A Senate hearing this week focusing on block reward mining in the U.S. debated the benefits of increased disclosures for miners, while witnesses pointed to the real-world impacts of mining operations on the environment, energy usage, and economy.
On Tuesday, the Senate Environment and Public Works Committee Subcommittee on Clean Air, Climate, and Nuclear Safety held a hearing on the Crypto-Asset Environmental Transparency Act, with witnesses from an economic justice organization, the New York state government, and Nebraska’s power district sharing their views on the impact of mining in their states.
The bill under discussion was introduced in December 2022 by Senators Ed Markey (D-MA), Jeff Merkley (D-OR), and Bernie Sanders (I-Vt.) and House Representative Jared Huffman (D-CA 2nd District), and would require block reward mining companies to disclose emissions for operations that consume more than five megawatts of power, as well as a comprehensive investigation into the impacts of U.S. block reward mining by the Environmental Protection Agency (EPA).
Subcommittee Chairman Sen. Ed Markey, who kicked off Tuesday’s session, focused on the environmental impacts and energy drain of BTC mining operations, citing in his opening remarks the much-used comparison that mining consumes as much power per year as the Swedish economy, and concluding that “Bitcoin is more like digital coal than digital gold, the commodity is virtual but the harm is tangible.”
The Democrat Committee Chairman praised the proof-of-stake mechanism as superior to proof-of-work due to its—perceivably—more efficient use of energy and reduced impact on the environment.
In contrast, his Republican counterpart, Subcommittee Ranking Member Sen. Pete Ricketts, focused on the economic value of the industry, particularly in relation to his state Nebraska, and compared mining to other energy-draining industries—Republican Senator Cynthia Lummis doubled down on this later in the hearing by asking why electric vehicle charges are not being subjected to the same scrutiny as block reward mining.
Environmental concerns at fore
During the hearing, Sen. Markey highlighted the need for increased reporting from miners, saying, “the people who profit from Bitcoin mining can’t be left to grade their own homework.”
He also reiterated that the bill under discussion would mandate a detailed EPA-led study of the environmental impact of block reward mining and require miners to report their carbon emissions to the EPA greenhouse gas reporting program.
The first witness, Rob Altenburg, Senior Director for Energy and Climate at PennFuture, a non-profit environmental advocacy organization, shared Markey’s concerns about block reward mining and pointed to the industry’s use of unsustainable waste coal and fracking in its search for energy, as well as the drain on nuclear energy’s ‘greener’ supplies.
Speaking after Altenburg, New York State Assemblymember Anna Kelles also voiced her support for the bill, referencing several damning statistics, an example being that “one Bitcoin transaction requires approximately 880 kWh. This is equal to the energy needed to power the average U.S. household for 30 days”—a popular stat also mentioned by Altenburg in his remarks.
Kelles’ concerns are echoed in a recent report by Canadian consultancy firm MNP, which compared the average energy consumption per transaction of the major digital assets. It found that in 2020 and 2021, a BTC transaction could require up to 706kWh. BSV, in contrast, maxed out at 3.3kWh per transaction.
Altenburg and Kelles both raised concerns about noise pollution related to the block reward mining process, although when it came to discussing the pros and cons of digital assets, Altenburg was keen to distinguish between the ‘blockchain’ and ‘cryptocurrency,’ praising the former’s increased potential for positive utility and solid value, compared with the latter.
The Committee’s third speaker, Courtney Dentlinger, Vice President of Customer Service & External Affairs at Nebraska Public Power District, was the sole dissenting witness in favor of block reward mining. She focused on Nebraska’s ability to produce enough energy to welcome block reward mining, and suggested this has resulted in economic growth in rural areas.
Sen. Ricketts was also keen to point out the contradiction between the belief that mining has resulted in negative climate impacts and Nebraska’s use of clean energy technology for mining, to which Dentlinger affirmed that the state has seen increased tax revenue and job creation allowing for clean energy infrastructure investments and reduced property taxes.
Throughout the hearing, the Democrat and Republican committee heads very much stayed in character, with Markey probing environmental impacts and Ricketts touting economic benefits, but one point that was returned to frequently and not disputed amongst the committee members was the proof-of-stake over proof-of-work debate.
Proof-of-stake has fans on the hill
When discussing the excessive energy usage of mining, Sen. Markey stated that the problem “isn’t an issue that’s built into blockchains, it’s built into Bitcoin,” referring to BTC. He went on to praise, in comparison, the proof-of-stake system used by Ethereum.
BTC uses the proof-of-work consensus mechanism that asks miners to solve difficult mathematical puzzles to complete a block of transactions and secure the blockchain. As compensation, they’re rewarded with digital currency.
By contrast, Proof-of-stake, as used by Ethereum, aims to achieve the same outcome—to securely verify transactions on the blockchain—but without needing the same amount of computing power. In Proof-of-stake, digital currency owners validate block transactions based on the number of ‘staked’ coins and earn rewards for their validating. The Proof-of-stake mechanism changes the way blocks are verified using the machines of coin owners, so in theory, there doesn’t need to be as much computational work. Thus less energy/electricity is used in the process.
Leaving aside arguments about the relative benefits and drawbacks of the two systems regarding security and accessibility limitations—because the Committee also left them aside—the hearing’s first two witnesses outlined the negative effects of proof-of-work mining in the States.
Rob Altenburg noted that “all together Bitcoin consumes more energy, more electricity than 80% of our states and more than many entire countries” and suggested that “Bitcoin (BTC) is wasteful by design, but this sort of waste just isn’t necessary.”
Citing Ethereum’s proof-of-stake as an example, Altenburg argued that a more energy-efficient and less polluting system already exists, saying it does everything BTC does but faster, cheaper and using a fraction of the energy and by contrast, “Proof-of-work is essentially cryptocurrency version 1.0.”
This sentiment was echoed by Kelles, who suggested that other forms of validation, such as proof-of-stake, “utilize far less energy, posing less of a threat to meeting state and federal climate change emissions goals.”
Senator Markey also signaled his support for proof-of-stake over proof-of-work, stating that “if it is possible and it is more energy efficient and it gets the same result,” mining should move in this direction—a hint environmentally conscious lawmakers might be trying to move the industry towards this alternative consensus mechanism.
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