Climate change and US Government pressure on cryptocurrencies

In a video posted to his YouTube channel, Charles Hoskinson, co-founder of blockchain engineering firm Input Output Global, Inc., and blockchain platform Cardano, commented on the US government's efforts to regulate - or even ban - the Proof-of-Work (PoW) Consensus Method, which Bitcoin uses.

Recently, the US Government released the document entitled Climate and Energy Implications of Crypto-Assets in the United States. The study points to a predisposition by Joe Biden and part of the current American political class to lead to some extent the future of the cryptocurrency industry.

The backdrop for the new venture is climate change - specifically the steep energy consumption required for the bitcoin mining process with PoW.

But the document in question was preceded by Executive Order 14067, signed by Biden on March 9th, which aims to ensure the “responsible development of digital assets”.

Charles Hoskinson warns of the danger of administrations that are too politically savvy - Biden's in particular, as his team is made up of very experienced politicians who tend to "bury very important things in bureaucracy".

That's what we'll see next.

How the US government intends to regulate PoW

On the report's page seven, the intention to “ensure the responsible development of digital asset recommendations” begins to point to bureaucratization as a way to guide the paths of the cryptocurrency industry.

The first point deals with greenhouse gas emissions, related to the environmental impact caused by the blockchain. According to the document, the Environmental Protection Agency (EPA), the Department of Energy (DOE), and other federal agencies should “provide technical assistance and initiate a collaborative process with communities in the crypto asset industry to develop environmental performance standards based on effective evidence for the use of responsible design development of environmentally responsible cryptographic asset technologies”.

In other words, the EPA and DOE are going to start talking to companies to tell them to change the way their cryptocurrencies work and in what way they should include standards for very low energy intensities, low water usage, low generation of noise, operators' use of clean energy, and standards that strengthen over time so that additional carbon-free generation matches and exceeds their facility's additional electricity load if these measures prove ineffective in reducing impacts.

But, according to Hoskinson, the real agenda is hidden:

The government should explore executive action, and Congress could consider legislation to limit – or even eliminate – the use of energy-intensive consensus mechanisms for cryptocurrency mining. In other words, Bitcoin could be banned.

Hoskinson says the government could just approach the Bitcoin industry and say mercilessly, “Hey, nice thing you got there with proof of work, but, you know, global warming is bad, so we should ban it, and we'll soft ban it by having the EPA and DOE come in and basically create standards that you can't adhere to and then when you can't create some form of executive order or legislation to basically prevent you from being able to do it or destroy your profit margins so it's no longer profitable for the American mining industry”.

So a committee of strangers can come together to write a report basically saying that the most valuable cryptocurrency in the world is illegal.

Proof-of-Useful-Work (PoUW)

According to Cornell University, in PoW hash operations are repeated until the resulting hash has certain properties. This approach uses a lot of computational power and energy for the sole purpose of securing the blockchain.

In order not to waste energy on hashing operations that have no other purpose than to allow consensus between nodes and therefore secure the blockchain, Proof-of-Useful-Work (PoUW) is an alternative approach that aims to replace overuse of hash functions with tasks that bring additional benefits in the real world (e.g. supporting scientific experiments that rely on computationally heavy simulations).

The question is: will the Biden administration stand up to these big techs?

“We have a protocol called Ofelimous, which we developed specifically for this. Our recommendation is that Bitcoin considers adopting this”, proposes Hoskinson, but at the same time recognizes the likely resistance on the part of maximalists:

“I doubt that that community is going to move in that direction, but it's very clear that there are people in this administration and in various political parties throughout the world that really do want to start carbon scoring the mining of cryptocurrencies now.”

The advantages of Proof-of-Stake

“I've also always taken the position that proof of stake is a vastly superior consensus mechanism in many ways, assuming you can address the network design requirements and the security requirements, which is why we spent seven years of innovation with Oroboros and brought it to market, and the report does accurately reflect that we have a massive advantage in terms of energy usage”, explained Hoskinson, referring to the report's positive mention of PoS and Cardano:

Source: Climate and Energy Implications of Crypto-Assets in the United States report.

But, according to the founder of Cardano, we cannot underestimate the power of tribalism:

“Bitcoin maximalists - because of their "religion" - will refuse to recognize or believe that PoS is legitimate. That's their prerogative, but it's very clear that there's a red target now on their backs."

The siege closes in cryptocurrencies

“Actually, for those who want to ban cryptocurrencies, they have the one-two punch of saying mining should be banned because it's not ecologically friendly, and proof of stake should be banned because they're securities”.

Let's better explain Charles Hoskinson's statement, especially the second part.

Attack #1: securities

Earlier this month, Securities and Exchange Commission (SEC) Chairman Gary Gensler once again called for cryptocurrencies to be classified as securities and for cryptocurrency companies to register with the agency.

At an event hosted by the Practicing Law Institute on September 8th, Gensler stated that the cryptocurrency industry does not need new guidelines and that existing SEC rules apply to it.

Gensler said that, in that regard, he would support Congress by giving an SEC “sister regulator” more authority in overseeing cryptocurrencies like Bitcoin.

Gary Gensler fooled a lot of people with his recent actions as chairman of the SEC. In 2018, when he taught a course at MIT titled Blockchain and Money, Gensler hinted that he was an enthusiast of the cryptocurrency industry, especially Bitcoin. As we can see, not that much.

Attack #2: carbon emissions

It relates to everything written in this article so far.

In this way, the US government is showcasing its desire to drive the cryptocurrency market, surrounding it with legal devices to regulate cryptos - or even to exterminate them.

"Isn't that banning cryptocurrencies altogether?", asks Charles Hoskinson.

Hoskinson spoke his mind

In his video, Charles Hoskinson did not mince words to express his indignation at the arbitrariness of the American government:

“So just remember: government is not your friend, never has been, never will be, and doesn't care about you, and is never accountable when they fuck your life up, and you can never get it back. Can't sue them, can't recover the fees that you spend fighting them and even if you win, you still lose because they find a way to hit you again”.

Hoskinson recalls that the cryptocurrency industry has created millions of jobs and generated more than a trillion dollars. This gigantic ecosystem has great engineers and scientists. American universities are emerging in the production of research for cryptocurrencies.

"These things are getting increasingly more personal. It used to be hypothetical stuff, but it's hard to argue with the White House report basically saying 'Well if you can't get the DOE to do it, use an executive order or legislation to ban it.’ That's getting too close to home for me", said the Cardano founder.

Maximalism and the call to unity

Charles Hoskinson scoffed at the fact that Bitcoin maximalists cheered when the Lummis-Gillibrand bill came out aiming to ban PoS and used the government's heavy hand to go after cryptos using this consensus method, and now they are themselves in the crosshairs of the State.

He sent a message:

“To the bitcoin maximalists out there, you reap what you sow. If you try very hard to use the Government to cudgel your opponents, don't be surprised when they use the very same club to hit you in the head”.

Hoskinson ends the video by calling for the union of different communities to overcome tribalism, for the sake of the crypto industry as a whole:

“Maybe it's time we work together as an industry. Maybe it's time we unify a little bit and we stop calling everybody we disagree with evil and a scammer and recognize that there are much bigger problems and concerns that, if we're divided, we will not have the resources or ability to overcome for our industry. Or maybe not. The choice is yours.”

We're with you, Charles.

CORA (Cardano Onboarding Route Alliance)