Days after the United Nations held their 26th Climate Change conference, Sweden’s financial advisory and environment protection agency put in a request for a complete ban on proof-of-work Crypto Mining. In an attempt to keep the planet cool.
Although most of the mining in Sweden is considered a more “clean” method of mining. Even “green” mining poses a risk to our planet’s carbon omissions according to Sweden’s financial advisory Erik Thedéen.
Sweden’s crypto mining market has increased drastically within the last year. Regulators even claim the electricity consumption levels are that of over 200,000 households.
The Swedish regulators have asked the EU to consider the banning of “proof-of-work mining” in particular. They claim that other methods of mining have a much lower energy usage.
The general directors of the Financial Services Authority of Sweden (FI) Erik Thedéen, and the Swedish Environmental Protection Agency (SEPA) Bjorn Risinger are working together on alternative methods to discourage mining. These methods include a higher tax on cryptocurrencies and putting more effort into the education of the effects mining has on the environment.
Theséen and Risinger plan to end further crypto mining operations and stop companies from involving alternative cryptocurrency payment methods.
What is Proof-of-Work Mining?
The Swedish regulators are targeting proof-of-work mining in particular. Understanding how proof-of-work mining works can be quite complicated. You will first need a basic understanding of how cryptocurrencies work.
For this illustration, we will use Bitcoin.
Through mining Bitcoin, the digital currencies distributions work through a locked “blockchain.” The blockchain holds records of all the Bitcoin transactions made within the “blocks.”
When a transaction is made from one block to another, the record is made visible to the public in a hash function. This will help ensure all transactions are in fact true and not altered.
The blockchain users keep aware of where the transaction should allocate the funds.
Users are able to detect any tampering in the transaction made through the hash function SHA-256. When the miner processes a hash function of a transaction, it will always provide the same number to the user processing it.
Proof-of-work miners will run the transactions made to the blockchain and confirm whether this was a hacker’s work, or whether it was a true transaction made. The miners will receive a portion of the transaction made for confirming the hash rate on your behalf.
For each transaction made, 3-6 confirmations are considered enough to claim the transaction is true. Once the transaction has been confirmed on the blockchain, your wallet will update to reflect the transaction.
[TLDR] Proof-of-work mining is a system where miners will run hash functions sent to the blockchain and confirm a transaction is true in exchange for a reward.
The demands from the FI and SEPA in an open letter to the EU include:
- Sweden’s plans to introduce measures to prevent or slow down the already established crypto-mining productions that use high-energy mining methods.
- All companies that allow trading and investing of cryptocurrencies are no longer allowed to market or claim to be sustainable companies.
- The EU is to consider a blanket ban on the high-energy mining methods in the EU altogether. They claim that multiple other methods should be used instead. They also claim this will reduce mining energy consumption by over 99%, so long as the methods are maintained correctly.
In the letter, the FI wrote
The consumer risks are significant, and crypto-assets are commonly used for criminal purposes such as money laundering, terrorist financing, and ransomware payments. Crypto-assets also have a significant negative impact on the climate as mining leads to both large emissions of greenhouse gases and threatens the climate transition that needs to happen urgently. This is alarming to crypto-assets, therefore, need to be regulated.
The FI recognizes that this will ultimately lead miners to relocate their bases of operation, which in itself will cause higher omissions. Their response to this is that they will tackle this as it comes. The FI claimed they would rather lead as an example to other countries in hopes that they will follow.
Sweden’s arguments against cryptocurrency mining stand parallel to China who banned all cryptocurrency mining earlier this year. However, we shall wait to see whether or not the country’s laws will mirror China’s as well.
Although Bitcoin mining does require a lot of energy and therefore does create carbon emissions, an argument can be made on the need to focus on this instead of other contributions. Some estimates claim the carbon footprint of cryptocurrencies is less than 0.01% of the global carbon emission footprint.