U.S. Government Tightening Grip on Bitcoin Mining: A Closer Look

Jonathan Stoker Feb 02, 2024, 22:20pm 80 views

U.S. Government Tightening Grip on Bitcoin Mining: A Closer Look

US Department of Energy Investigates Bitcoin Mining

The US Department of Energy (DOE) is intensively examining the BitcoinBitcoin$42,260 -0.64% mining sector. The Energy Information Administration (EIA), a statistical body under the DOE, is set to survey electricity consumption of selected American miners over the next six months starting from the succeeding week, in response to an emergency data collection request.

Concerns Regarding the Survey

The current administration's critical stance on cryptocurrency, coupled with the usage of the term emergency in the order, has sparked concerns that the data collected may be used to create policies that could negatively impact the mining industry. In its public filing, the EIA proposed the potential for public harm from crypto mining as a reason for data collection.

However, the EIA is a policy-neutral agency that does not create, implement, enforce or comment on policy, as highlighted by EIA spokesperson Morgan Butterfield. The results from this data collection are aimed at guiding the roadmap going forward regarding a regular three-year clearance over the next six months.

Underlying Implications of the Survey

Being policy-neutral does not necessarily prevent the survey from influencing policy. There is sufficient reason to suspect that by running this survey, the EIA is instigating questions about Bitcoin's broader purpose and its societal benefits, perhaps with a preconceived answer in mind.

Rationale Behind the Emergency Order

The justification for the emergency order given by the Office of Management and Budget was the recent crypto price rally that saw Bitcoin's value increase by over 50% in a matter of months. The EIA suggested this surge would stimulate more crypto mining activity, thus escalating electricity consumption.

Selected Companies for Data Collection

The EIA selected 82 companies, operating approximately 150 facilities, to represent the universe of cryptocurrency companies across the country. The agency cited an incident in Plattsburg in 2018, where increased crypto mining combined with strained electricity systems created heightened uncertainty in electric power markets, potentially leading to demand peaks that could affect system operations and consumer prices.

Regulations on Crypto Mining

Since then, New York State has imposed a two-year ban on the launch of new crypto mining facilities unless they are entirely powered by renewable energy. Texas, which profited significantly following China's nationwide ban on crypto mining, has also expressed intentions to regulate the mining industry.

Assessment of Crypto Mining's Evolving Energy Demand

A public version of the survey reveals routine questions being asked to mining firms, such as the number and type of chips they're running, their facility's electricity consumption, and how much electricity is directly used for mining. The EIA aims to focus specifically on how the energy demand for cryptocurrency mining is evolving, identify high-growth geographic areas, and quantify the sources of electricity used to meet cryptocurrency mining demand.

Value of High-Level Statistics

It could be argued that having such high-level statistics will benefit both the country and the industry, as it provides more detailed information directly from the mining companies. Currently, the most reliable data we have regarding the mining industry's footprint comes from the Cambridge Bitcoin Electricity Consumption Index.

Why Initiate the Survey Now?

While the rationale behind instigating the survey at this particular point is unclear, it should be noted that the Biden administration has prioritized the reduction of the country's carbon footprint. Furthermore, Senator Elizabeth Warren asked federal regulators to mandate crypto miners to disclose their emissions and energy usage.

Debate Surrounding Bitcoin's Environmental Impact

Bitcoin mining is expected to become a popular debate topic in the media as we approach the halvening event, a programmed reduction in the Bitcoin subsidy paid to miners every four years. The impact of the halvening on the mining sector remains unclear, but predictions range from an increase in the crypto carbon footprint to a possible reduction.

Acknowledging Bitcoin's Environmental Cost

Recently, there has been public acknowledgment of Bitcoin's environmental cost, particularly after EthereumEthereum$2,315 -2.42%, the second-largest network, reduced its energy consumption by 99% through a single upgrade. While organizations like Greenpeace are advocating for Bitcoin to abandon energy-intensive mining, some view the sector as beneficial to environmentalism.

Mining and Energy Consumption

Mining is recognized as an energy-intensive process, with Bitcoin running on a cryptographic algorithm known as proof-of-work (PoW), designed to discourage spam and network attacks by adding costs to server interaction, typically in the form of computer processing time dedicated to solving

Edited by Jonathan Stoker

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