The U.S. Department of Energy (DOE) is placing even stricter scrutiny on Bitcoin (BTC) mining. Is this something to be wary of?

“Urgent” investigation

More specifically, the Energy Information Administration (EIA), a statistical agency under the DOE, released an “urgent data collection request” to track the electricity consumption of some U.S.-based miners for six months. They say they will investigate.

Due to the wording of the order as an “emergency” and the current administration’s critical stance on crypto assets, many are concerned that the information collected could be used for policies that could be detrimental to the mining industry.

In its public request, the EIA cited the potential for “social harm” caused by crypto mining as the reason for collecting the data.

“The EIA is a policy-neutral agency and does not develop, implement, enforce, or comment on policy,” EIA spokesperson Morgan Butterfield told CoinDesk.

“The results from the data we collect will help inform our path decisions regarding three-year periodic approvals, which will take place over the next six months.”

However, being policy-neutral does not mean that this research will not influence policy. Just by conducting research, the EIA is raising questions about Bitcoin’s larger purpose and whether it benefits society, and it’s enough to believe it already has an answer in mind. .

For example, the rationale for the emergency order granted by the Office of Management and Budget was that Bitcoin appreciated by more than 50% in a matter of months. The EIA said this would “incentivize crypto-asset mining and increase electricity consumption.”

“Given the newness and rapid change of this issue, and the inability to quantitatively assess the potential for harm to the public, the EIA relies on reliable data to provide insight into this evolving issue. “We feel a sense of urgency to create a

According to Butterfield, 82 companies operating approximately 150 facilities were selected to represent the “cryptocurrency industry” across the United States.

Risks Bitcoin poses to citizens

The EIA points to the cold snap that hit Plattsburgh, New York in 2018 to justify the risks that crypto assets pose to the general public.

“The combined effects of increased crypto mining and a strained power system could increase uncertainty in electricity markets and lead to demand peaks that impact system operations and consumer prices.” EIA)

Since 2018, New York state has passed a two-year ban on new crypto mining facilities opening unless they are powered entirely by renewable energy.

Texas, which benefited greatly after China passed a nationwide crypto mining ban, is also trying to slow down its mining industry. Cryptominers in Texas work directly with the state-run power grid operator and are paid to shut down power during periods of peak demand or when the network is under stress.

Indeed, in the public version of the survey, EIA asked mining companies very basic questions, such as the number and types of chips they run, how much electricity their facilities consume, and how much electricity goes directly to mining. It is shown that

“We will focus specifically on how energy demand for crypto-asset mining is evolving, identify regions of high growth, and quantify the power sources used to meet the demand for crypto-asset mining.” EIA said in a statement. Reports will be submitted on the last Friday of each month until the end of July, with the possibility of an extension thereafter.

Furthermore, some argue that such high-level statistics would benefit countries and industries by providing more detailed information directly.

Currently, the best data on electricity consumption in the mining industry is the Cambridge Bitcoin Electricity Consumption Index. This essentially estimates the lower and upper limits of the Bitcoin network’s daily energy consumption by extrapolating from the current hash rate.

Timing of investigation

But why now? Even if the recent spike in Bitcoin prices was the cause for an emergency investigation, the question remains why it was only this time.

It’s worth noting that the Biden administration is prioritizing reducing carbon emissions. Democratic Sen. Elizabeth Warren, a crypto critic, is also calling on federal regulators to force crypto miners to disclose their emissions and energy usage.

Bitcoin mining is likely to be in the headlines in the run-up to its halving, which occurs every four years.

It is not yet clear how the halving will affect the mining sector beyond rendering inefficient mining equipment useless in the short term. Some predict that the carbon footprint of crypto assets will increase in the coming years, while others see it decreasing.

Furthermore, in recent months, the public has been divided about Bitcoin’s environmental costs, especially after the top two network, Ethereum, reduced its energy consumption by 99% with a single upgrade.

Some groups, like Greenpeace, are calling for an end to Bitcoin’s energy-intensive mining, while others are beginning to see Bitcoin’s environmental benefits.

For example, the University of Cambridge recently revised down its estimate of Bitcoin’s annual energy use, and institutions such as MIT and KPMG believe that the Bitcoin network will help “ensure balance” in the power grid and support renewable energy development. A report was released stating that subsidies will help green the economy.

Bitcoin costs and benefits

Mining is an energy-intensive process. Proof-of-work (PoW), the cryptographic asset algorithm that Bitcoin runs, reduces spam and Sybil attacks on networks by adding costs in the form of computer processing to solve mathematical puzzles to interactions with servers. , designed to suppress Denial of Service (DoS) attacks.

Some opponents of the mining process often describe Bitcoin mining as “wasted” energy, but that is not the case. That energy is being spent intentionally as a kind of testimony.

The problems that Bitcoin miners race to “solve” do not add anything to the human body of knowledge or contribute to something productive like Folding@home (a distributed computing project that analyzes proteins). It has no meaning in that it has nothing to do. However, it has value in terms of ensuring network security.

And that’s where it gets tricky. In other words, how should you evaluate Bitcoin? What is the value of Bitcoin? The standard answer is to look at how the market values ​​it, which at the time of writing is approximately $42,000 (approximately 6.22 million yen, equivalent to 148 yen to the dollar).

But most of the actual debate surrounding Bitcoin’s high energy usage has little to do with Bitcoin’s price. Rather, it focuses on the costs and benefits of Bitcoin.

I wish I could say that EIA research can help us better understand those costs and benefits. However, it seems like the survey authors have already answered their question of whether Bitcoin poses a risk to the general public and are looking for data to support that.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: Bitcoin mining facility in Washington state (Eliza Gkritsi/CoinDesk)
｜Original text: The US Government Seems to Be Closing in on Bitcoin Mining