EU politicians are back in the spotlight less than a month after voting for stricter rules for non-hosted crypto wallets.
This time it has to do with internal documents showing discussions to “protect” Ethereum at the expense of Bitcoin for its supposedly greener credentials.
The issue raises questions about protectionism and picking winners and losers, which are fundamentally opposed to the free market.
EU officials shoot at bitcoin
The internal documents reveal the extent of talks between officials to “protect” Ethereum.
The sentiment stems from Proof-of-Stake (PoS) networks consuming significantly less power than Proof-of-Work (PoW) networks. PoS does not rely on power-hungry hashing power for block production.
Ethereum is moving from PoW to PoS even before May 2018, when developers introduced the v.01.01 Casper code to support the hybrid PoW/PoS consensus.
According to estimates by the University of Cambridge, the Bitcoin network consumes 131 TWh of electricity annually, which is equal to the annual electricity consumption of Ukraine. In addition, as the Bitcoin price and usage increases, so does the energy consumption of the network.
In March, EU policymakers considered an outright ban on PoW mining, sparking an uproar in the crypto community. Lawmakers then removed language from the MiCA proposal that suggested a PoW ban to decongest the industry and avoid confusion.
Nonetheless, with PoW mining under renewed scrutiny, policymakers are opting for a different strategy – to push Ethereum and other “sustainable” tokens.
Logs in the internal documents showed that policymakers floated the idea of “legitimately demanding” Bitcoin’s transition to a PoS network. They also unveiled a campaign to protect “sustainable” tokens without extending the same protections to Bitcoin.
“If Ethereum is able to shift, we could ask Bitcoin to do the same.
We need to “protect” other crypto coins that are sustainable. Not see [the] need to “protect” the bitcoin community.
Some say Bitcoin’s strength lies in its being a PoW token. Therefore, there are doubts that it will ever move to PoS.
The benefits of Proof of Work
Talk of Bitcoin transitioning to a PoS network has been making the rounds for several years. For example, in April 2020, Bitcoin Suisse founder Niklas Nikolajsen suggested that this could happen once Ethereum transitioned and “proved the concept.”
During the interview, Nokolajsen also expected that Ethereum would be completely converted “in a few months”. But two years after this interview, Ethereum developers cite more delays.
PoW is not inherently more secure than PoS because PoW security depends on the hashing rate of the network. However, because the Bitcoin network’s hashing power is so high, capturing more than half of the total processing power is prohibitively expensive, making a 51% attack pointless.
The potential loss of being the most trusted and secure cryptocurrency and the associated technical challenges speak against moving from Bitcoin to a PoS system.