the resources that have been set aside for Bitcoin mining in more advanced and greener crypto projects, we can accomplish much more for the nascent digital economy. We can keep piling coal in the old steam locomotive or we can upgrade to a high-speed train and invest the resources to make it go longer and faster. Some will highlight renewable energy and how Bitcoin can reduce its carbon footprint by using more green energy.

Currently, less than a third of the world’s electricity comes from renewable energies. If that share was all about cryptocurrency mining, that might give it some semblance of sustainability, but it would be little more than a fig leaf. We would be much better off directing renewable energy to truly sustainable and sensible uses. When it comes to cryptography, there are many promising and mathematically rigorous solutions that can grant a network PoW levels of security.

Mining is on its way out and we are making ourselves vulnerable by prolonging its inevitable demise. Moving to lighter, more durable, and scalable solutions will open up the crypto space to a much wider audience and fulfill its promise of true decentralization and democratization. The sooner we accept this fact and make the switch, the better it will be for everyone inside and outside the crypto space.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Dominik Schiener is co-founder of the Iota Foundation, a non-profit foundation based in Berlin. He oversees partnerships and the overall realization of the project vision. Iota is a distributed ledger technology for the Internet of Things and is a cryptocurrency. Moreover, it won the biggest blockchain hackathon in Shanghai. For the past two years, he has focused on enabling the machine economy through Iota.

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