On March 9, United States President Joe Biden signed the Executive Order on Ensuring Responsible Development of Digital Assets, a precursor to upcoming digital asset and Blockchain legislation feared by many in the industry.
As part of this executive order, the White House Office of Science and Technology Policy (OSTP) has been tasked to compile a report to determine whether or not digital assets are environment-friendly.
“The Executive Order tasked the White House Office of Science and Technology Policy (OSTP) to submit a report to the President. That examines the potential for digital assets to impede or advance efforts to tackle climate change and the transition to a clean and reliable electricity grid,” a notice published by the OSTP stated.
The request for a report from the OSTP comes with the nation’s goal of reaching net-zero greenhouse gas emissions by 2050. The deadline for submitting the report is set for May 9, and the OSTP is requesting information from the public.
“As OSTP conducts this examination, it invites comments from interested stakeholders, including the public. In particular, this RFI seeks comments on the protocols, hardware, resources, economics, and other factors that shape the energy use and climate impacts of all types of digital assets.”
Questioning Proof-of-Work
With digital currencies, most notably Bitcoin, being lambasted in 2021 over their extremely high electricity consumption, it can be said that the OSTP report has been a long time coming. However, questioning the eco-sensitivity of Bitcoin, the pioneer digital currency is not that simple.
First off, it is important to explain that Bitcoin is built on Blockchain technology like any digital currency that has come after it. The Blockchain allows for data to be recorded in an immutable and timestamped manner, allowing for transactions to be virtually impossible to be altered with fraudulent intentions.
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The Blockchain is a chain of data blocks connected. A miner or node on the network competes with other miners in solving a highly complex mathematical problem to win the right to add a block, which is filled with transaction data, onto the Blockchain. This is called Proof-of-Work (PoW).
PoW not only requires specialized and state-of-the-art computers for mining, but it also uses massive amounts of electricity. Adding to the high electricity consumption of supercomputers is the cooling system needed to house them.
Electricity burns fossil fuels and is responsible for about 40% of carbon dioxide emissions. And because PoW has an extremely high electricity consumption, it is deemed by many as a hazard to the environment and technology that is unsustainable.
Proof-of-Work and Blockchain Legislation
However, it must be noted that energy efficiency is not measured on electricity consumption alone, and the technology’s utility must be examined to measure true energy efficiency. And this is where a line must be drawn between digital currencies and Blockchain-based digital assets and platforms, especially when it comes to legislation.
“Whereas cryptos offer a never-ending supply of tradable and highly marketed tokens, primarily focused on exchanging or ‘holding’ value. Blockchain evangelists see the tokens as a means to access a non-exhaustive list of potential application utilities which aims to replace today’s legacy infrastructure,” Bryan Daugherty, Public Policy Director of BSVBlockchain.org, explained.
“Without intimate, technical knowledge and access to the latest research on the competing Bitcoin protocols, it is likely that regardless of how well-intentioned policymakers are, their pending regulations will lead to stifling Blockchain innovation,” Daugherty revealed.
The BSV Blockchain also uses PoW that is deemed energy inefficient, but unlike most popular digital currencies like BTC and ETH, its utility balances out its high electricity consumption. The utility is measured in data blocks and throughput. While BTC remains at 1MB blocks at only a maximum of seven transactions per second (tps) and ETH can only complete about 70 tps, BSV can already handle 4GB blocks and up to 50,000 tps.
“In any network, including Ethereum and BTC, transaction validation is several million times more energy inefficient than hashing. Within BSV, the validation load becomes the energy use, which remains low compared to existing systems, including Visa. The issue is the amount of scale and nothing else,” nChain Chief Scientist and Bitcoin creator Dr. Craig Wright said.
The BSV Blockchain has unlocked the ability to scale limitlessly, which means that these figures are just the beginning. As the network scales, terabyte-sized blocks and millions of tps are possible in the future.
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Blockchains such as BSV should not bear the burden of restrictive legislation regulating energy-inefficient digital currencies. Hence, separate Blockchain legislation or exemptions should be enacted to regulate technology that can truly benefit the world.
“It is a matter of national and public interest to assure that stable, secure, and sustainable Blockchain technology has the unobstructed lane to meet its inherent design to scale and handle the world’s data and financial growing needs. Improving beyond the capabilities of today’s limited digital infrastructure,” Daugherty pointed out.
