The Central Bank of Sweden has suggested to ban proof-of-work mining algorithms to fight energy-consuming digital currencies such as Bitcoin.
It has been suggested that POW (proof-of-work) mining consumes too much energy and should be banned in favor of less energy-intensive methods.
Recently, the Swedish central bank tweeted that energy consumption had increased in recent years. This caused them to use the occasion to focus on the case of bitcoin.
Why do they want to ban POW?
POW is a mechanism to turn energy that is produced in the real world into scarce digital assets or “hard money.” The energy consumption is what makes bitcoin hard to produce and therefore robust and secure.
Bitcoin miners are hardware devices that execute a specific algorithm around the clock. Through this process, new blocks in Bitcoin’s blockchain are found and whoever succeeds, is rewarded with the block reward which follows a predetermined issuance rate.
According to estimates by the University of Cambridge, bitcoin mining currently consumes about 128 TWh of electricity per year. This is more than the total of some countries, such as Sweden, Norway, and Finland.
As reported by Riskbank, bitcoin mining contributed to an annual energy consumption equivalent to that of 200,000 households (in Sweden alone).
Therefore, the central bank insists that bitcoin must be banned, agreeing with the Financial Supervisory Authority and the Environmental Protection Agency.
The success of such strategies is rather thin. Bitcoin is in its essence just a mathematical algorithm and banning bitcoin is comparable to banning math. Even after the ban one plus one equals two.
The bitcoin mining ban last year in China has not been effective. Mining operations relocated to other regions, such as North America or neighboring countries of China. Despite that disruption, it was reported that China still is the second largest country for bitcoin mining.
The bitcoin figures speak for themselves. At the end of 2021, Bitcoin ranked first as the world’s cleanest industry with its high mix of renewable energy. The clearest example is in Norway, where bitcoin miners harness 100% renewable energy.