Proof-of-Work (PoW) Mining Under Scrutiny Despite Shift Towards Sustainability

In the world of digital assets there are various consensus mechanisms widely used.  These are methods by which a respective network is secured.  A few of these include,

• Proof of Stake (PoS)
• Delegated Proof of Stake (DPoS)
• Proof of Activity (PoA)
• Proof of History (PoH)

Without a doubt though, Proof of Work (PoW) is the most well-known, as it is used by none other than the top digital asset – Bitcoin (BTC).

If you are reading this, then you already know that for all its strengths PoW has many detractors – the majority of which maintain issues with the required power consumption for such networks.  Beyond looking solely at the amount of power required, there is the question of how that power is generated.  Each prominent talking points throughout 2021, with no end in sight.

The following are a few developments involving PoW mining from recent days.

Intel to Manufacture Miners

The contention surrounding use of PoW is being viewed as an opportunity by some.  One example of this is processor manufacturing giant, Intel.  It is believed that in the coming weeks, Intel will reveal its own line of custom ASIC miners (specialized devices built solely for mining cryptocurrencies).

What makes this potential reveal intriguing is the associated patent filed for the product in 2018.  If successful in its goal, Intel’s ASIC miners are expected to greatly reduce power consumption (up to 15%), while simultaneously offering capabilities on par with existing options.

If a major manufacturer like Intel were to enter the Bitcoin mining arena, the market landscape would immediately change.  Prices for miners would become more competitive, shortages would become less likely, network hash-rates would continue to rise as a greater portion of the population is able to gain exposure to the practice, and the environmental footprint of the Bitcoin network would diminish as hardware efficiency rises.

Block to Build Open Bitcoin Mining System

Much like Intel, Block (formerly known as Square) has recently shown an interest in developing its own Bitcoin mining system.  While hopes to do so were first announced in late 2021, it was only this past week that Jack Dorsey confirmed the plan was moving forward.

The company notes that as it begins the development process, it has its eye on three key areas.

• Availability (wide-spread access will encourage decentralization of hashing power)
• Reliability (low maintenance reduces entry of barrier, allowing for the ‘average joe’ to partake)
• Performance (increased efficiency and hashing power is a must to foster network growth)

Where this endeavour differs from that of Intel’s is that the Bitcoin mining system being developed by Block is said to be open-source.

Bitcoin Mining Council Q4 Results

Despite the aforementioned mining solutions from companies like Intel and Block not yet being available, the Bitcoin network has still managed to significantly reduce its negative impact on the environment over the past year.

This reduction of impact has occurred not through increased efficiency of miners, but rather the source from which power is generated.  When China (and various countries in the time since) banned the practice, miners were forced to move their operations.  As a result, many saw their primary sources switched from coal to some form of renewable power.

As Bitcoin is not owned by a single entity or group, there is no one to officially speak on its behalf.  While this is sometimes a good thing, it is most definitely a hurdle when it comes to defending the network.  As such, various influential companies and individuals formed the ‘Bitcoin Mining Council (BMC)’ in 2021 – with a goal of promoting the use of sustainable energy, while collecting and sharing network facts.

In its most recent quarterly survey, the BMC revealed various promising metrics which point towards a promising future for the practice.

Michael Saylor, CEO of MicroStrategy, commented on these results, stating,

“This quarter we saw the trend continue with dramatic improvements to Bitcoin mining energy efficiency & sustainability due to advances in semiconductor technology, the rapid expansion of North American mining, the China Exodus, and worldwide rotation toward sustainable energy & modern mining techniques.”

The take home point from this recent report by the BMC is that the network is trending in the right direction.  Yes, the Bitcoin network requires a massive amount of power to operate, but it is doing so on a foundation of increasingly sustainable power.  With various solutions on the horizon from Intel, Block, and others, this trend should only continue with time – ideally making the argument that Bitcoin is bad for the environment a moot point.

An Oath Against Mining

Despite the progress being made towards sustainability by PoW mining, there are many not yet convinced.  This most was most recently demonstrated through an odd event which saw residents of Svaneti, Georgia taking a holy oath to abstain from PoW mining.

PoW mining in Georgia has become an issue, as its power-grid is being taxed by the practice.  This is an issue being seen in various locations which boast cheap-electricity.  In these instances, environmental footprint is not the issue – rather, it the burden placed on the grid.

PoW Viewed as ‘National Issue’

An oath against PoW by a couple hundred citizens may not tip the scales in either direction. However, if Erik Thedéen, Vice Chair of the European Securities and Markets Authority, has his way, rocky roads may be on the horizon.

Calling PoW mining a ‘national issue’ in a recent interview, Thedéen is advocating for regulators within Europe to ban the practice in favour of PoS.

Interestingly, Thedéen believes that the recent migration of Bitcoin mining towards sustainable power sources is a bad thing, stating, “Bitcoin is now a national issue for Sweden because of the amount of renewable energy devoted to mining.”

The issue here being that with sustainable power devoted towards PoW mining, it means that other sectors reliant on coal will need to wait their turn to make the switch.  It would appear as though this is a situation which falls under being ‘damned if you do, damned if you don’t’.