The letter, put forth by council members like Grayscale CEO Michael Sonnenshein, Microstrategy CEO Michael Saylor, and Block (formerly Square) founder Jack Dorsey, was addressing statements from House Democrats which called on the EPA to monitor crypto mining facilities to investigate their environmental impact.
Bitcoin, which runs on proof-of-work (PoW) and requires running high-powered computers, has been at the centre of regulatory scrutiny for some time in the face of climate change discussions.
The Council’s letter addresses a few key claims made by Congress, including that Bitcoin mining centres are “polluting communities and are having an outsized contribution to greenhouse gas emissions.”
“The statement above unfortunately confuses datacenters with power generation facilities,” the letter states.
“Power generation facilities are not datacenters. Datacenters which contain ‘miners’ are no different than datacenters owned and operated by Amazon, Apple, Google, Meta, and Microsoft. A ‘miner’ is merely industry terminology for a specialized computer server operating inside a datacenter. All datacenters utilize electricity generated externally. Emissions are created at the power generation source upstream from the datacenters. Digital asset miners simply purchase electricity from the grid, the same as Microsoft and other datacenter operators.”
Another prominent narrative that has been making the rounds for years now relates to Bitcoin’s energy consumption compared to other things.
One claim that the Bitcoiners address is that “a single Bitcoin transaction could power the average U.S. household for a month.”
“This is patently and provably false,” the letter says, adding that “Bitcoin transactions do not carry ‘energy payloads.’ Bitcoin transactions cannot be ‘redeemed’ for energy. Broadcasting a transaction requires no more energy than a tweet or a Google search. Bitcoin miners collect revenue based on the issuance of Bitcoin (currently 99% of their revenue mix) and fees associated with individual transactions (which can involve thousands of distinct, separate transfers). Causally speaking, it is the high price of Bitcoin combined with its yearly new issuance (328k BTC this year) which induces miners to consume energy.”
Last month, reports out of Germany suggested that European Union officials were privately mulling over a regulatory crackdown on Proof-of-Work crypto mining in favour of Proof-of-Stake, citing PoS’s alleged environmental impact. Similar discussions may be taking place in American Congress given their claim that “Less energy-intensive cryptocurrency mining technologies, such as ‘Proof-of-Stake’ (PoS), are available and have 99.99 percent lower energy demands than PoW to validate transactions.”
The Council’s letter explains that PoS isn’t a “mining technology,” but a technique to determine authority over a distributed ledger.
“Moreover, it has a much more limited track record, is controlled by founders, has single points of failure and it remains dubious as to whether Proof of Stake can effectively govern a global, apolitical monetary system, in a manner like Proof of Work.”
The Bitcoin Mining Council was formed in May of 2021 when Microstrategy chief and Bitcoin evangelist Michael Saylor initiated the group’s first meeting with other giants of the industry. Its mandate is to promote transparency and argue the benefits of Bitcoin PoW mining.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.