Rostin Behnam – chairman of the Commodities and Futures Trading Commission – is displeased with Bitcoin’s current levels of energy consumption. He believes regulators should establish incentives to push the network towards a proof of stake (POS) consensus model.
Not Worth the Energy, says Benham
Speaking at POLITICO’s Sustainability Summit, Benham claimed that Bitcoin’s energy consumption doesn’t match its economic output. “That may rebalance over time, but right now it’s clearly skewed,” he said.
Most of Bitcoin’s energy consumption is primarily driven by “mining”, which is central to its “proof of work” consensus mechanism. The model requires users to spend computational energy creating Bitcoin’s next block, winning them new coins and transaction fees.
Almost all mining rewards today are generated from newly mined coins rather than fees. As such, there is currently little relationship between the cost of mining and the transaction value that the network secures.
Benham said he “gives credit” to those in the industry who are recognizing issues around crypto and energy use. Specifically, he credited those protocols for transitioning towards the proof of stake model, which he called another “method of mining coins”. Proof of stake rewards new coins and transaction fees to those who stake their existing crypto, rather than spend energy.
To bolster this industry-wide transition, Benham wants traders to provide energy “disclosures” on their digital asset purchases. This would require that Bitcoin trading platforms reveal how much energy is used to mine each of their coins.
“[These disclosure would] make that market shift to a more proof-of-stake functionality or other functionalities that will reduce that energy consumption,” he said.
Bitcoin is fungible and circulates widely, so it’s unclear how feasible the tracking and reporting of such metrics would be.
The Push to Change Bitcoin
Ripple co-founder Chris Larsen also began an environmental campaign in March to move Bitcoin to proof of stake. Even congresspeople have called upon the Environmental Protection Agency to review Bitcoin miners’ ESG compliance while citing POS as a more efficient alternative.
Bitcoiners are almost unanimously against such proposals, however. Industry leaders including Michael Saylor and Jack Dorsey sent a letter to the EPA early this month arguing why.
“It’s misleading to refer to Proof of Stake as a more ‘efficient’ form of Proof of Work, since it does not achieve the same thing,” they argued. “A bicycle uses less energy than a plane, but it achieves something different, and so cannot be considered more efficient.”