After China banned bitcoin mining, the Swedish authorities, namely the Swedish Financial Supervisory Authority and the Swedish Environmental Protection Agency, are demanding that mining operations be restricted as they consume a lot of energy.
In a report published by the French newspaper "20 Minutes", writer Matilde Cousin says that the joint statement of these Swedish bodies, which was published on November 5, raised some kind of concern.
Spain's FX has seen it as the "first steps towards banning cryptocurrencies in the European Union", while French website le Journal du geek wondered if "Bitcoin will soon be banned in the EU." ".
What is the content of this statement?
The statement of the two government agencies contained 3 main demands, one of which was directed at the European Union, in which it was proposed that “a European ban on energy-intensive mining operations based on the “Proof of Work” protocol was proposed. digital if it proves to be less resource-efficient.
And the newspaper "20 Minute" noted that "there are already other mining methods that reduce energy consumption by 99.95%."
Is Proof of Work Protocol Ban in the European Union a Ban on Bitcoin?
According to Natalie Jansson, professor of economics at l'école de commerce Neoma, the "Proof of Work" protocol is the "characteristic" of bitcoin that has made "some people think it's why bitcoin is superior" to other cryptocurrencies.
As part of this process, miners compete to validate transactions.
The economic expert stresses that this system is important to ensure that no manipulations occur, and if anyone tries to manipulate the verification system, "he will be forced to repeat this with all the other blocks that have been previously validated," but this system has flaws, most notably - according to Janson - slowness and consumption Lots of energy.
Are there alternatives?
The writer mentioned that the “lightning network” represents one of the suitable alternatives to the traditional Proof of Work protocol, and the expert Janson explained that this method “maintains a certain level of security during the transaction validation process, but it is based on the (Proof of Work) system, and the difference between The two methods are the number of verification times”, and this method would help reduce energy consumption, but it does not comply with the proposal of the Swedish authorities, which are requesting to ban the “Proof of Work” system altogether.
The Swedish Financial Supervisory Authority and the Swedish Environmental Protection Agency pointed to another method called the “Proof of Stake” protocol, which can reduce “energy consumption by 99.95% while maintaining the same functionality required in the cryptocurrency mining process.”
In this case, the two agencies cite terms for mining Ethereum, the second most popular cryptocurrency, which is set to move to this method in a new release.
This staggering figure is based on a comparison of power consumption between Proof of Work and Proof of Stakes, but it hasn't been verified by researchers.
"The downside to this method is that it is less secure for Bitcoin users and has more instability," Janson emphasized.
Can bitcoins be mined using other means?
Janson argues that the Lightning Network may be an acceptable option for the "hardcore" Bitcoin community, as it maintains the "Proof of Work" protocol, and does not recognize those using the "Proof of Stake" protocol.
Because the Proof of Work protocol is "what made bitcoin so successful" and contributed to its price hike, it's hard to think of changing it.
What does the European Commission think?
The Swedish agencies have not confirmed whether they have brought these proposals up for negotiation in Brussels, and the balance within the Commission appears to be tilting in favor of regulation of this market more than the ban, which was confirmed in June 2020 by Valdis Dombrovskis, the European Commission's Executive Vice President for Economics.
Why do these Swedish agencies want to regulate the cryptocurrency market?
In a press release issued on 5 November during the United Nations Climate Change Conference in Glasgow, Sweden issued a strongly worded indictment against the "Proof of Work" protocol amid fears that it is draining energy resources that could be harnessed to other priorities.
According to the statement, "Electricity consumption for Bitcoin mining in Sweden increased by a few hundred percent this year between April and August, and now stands at 1 terawatt hour per year, which is equivalent to the electricity capacity of about 200,000 Swedish families." The two Swedish agencies said that part of the renewable energy needed for the energy transition may not be enough to cover the country's need if mining operations develop further.