Honestly, it was only a matter of time for regulators to impose ban on crypto mining. Essentially, what started out as a system to take advantage of the excess electricity in a power grid, is now paralyzing all countries with its massive consumption. Currently, one quarter of world’s population is facing a water crisis. Furthermore, almost 50% of the world’s population has no access to electricity. In a time when the climate change and wars are draining resources, crypto mining will naturally be a lower level priority. With that, the state of New York is pushing a ban on crypto mining for two years.
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Moratorium on Crypto Mining
The New York State Senate approved a bill that creates a moratorium of proof-of-work crypto mining. At this point, the bill is on its way to Governor Kathy Hochul to get the final approval.
Proof-of-work is the most energy-consuming consensus algorithm. Generally speaking, PoW blockchains suffer from low transaction speeds, high gas fees and bad scalability. Bitcoin and Ethereum are the largest cryptocurrencies by market cap and they both utilize PoW.
Subsequently, the legislation would impose a two-year pause on mining tokens with PoW algorithm. Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Dogecoin (DOGE) are some of the largest proof-of-work cryptocurrencies.
However, the bill states that the ban only includes carbon-powered crypto mining in the state. Simultaneously, there will be a comprehensive report on the mechanism’s environmental impact. Ultimately, the report will decide the fate of PoW in the future. Governor Hochul has 10 days to either sign orr veto the bill. In the meantime, the state of New York is facing backlash from prominent crypto advocates and Bitcoin maximalists.
“[This bill] establishes a moratorium on cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions; provides that such operations shall be subject to a full generic environmental impact statement review.”
Vitalic Buterin has taken into Twitter to object this decision. Despite his previous comments on PoW mechanisms inefficiency, Buterin is not happy with the decision that could possibly harm Ethereum. The Ethereum blockchain is due for an upgrade that will initially replace proof-of-work with the much more efficient proof-of-stake.
Energy Crisis
Last year, China had massive crackdowns on cryptocurrencies and crypto mining citing the energy consumption as unacceptable. Following that, some large mining operations moved from China to Kazakhstan where they quickly drained electrical resources. Soon, the endless power outages brought the angry people to the streets almost causing a full on revolution.
As for New York, the two-year ban is a serious attempt. According to Bitcoin Electricity Consumption Index of Cambridge University, New York accounts for almost 10% of nation’s Bitcoin hashrate. Georgia, Texas and Kentucky are following NY in the ranks.
Potentially, the NY crypto mining bill can jump start a chain of similar bans within the US. However, the EU is also considering to take the same actions against proof-of-work mining. For what it seems, the proof-of-work may be coming to an end and the largest cryptocurrencies by market cap will get hurt the most. So, is the longest-running bull market in history about to nosedive?
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