Through a new campaign, a climate organisation is pushing for a change in how crypto coins are mined. A switch from ‘proof of work’ to ‘proof of stake’ would save up to 99% energy.
One of the major problems with cryptocurrencies such as bitcoin, in addition to rampant fraud, is energy consumption. For example, according to research by the Dutch Central Bank, a bitcoin transaction emits as much CO2 as a household in three weeks. Meanwhile, the bitcoin network itself consumes as much energy per year as Sweden. And then we’re just talking about the most popular crypto network, one of many.
With a new campaign, climate activists now don’t necessarily want to fight crypto, but the way it is mined. The ‘Change the Code Not the Climate’ campaign is pushing for a change in, as the name implies, the code that manages blockchain transactions.
Many calculations are done in the current system in cryptocurrencies such as bitcoin on a blockchain. They must validate and secure every transaction. To mine new coins, miners must prove that they have done the ‘work’ to solve those complex puzzles.
Another system, ‘proof of stake, ‘ works via consensus. Users who already have coins can bet a certain amount of them as a deposit to validate transactions. Anyone who provides false information will be fined. This system has the advantage that you do not have to do large amounts of calculations and thus, according to the activists, consumes up to 99% less energy.
However, a possible disadvantage is that you often already need some coins to act as a ‘validator’. Therefore, this role will mainly be reserved for wealthy investors for many currency systems, which is not really in line with the image of ‘a decentralised system that everyone can subscribe to’.
The switch towards ‘proof of stake’ has been going on for some time with, for example, rival blockchain ethereum, which uses the ‘more environmentally friendly’ method with Solana. Once started as a joke but now a rival crypto coin, Dogecoin would also move towards ‘proof of stake’. The activists now want the world’s most famous cryptocurrency to take that step. The activists fear that mining the coins will otherwise negate progress towards more environmentally friendly energy production.
The pressure on the system is increasing with the campaign in the US, but it doesn’t come out of nowhere either. The method is also criticised in the EU. A ban on proof of work coins was on the table for the recently passed Digital Markets Act, among other things, although it was ultimately not enacted into law.