The U.S. has now become the world’s leading nation in Bitcoin and other digital asset mining after a historical miner exodus from China in the summer of 2021. Miners in Kazakhstan, the second biggest mining nation by hashrate, have also experienced disruption to their operations due to recent turmoil.
Congress and government officials are anticipating America’s lead in the industry to continue and may be seeking accountability for the environmental impact of mining.
In a press release on January 12th, 2022, the Energy and Commerce Committee Chairman Frank Pallone, Jr. (D-NJ) and Oversight and Investigations Chair Diana DeGette (D-CO) announced that the committee will discuss actions to be taken place for proof of work cryptocurrencies. The hearing is scheduled for January 20th, 2022.
Pallone and DeGette state that “In just a few short years, cryptocurrency has seen a meteoric rise in popularity. It’s time to understand and address the steep energy and environmental impacts it is having on our communities and our planet.”
Proof of work ‘alternatives’
The committee’s focus will be on understanding the current energy footprint that proof of work mining has on the environment. Pallone and Degette also wish to develop an action plan for cryptocurrencies to rely less on energy intensive means to operate.
The live webcast for this hearing will be available for the public to attend.
A less energy intensive solution that the committee may propose is a proof of stake model that does not require energy to validate transactions. However, proof of stake systems are not like-for-like replacements for proof of work systems as they involve trade-offs when compared to the qualities of proof of work. For example, it is difficult to achieve a fair distribution of tokens with a proof of stake system because the token itself is required to be staked in order to validate transactions. This raises the question of how to distribute the initial tranche of tokens amongst users. Proof of stake systems also trend towards more centralisation as the biggest stakers receive the biggest share of the validating rewards which in turn make them even larger stakeholders.