The European Securities and Markets Authority is concerned about the risks bitcoin mining poses to achieving the Paris Agreement’s climate change targets.
In an interview with the Financial Times, Erik Thedéen, the watchdog’s vice-chair, stated that the amount of renewable energy dedicated to crypto mining has increased significantly. He went on to say that mining has become a “national issue” in Sweden. Thedéen further stated that he is not proposing a blanket ban on cryptocurrency, but rather a prohibition on proof-of-work mining in order to shift the business to a proof-of-stake model, which uses less energy overall.
Proof-of-work is the method through which a blockchain checks the legitimacy of blocks or transactions. In order to verify transactions, miners pool their processing resources to compete against one another in solving complicated tasks. They are awarded with coins in exchange.
The Proof-of-Work model necessitates each blockchain participant verifying transactions, which consumes a significant amount of energy. The proof-of-stake mechanism, on the other hand, allows transactions to be confirmed by a far smaller number of people. Participants stake their own cryptocurrency to create validating nodes that verify transactions.
POW consumes a lot of energy and requires a lot of equipment to run, but this adds to the system’s security because a rogue element would have to devote a lot of resources to achieve 51 percent control of the entire network. The disadvantage is that growing the network is expensive as energy and equipment requirements increase over time.
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