Following the signing of United States President Joe Biden of the Executive Order on Ensuring Responsible Development of Digital Assets on March 9, the White House Office of Science and Technology Policy (OSTP) has been ordered to examine the energy efficiency of digital assets and blockchain technology.
The White House OSTP is scheduled to submit a detailed report to the President before 5 p.m. on May 9, and has posted a notice requesting interested private entities and the public on “the potential for digital assets to impede or advance efforts to tackle climate change and the transition to a clean and reliable electricity grid.” The report is a step toward drafting comprehensive digital asset and blockchain legislation.
“Building on the historic progress on climate action that President Biden achieved in his first year in office, the President’s plan to achieve those goals includes improving energy efficiency, deploying a record amount of new carbon-free energy sources, and advancing clean energy innovation. The explosive growth of the digital asset ecosystem may contribute to greater energy use and negatively impact the climate,” the White House OSTP notice stated.
The voluntary response may only come in the form of an email submitted to [email protected] with the subject as “RFI Response: Climate Implications of Digital Assets.” Because of the limited time in gathering information and submitting the report, other forms of submission, like snail mail, will not be accepted.
Exploring the Energy Efficiency of Proof-of-Work
The probe on the energy efficiency and environmental effects of digital assets and blockchain technology comes after Bitcoin mining, which utilizes Proof-of-Work (PoW), has been widely criticized for its extremely high energy consumption.
“Bitcoin is based on a design that protects the network against bad actors by allowing honest nodes to reject blocks that either attempt to double spend coins or violate the established rules governing the network. This consensus is enforced through the accumulation of proof-of-work, which allows honest nodes to combine their collective hash power to fend off would-be attackers,” Bryan Daugherty, public policy director of BSV Blockchain and co-founder and chairman of SmartLedger.solutions, said as he writes about a commonsense approach to blockchain legislation.
PoW fosters competition within the network by making miners compete against each other in order to add a block on the blockchain. A highly complex mathematical problem needs to be solved in order to do this, and this requires a massive amount of electricity—both from the supercomputers used and the hi-tech cooling system needed to maintain them.
If the energy consumption of PoW alone is looked at, then there is no question that it is detrimental to the environment as it leads to a considerable emission of carbon dioxide—something that will set the United States back in its goal of having net-zero greenhouse gas emissions by the year 2050.
However, energy efficiency and sustainability are not measured by consumption alone. Furthermore, the separate implementations of Bitcoin and other digital currencies that use PoW would have to be looked at closely in terms of the utility and benefits they provide in order to know whether the energy consumption can be justified or not.
“The topic of sustainability, I suppose, is a question of the balance between the cost of something and the benefit it provides. And the fundamental unit of utility and benefit in Bitcoin, I guess, is the transaction. So, there’s a lot of talk about the energy cost of Bitcoin per transaction. When you increase the transaction rate by a factor of 50,000 without actually increasing the energy consumption of the entire network, you’ve essentially dropped the per transaction cost by that same factor,” nChain CTO and BSV Infrastructure Team Technical Director Steve Shadders said during a panel at last year’s CoinGeek Conference.
Looking at two of the most popular digital currencies at present, BTC and ETH, it cannot be denied that the utility and benefit they provide are only to those select few who can afford their prices. While BTC has a current average fee per transaction of $2.14, ETH is at a whopping $18.38.
These fees mirror the efficiency of their network and the fact that both are running on unscalable blockchains, which is evidenced by BTC’s throughput of just seven transactions per second (tps) and ETH’s 70 tps. BSV, on the other hand, is already at 50,000 to 100,000 tps, recently reaching a milestone of completing over 10 million transactions in 24 hours at fees per transaction that cost next to nothing.
This is because BSV has the ability to scale limitlessly, which means that as the network scales, the numbers previously mentioned will continue to increase until it reaches millions of tps. Electricity consumed per transaction will then amount to something very small, making it energy efficient and sustainable.
And this is just the tip of the iceberg. Because as BSV scales into the future, it can even surpass the utility and benefits that the Internet has given the world.
“Beyond the booming crypto-casino tokens and artistic NFTs that currently have most people’s attention—including regulators, remains the need for a technological advance to provide next-generation data security as we transition into a global data powered economy,” Daugherty pointed out.
And this is why Daugherty is strongly advocating for the government to “strive to synchronize their National Strategic Review Approach with a focus on security, stability, and sustainability.” Only by using this approach can pending regulation and legislation not stifle the innovation of blockchain.
“By using a balanced, unified, and standardized approach to review and compare blockchain technologies, I am confident that policymakers will find it entirely unnecessary to forfeit the future security of a nation’s network as well as financial and data infrastructure by seeking less secure models of consensus mechanisms than proof-of-work,” Daugherty revealed.