Welcome to 2019.
Earth is populated by a wide variety of unique cultures, eclectique individuals, and is consuming more energy than ever. While alternative eco-friendly fuel sources are regularly explored and implemented when possible, fossil fuels (oil, coal, natural gas) are still accountable for 80% of the worlds fuel.
Researchers, academic professors, and energy companies like Exxon are constantly researching new alternative methods for energy production that don’t rely on fossil fuels. While our wind farms are great and all, the little birds who get chopped to pieces, probably don’t think so.
There are other researchers and corporations that are constantly conducting research into what we can do to reduce our energy consumption, rather than support it. In the United States we have the EIA which tracks and reports our energy consumption and makes prediction for the future. In China they have their National Development and Reform Commision.
On 4/8/2019 China’s National Development and Reform Commision released their report that reoccurs every five years. The report identifies over 450 industry sectors that they believe should be reduced or eliminated from the economy for the stated reasons.
As you may have guessed and already seen in other media reports, the NDRC report stated that the Bitcoin Mining Industry needs to be eliminated. The official reason for this conclusion on the report what that mining ‘lacked safe production conditions, seriously wasted resources, polluted the environment,” and so on and so forth.
Members of the Bitcoin community have since panicked a bit. For the first time in months Bitcoins prices have risen above $5,000 USD, could this make it crash? Opinion and speculation tells us that there’s no reason to worry… yet. The NDRC has no law enforcement resources and will have to wait for the government to install a plan for execution. In the past, sectors labeled as ‘eliminate’ have taken upwards of 10 years to do, if ever.
If the regulation suggestion is enforced, it will be a large blow to the Bitcoin community of China and the world. Some of the world’s largest mining operations are headquartered in China. The ban would directly affect these operations by putting them out of business, and indirectly affect the mining hardware production companies such as Bitmain. In this instance these mining companies may choose to relocate to a different country or cease operations. This could either cause Bitcoins value to surge, or to crash.
The Energy Crisis
China’s claim that mining is a serious waste resources, it not an opinion held just by China. Many people involved in blockchain and digital assets have stated that the ‘proof-of-work’ concept used for mining Bitcoin is an extraneous use of resources.
At this time it has been reported that the amount of energy consumed by Bitcoin mining every year, is the exact same amount consumed by Switzerland. Bitcoins average electricity consumption is 61.4 TWh, which is 1.5% of what the US uses every year. This amount of energy could also be used to power 159 of the lowest GDP countries in the world.
Over 70% of all digital assets on the market are mined using proof-of-work. For those of you who are unfamiliar, mining is the process of solving a complex cryptographic hash function by a computer. When the function is solved, the miner is rewarded with the asset it mined. Many large mining schemes have opened up over the past 10 years where electricity costs are cheap in order to take advantage of the opportunity.
Other companies are looking to develop other methods to securing transactions on the blockchain. Two other proposed methods are proof-of-stake and proof-of-concept, both of which are yet to be adopted on a large scale. These alternatives consume less energy and allow for transactions to be verified quicker.