While some U.S. lawmakers grappled with the basics of digital assets, key issues about the definition of energy efficiency and how crypto miners are powered were debated on the floor of the House of Representatives during Thursday’s congressional hearing on the crypto industry’s environmental footprint.
Before lawmakers can set policy on cryptocurrency energy consumptions, they need to grasp the fundamentals of digital assets.
This was on full display at the two hours and 15 minutes-long hearing hosted by the Oversight and Investigations subcommittee of the House Energy and Commerce Committee, which was looking at the environmental impact of crypto mining
The hearing featured Cornell Tech Professor Ari Juels, Soluna Computing CEO John Belizaire, BitFury CEO Brian Brooks, former Chelan County (Washington state) Public Utility District General Manager Steven Wright and Jordan Ramis shareholder Gregory Zerzan discussing the energy consumption related to the proof-of-work (PoW) consensus model to validate crypto currency transactions.
“Some experts estimate bitcoin mining uses anywhere from 110 to 188 terawatts (TW) of the world's energy and annually, more energy usage than some small countries,” said Rep. Howard Griffith (R-Va.). “The question is, can our current electrical infrastructure support this level of consumption?”
The first witness was Cornell Tech's Ari Juels, who started by saying that “if my testimony achieves nothing else today, I would like to drive home one key point: bitcoin does not equal blockchain.”
Sustainable energy mix
It's no secret the PoW consensus model, used by the two largest cryptocurrencies by market capitalization, bitcoin and ether, requires a massive amount of energy. In fact, some data sources have compared bitcoin’s required energy to an entire country’s power consumption.
Witnesses at the hearing dug deeper into the data and told lawmakers that's not an apples to apples comparison, given the mix of power sources used for validating a transaction.
“An activity that consumes 100 TW of power derived exclusively from coal or oil adds carbon to the environment and consumes a scarce resource; an activity that consumes the same amount of power derived from a mix of solar, wind and hydropower does neither,” said Bitfury's Brooks, the former acting comptroller of the currency.
He provided data that the energy mix used by bitcoin mining was about 58% sustainably sourced last year, which included wind and hydro power, solar, nuclear and carbon offsets, compared to 31% for the U.S. energy grid as a whole.
Juels and Brooks debated the efficiency of crypto mining later in the hearing. Brooks argued that more-efficient machines, which in industry terms usually means they burn less electricity per terahash, means a more efficient network overall.
Juels responded that what actually matters to consumers is the electricity burned per number of transactions processed. Because transactions per second have remained roughly stable at five per second, whereas the network’s energy usage has increased, the Bitcoin network has actually become less efficient in the past few years, Juels said.
Soluna's Belizaire and Zerzan, the Jordan Ramis PC shareholder, said crypto mining actually helps renewable energy producers sell electricity that is otherwise wasted, thus providing them with much-needed capital.
Similarly, towards the end of the hearing Brooks also mentioned that BitFury primarily works with local utility providers “because they can only make the economics work if there is a baseload consumer,” meaning the miners.
Back to basics
The better part of the hearing focused on the basics of blockchain technology, educating the lawmakers on how different validation models such as proof-of-stake (PoS) operate and some of the cybersecurity concerns around blockchain networks, such as 51% attacks (when an attacker controls 51% of a network’s hash power, allowing them to control transactions).
Several lawmakers also asked about unintended positive or negative factors that could stem from bitcoin mining.
Rep. Cathy Rodgers (R-Wash.), who began the hearing with an off-topic speech about inflation, COVID-19 and President Joe Biden, asked about the potential of blockchain to protect citizens’ privacy, as well as the potential adverse impact of regulation on job and investment growth. Rep. Annie Kuster (D-N.H.) inquired about innovations that could stem from bitcoin mining and benefit other industries.
“I think what happened today is, we started the education,” said Soluna’s Belizaire in an interview with CoinDesk, after the hearing.
The hearing began a learning process for some of the most important lawmakers around energy and commerce, he said, which could set the stage to bring in legislation to incentivize the use of more green energy for the industry.
“I thought it was really exciting for an oversight committee like that to really dig in and seek out the truth and really educate themselves,” he said.