Accused of being too energy intensive, the "proof of work" method, used to validate Bitcoin, is singled out by Swedish authorities. The Swedish financial supervisory authority and the Swedish environmental protection agency want to ban it at EU level. Instead, the European Commission proposes to regulate cryptocurrencies.

Bitcoin banned in the EU?

Threat to Bitcoin  ? After China, which has put a stop to mining operations on its territory, Swedish authorities have in their sights cryptocurrencies that they consider too greedy in energy. The Swedish financial supervisory authority and the Swedish environmental protection agency are targeting a so-called “mining” method used to validate Bitcoin, the “  proof of work” .

Their joint statement, published on November 5, raised concern: the Spanish site FXmag sees it as “the first steps towards a ban on cryptocurrencies in the European Union”, while the Journal du geek wonders if “Bitcoin [ will] soon be banned from the EU ”.

What does this press release contain? The two agencies are making three requests , including one at European level. These authorities want "the EU to consider a ban at European level on the energy-intensive mining method called" proof of work ".

On the other hand, they do not rule out the door to other methods of producing cryptocurrency, if these prove to consume less resources. “There are other crypto-asset mining methods, which could also be used for Bitcoin and Ethereum, which are estimated to reduce power consumption by 99.95% with functionality maintained. » 20 Minutes reviews this proposal.

Does proposing to ban the use of the “proof of work” method in the EU amount to banning Bitcoin there?

This “proof of work” method is the “trademark” of Bitcoin, explains Nathalie Janson, associate professor of economics at the Neoma business school , to 20 Minutes . It is this method that "makes some people think that Bitcoin is superior" to other cryptocurrencies.

This process puts minors in competition to validate transactions. "Since you are going to verify the blocks by this competition, you have an almost improbability of the falsification of the process," notes the researcher. If someone were to tamper with the validation, they would have to re-tamper all the blocks that were previously validated. "

This method, known for its safety, has drawbacks, recalls Nathalie Janson: "It is true that the" proof of work "consumes energy, and it is not very fast either. "

Are there alternatives to this “proof of work” method?

The "lightning network" is one of them. It "allows the quality of the validation security level to be maintained, while always having" proof of work ", but by considerably reducing the number of times it is used", explains the professor. This method makes it possible to lower energy consumption, but responds "only half to the Swedish proposal", notes the economist, because the Swedish authorities propose to ban completely "proof of work".

Another avenue to which allusion is made by the Swedish financial supervisory authority and the Swedish environmental protection agency: the “proof of stake” method. They estimate that it reduces “energy consumption by 99.95% with functionality maintained”. These two agencies use here the terms of Ethereum , the second most widespread cryptocurrency, which will pass, for a new version, to this method. This spectacular figure is based on a comparison of the estimated energy consumption of “proof of work” and “proof of stake”. It has, however, not been validated by researchers.

The downside of this method is that it is considered less secure by Bitcoin users and that it presents more instability, recalls Nathalie Janson.

Could Bitcoin be produced with these other mining methods?

For Natalie Janson, the "lightning network" could be accepted by the "hard-core" Bitcoin community, because it retains "proof of work". On the other hand, it does not see them adopting the "proof of state".

For these users, “proof of work” is “what made Bitcoin so successful” and made it “take off in price”. Difficult, therefore, to consider a change of method.

What does the European Commission think of this?

Contacted by 20 Minutes , the two Swedish agencies did not confirm whether they had brought these proposals to the table in Brussels. The balance within the Commission tilts more in favor of regulation than of a ban, as indicated in June 2020 by Valdis Dombrovskis, the vice-president in charge of "an economy at the service of people".

Why do these Swedish agencies want to start regulating cryptocurrencies?

In their press release of November 5, while the COP26 is taking place in Glasgow, they draw up a severe indictment against the “proof of work” method, which they fear to see using energy resources that could be used for other priorities. “This year, between April and August, electricity consumption for Bitcoin mining in Sweden increased by several hundred percent and now stands at 1TWh annually, they noted. This is the equivalent of the electricity of 200,000 Swedish households. "

These agencies fear that part of the renewable energy, necessary for the country's energy transition, will no longer be available if larger mining operations were to develop in the Nordic country.

Post a Comment

Previous Post Next Post