EU securities and markets authority, recently expressed concerns on the risks posed by bitcoin mining on climate change goals. The EU securities regulator feels the mining poses a threat on the actualization of the climate change goals enveloped in the Paris agreement.
In an extensive interview with financial times, the Vice Chairman of the EU securities, Erik Thedeen, revealed that the renewable energy committed to crypto mining has, in recent times, significantly risen. The Vice-Chair, also stressed that mining remains a national issue in his home country, Sweden. Thedeen further clarifies that his recommendation remains restricted to ban on proof-of-work mining, not total crypto ban. He claims the ban possesses the tendency to move the industry into a state of proof-of-stake, which consumes limited energy.
Over the last decade, mining has proven to be a robust business arena and, with all indications devoid any sign of declining. More so, the computing energy channeled to the industry attained a record status late last year. This manifested, despite an existing ban on mining and cryptocurrency operations in China, a country, identified as one of the biggest crypto markets of the world.
EU Securities: Proof-of-work versus Proof-of-Stake
Accordingly, a proof-of-work can be defined as a process which allows the blockchain to verify the legitimacy of blocks or transactions. Crypto miners, usually commit robust computing power as a way of competing with one another, especially in addressing complex problems. Consequently, the miners become rewarded with coins. However, this model mandates all miners to verify every respective transactions on the blockchain. This, thus costs a huge amount of energy.
The proof-of-stake, on the other hand enables the verification of transactions, by a small number of parties. Accordingly, participants risk their crypto in generating validated nodes, needed to verify those transactions.
Now, both the proof-of-work and proof-of-sales remain known as successful. However, both consensus mechanisms possesses unique trade-offs associated with them. The point-of-work, costs a huge amount of energy and techniques to operate. With this, the model enjoys a significant level of security, owing to the huge resources, needed by criminal elements to attain 51% control of the network. However, the disadvantage of the model has to do with the cost implications of scaling the network.
Furthermore, the proof-of-stakes, becomes maintained by coins or tokens. This model get easily scalable owing to the fact that it devoid any huge requirement of energy and equipment. However, the disadvantage associated with the model remains it’s network control can be purchased, using money.