EU policymakers are back in the spotlight less than a month after voting for stricter rules on unhosted crypto wallets.
This time it’s to do with internal documents that show discussion to “protect” Ethereum at the expense of Bitcoin over its supposed greener credentials.
The issue raises questions over protectionism and picking winners versus losers, which are fundamentally against the free market.
EU officials are gunning for Bitcoin
The internal documents reveal the extent of talks among officials to “protect” Ethereum.
The sentiment stems from Proof-of-Stake (PoS) networks using significantly less energy than Proof-of-Work (PoW) networks. PoS doesn’t rely on electricity-hungry hashing power for block production.
Ethereum is transitioning from PoW to PoS and has been since before May 2018, when devs rolled out the v.01.01 Casper code to assist hybrid PoW/PoS consensus.
According to estimates by Cambridge University, the Bitcoin network uses 131 TWh of electricity a year, equivalent to the annual electricity consumption of Ukraine. What’s more, as the Bitcoin price and its usage grow, so too will the network’s energy consumption.
In March, EU policymakers considered an outright ban on PoW mining, causing an uproar in the crypto community. Lawmakers subsequently removed wording in the MiCA proposal that suggested a PoW ban to ease the industry and avoid confusion.
Nonetheless, with renewed scrutiny over PoW mining, policymakers are opting for a different strategy – to push Ethereum and other “sustainable” tokens.
Minutes in the internal documents showed policymakers had floated the idea to “legitimately request” Bitcoin transition to a PoS network. They also revealed a campaign to protect “sustainable” tokens without extending those same protections to Bitcoin.
“If ethereum is able to shift, we could legitimately request the same from bitcoin.
We need to ‘protect’ other crypto coins that are sustainable. Don’t see [the] need to ‘protect’ the bitcoin community.”
Some say Bitcoin’s strength lies in it being a PoW token. As such, there are doubts it will ever transition to PoS.
The benefits of Proof-of-Work
Talk of Bitcoin transitioning to a PoS network has been doing the rounds for several years. For example, in April 2020, Bitcoin Suisse founder Niklas Nikolajsen suggested it could happen once Ethereum had transitioned and “proved the concept.”
During the interview, Nokolajsen also expected Ethereum to have fully transitioned “in a few months.” But two years on from that interview, Ethereum devs are citing further delays.
PoW isn’t inherently more secure than PoS, as PoW security depends on the hashing rate of the network. But because the Bitcoin network’s hashing power is so high, capturing more than half of the total computing power is prohibitively expensive, making a 51% attack pointless.
The potential loss of being the most trusted and secure cryptocurrency, and the technical challenges of doing so, count against Bitcoin moving to a PoS system.