Until then it was only a matter of time China has issued a ban on bitcoin (Bitcoin) mining, trading and crypto services. To do anything with Bitcoin anywhere in the People’s Republic, you need a special permit. The Chinese government gives the reason for the action against Bitcoin reduce its well-documented impact on the climate. Regardless of how much truth there is in this statement, one thing is clear: China’s justifiable anger at power-guzzling and carbon-spitting cryptocurrencies serving the Earth’s climate is just the first shot in an upcoming global showdown over Bitcoin and other crypto projects based on proof-of-work ( PoW), the complicated crypto security mechanism that we subsume under “mining”. This doesn’t seem like a battle crypto can or will win.
For many cryptocurrency enthusiasts who hold bitcoin, this is a difficult realization. Luckily, there’s a helpful parallel that even goes by the same name: coal mining. Coal is dead because it’s cleaner, cheaper, more efficient, and more technologically advanced alternatives.
Related: CO2 neutral bitcoin? New approach aims to help investors offset BTC’s carbon emissions
Granted, the coal won’t go down without a fight, backed by well-funded corporate lobbies and powerful politicians who are often open to generous campaign donations. Still, if your financial advisor told you that he felt really good about investing in coal, you’d probably get a new financial advisor. For similar reasons, it might be time to embrace the fact that mining, from coal to crypto, could soon be a relic of the past.
Short-term effects of China’s Bitcoin ban
A combination of inertia and reluctance to stop mining has temporarily cushioned the full impact of China’s war on bitcoin. After the initial shock The United States took the opportunity created by the Chinese ban on becoming that the new mining center of the world. In Asia, Kazakhstan and Malaysia are expanding mining, as are Germany and Ireland in Europe and Iran in the Middle East. according to to the latest statistics. Efforts to keep crypto mining going make for some very strange geopolitical bedfellows.
Such a colorful and diverse “bitcoin mining coalition” may bring some comfort to some investors, but the truth is that it will not stand the test of time. The US can’t keep up with China’s low energy prices, and it can’t hold the title of champion miner for long. Germany and Ireland are in a similar boat. Iran is currently battle Mass protests due to a severe water shortage, so it is politically undesirable and socially untenable, even for a theocracy, to boast a stake in the world’s least sustainable cryptocurrency. Malaysia is similarly subject to extreme weather conditions and rising sea levels that would not allow it receive its mid- to long-term efforts to mine cryptocurrencies. Taken together, these developments severely limit the future prospects of the mined cryptocurrency.
Climate commitments are marginalizing mining
It certainly doesn’t help when it comes to bitcoin miners, which have a majority of the world’s states and practically omnipotent developed nations entered in the Paris climate agreement. This comes with a firm commitment to limit CO2 emissions and prevent the planet from further overheating. Mining for bitcoin contradicts this promise. In addition to the Paris climate agreement, the European Union is pursuing its own climate protection plan, the European Green Deal. These large-scale multinational agreements marginalize energy-intensive projects like bitcoin mining.
Related: Back to the roots of mining: Bitcoin is going green faster than ever
As the tide turns in favor of carbon neutrality, the task of mining cryptocurrency is being left to a handful of countries that either don’t take their climate goals seriously or simply don’t make long-term plans. It is no coincidence that many of the countries currently making a last-ditch effort to mine Bitcoin are authoritarian states facing growing international pressures alongside growing internal strife and discontent. Few, if any, serious investors can bet their crypto portfolio on the political stability of a dictatorship or autocracy that is running out of water and violently repressing public dissent. Bad optics, bad for the climate and bad for business.
A cryptocurrency that has been pushed to the political and geographic fringes can hardly claim to be truly decentralized and democratic. Even leaving the climate issue aside, how are we to view the cryptocurrency mined in tyranny as a sign and tool of economic liberation? From a financial, climate and visual point of view, the sun is setting on Bitcoin and other mined cryptocurrencies. It’s only a matter of time.
The power of inertia and the pain of letting go
So what keeps the mining train running? First of all, let’s not underestimate the power of inertia and ingrained habits. Bitcoin was revolutionary when it came out in 2008. It paved the way to a new digital economy. Proof-of-work was a revelation in terms of decentralization and security, but its lack of efficiency left us with a ticking time bomb. This bomb is going off now.
Abandoning mining will be painful and its immediate replacement is not obvious. Powerful players around the world have amassed the technological and energetic resources to continue mining cryptocurrencies for the foreseeable future, and they can pull enough political and economic leverage to maintain the status quo for a while longer. When the institutional crackdown finally comes, some of the mining will shut down underground and slide into the organized crime realm as long as it remains profitable.
Related: Crypto mining needs to be redefined before it’s just thrown away
However, without legal ups and downs for free exchange and mass adoption, respective cryptocurrencies will be eclipsed and marginalized, with their valuations permanently devastated. Ultimately, the market for mining projects and law enforcement will make mining obsolete. The question for investors and crypto enthusiasts is: why wait for that to happen?
Getting rid of mining can boost the crypto economy of the future
If we invest the resources dedicated to Bitcoin mining into more advanced and green crypto projects, we can do significantly more for the burgeoning digital economy. We can continue to pile coal into the old steam locomotive or switch to a bullet train and invest the resources to make it go longer and faster. Some will point to renewable energy and how Bitcoin can reduce its carbon footprint by using more green energy.
Currently, less than a third of the world’s electrical energy based from renewables. If that portion were fully dedicated to cryptocurrency mining, it might give it some semblance of sustainability, but it would be little more than a fig leaf. We would do much better to direct renewable energies towards truly sustainable and meaningful uses. When it comes to crypto, there are numerous promising and mathematically rigorous solutions with the potential to bring PoW security levels to a network.
Mining is on the way out, and we’re making ourselves vulnerable by delaying its inevitable demise. The move to lighter, more sustainable and scalable solutions will open the crypto space to a much wider audience and fulfill its promise of true decentralization and democratization. The sooner we accept this fact and make the switch, the better for everyone inside and outside the crypto space.
This article does not contain any investment advice or recommendation. Every investment and trading move involves risk and readers should do their own research when making a decision.
The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Dominik Schiener is co-founder of the Iota Foundation, a non-profit foundation based in Berlin. He oversees partnerships and the overall execution of the project vision. Iota is a distributed ledger technology for the Internet of Things and a cryptocurrency. He also won the largest blockchain hackathon in Shanghai. For the past two years he has focused on enabling machine economy through iota.
