Key learning points
- The White House Office of Science and Technology Policy has released a detailed report on the potential environmental impacts of various blockchain consensus mechanisms.
- While it has been widely reported that the White House wants to ban Proof-of-Work mining, the actual text of the document tells a different story.
- The report can be more accurately described as a cost-benefit analysis, focusing heavily on the idea that the value provided by distributed ledger technology could be greater than its cost – it simply recognizes that the costs are real.
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The White House drew the ire of crypto enthusiasts everywhere on Wednesday after it released a report on the climatic impact of blockchain technology. While it was widely circulated that the report recommends banning proof-of-work consensus mechanisms, Crypto briefing took the time to read it and see what it really says.
Is the White House Planning a Proof-of-Work Ban?
Does the White House Want to Ban Proof-of-Work Mining? It doesn’t seem so, despite what many crypto enthusiasts have said.
The White House Office of Science and Technology Policy infuriated the crypto community Thursday after it released a report to guide policymakers in considering the environmental costs and benefits of blockchain technology. The report, titled “Climate and Energy Implications of Crypto Assets in the United States,” is the first in a series of multi-agency policy reports ordered by President Biden in March.
It has caused quite a stir in the hours since its release.
While the report is comprehensive and expertly researched, it has been widely condemned by the crypto community. Reaction on social media has been swift and outraged, with critics targeting one paragraph in the 46-page document:
“The Environmental Protection Agency (EPA), the Department of Energy (DOE) and other federal agencies should provide technical assistance and begin a collaborative process with states, communities, the crypto asset industry and others to establish effective, evidence-based environmental performance standards for the responsible design, development and use of environmentally responsible crypto asset technologies. These should include standards for very low energy intensities, low water consumption, low noise generation, clean energy use by operators, and standards that tighten over time for additional carbon-free generation to match or compensate for the additional electricity load of these facilities. exceed. Should these measures prove ineffective in mitigating the impact, the government should examine executive action, and Congress may consider legislation, to limit or restrict the use of high-energy-intensity consensus mechanisms for crypto-asset mining. to eliminate.
A quick look at Crypto Twitter reveals numerous screenshots of this section of text, mostly with the bold text highlighted above to emphasize its importance. The consensus among crypto believers is that this means the Biden administration is actively seeking to ban Proof-of-Work cryptomining, with many jumping straight to the most paranoid conclusions. “It’s not about climate change, it’s about full and complete control,” tweeted Bitcoin Magazine‘s Dylan LeClair. “Don’t give them an inch.”
Except, of course, it’s definitely about climate change. Rather than making a policy recommendation to ban Proof-of-Work mining, the report points out that such a ban would be a last resort: advances in ASIC technology, migration to greener energy sources, and even building blockchains specifically for monitoring and mitigating environmental pollution. impact are all listed in the report as alternatives to banning proof-of-work consensus mechanisms. In fact, they are considered the things to try first.
Crypto fans are painting the White House report as an attack on the industry, but this lecture fails to take into account its true purpose, which is made clear to anyone who takes the trouble to read it – it is a cost-benefit analysis weighing the benefits of blockchain technology against the potential climatic costs. An excerpt reads:
“The potential benefits of [distributed ledger technology] should outweigh the additional emissions and other environmental externalities resulting from operations to earn their wider use in the carbon credit market ecosystem, relative to the markets or mechanisms that displace them. Use cases are still emerging and as with all emerging technologies, there are potential positive and negative use cases that have yet to be thought of.”
In other words, the government likes to experiment with digital means. However, his job is to determine that they add more value than they subtract.
The stakes are high
For those who don’t know, planet Earth is experiencing rapid and perhaps irreversible changes in its climatic structure. For a century, those trying to understand how the climate works have argued that the amount of greenhouse gases our species pumps into the environment will, as a causal necessity, cause the destabilization of the Earth’s ecosystems. Now that it’s happening at a more noticeable pace, it should be clear that we’re running out of time to do anything meaningful to stop it. I’m not interested in rolling out facts and figures to counter the climate change deniers – the weather itself will soon prove convincing enough.
But for many in the space, the environmental impact of Proof-of-Work mining is being dismissed as mere FUD, seemingly unaware that dealing with fear, uncertainty and doubt is the day-to-day job of governments everywhere. And there are some problems of such a global scale that they… should instill fear, uncertainty and doubt – all this, I would like to remind anyone who will listen, are perfectly healthy emotions with various functions that help us to survive. Fire them at your own risk.
However, Crypto Twitter seems to be more inclined to resort to ridicule and ridicule, which contributes exactly nothing to the discourse. LeClair followed up his earlier alarming tweet with an accompanying piece, to write“Yes, we had almost stateless global money, but the climate activists protested so effectively.”
I won’t bother diving into the power consumption statistics of Proof-of-Work blockchains, but it’s no secret that it’s high. That is, in fact, the whole point of a Proof-of-Work system. Not considering its climatic impact is like lighting a fire in a house without bothering to look for a chimney.
It’s worth bearing in mind that yesterday’s climate report isn’t a sloppy piece of work, and there’s hardly a US federal agency that didn’t play a part in its compilation. In keeping with the president’s executive order that the various departments work out a “government-wide” approach to crypto regulation, the climate report is the result of collaboration between more than a dozen government departments and agencies. Led by the White House Office of Science and Technology Policy (OSTP), the Interagency Policy Committee that contributed to the report includes the Commodity Futures Trading Commission (CFTC), the Consumer Financial Protection Bureau (CFPB), the Environmental Protection Agency ( EPA), the Federal Deposit Insurance Corporation, the Federal Reserve Board, and several others. It also includes extensive input from various cabinet departments, including the Ministries of Commerce, Defense, Energy, Justice, Homeland Security, Finance and State.
These departments and agencies are not slow at what they do. The government invests a lot of time and money in hiring highly competent people to do its grunt work, and the research it provides is top notch. I understand that it is fashionable in the crypto sphere to have no faith in the government at all; but then it is also fashionable for people to say that tax is theft, while still pushing for agricultural subsidies, aged care, highways, ubiquitous police forces, semi-decent schools and robust national defense.
However, anyone who has ever worked in or around the federal bureaucracy knows exactly how serious these people are. In this case, the result of their work is a serious piece of policy exploration, and it’s a shame so few people in the room are willing to read what it really says. In a field dominated by the mantra “do your own research,” it’s a funny irony that such a formative document can be so widely and horribly misread, if at all.
I close on a final note: it is noteworthy that the report does not use the term ‘cryptocurrency’, but opts for ‘crypto assets’. The government’s refusal to use established terminology, “cryptocurrency,” in its report is likely an important indicator of how officials and government researchers feel about the role of crypto in general in society. There is very little in the text of the report that acknowledges crypto as a functional currency for everyday consumer use. If the White House were to view crypto as a currency similar to the dollar, it would raise questions about how it should be regulated. Treasury Secretary Janet Yellen has made it clear that she hopes stablecoins will be regulated in the near future, but subject to Biden’s executive order, concrete plans for the wider space have yet to be established.
Nevertheless, the Treasury is expected to publish its own report on crypto assets in the coming days as a contribution to the president’s government plan, which will undoubtedly shed more light on how US officials feel about the complex field of digital asset adoption. Whatever it says, I hope it will be greeted with a little more nuance, although I must admit that my expectations are not high.
Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other cryptocurrencies.