European Union to Pursue Energy-Consumption Reduction Efforts in Crypto Mining
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The European Union (EU) intends to adopt an energy efficiency badge to address the rising electricity use in data centers such as cryptocurrency mining. The EU will urge member states to focus on reducing the energy usage of cryptocurrency miners as it works to get through the winter using significantly less Russian gas and other energy than it did before the sanctions were put in place because of the conflict in Ukraine.
According to a draft proposal, the executive branch of the EU intends to collaborate with international partners to create a rating system for more ecologically friendly cryptosystems, such as proof-of-stake (PoS), as opposed to the energy-intensive proof-of-work (PoW) method employed by Bitcoin.
The European Commission states in an Action Plan that “just as their use has grown significantly, the energy consumption of cryptocurrencies has more.” Care must be made to only employ the most energy-efficient forms of the technology when leveraging the usage of cryptocurrencies and other blockchain technologies in energy markets and trade, the Commission underlines.
How Does the European Union Aim to Achieve Its Energy-Reduction Requirement?
One of the primary steps envisioned in the document released on October 18 is reducing the energy usage of the Information and Communications Technology (ICT) industry, notably through an “environmental labeling scheme for data centers… and an energy efficiency label for blockchains.” According to a news statement from the Commission:
“With data centers and an ever-growing appetite for online services, today’s plan also outlines ways to decouple the ICT sector’s energy footprint from the exponential growth of data.”
Europe’s crypto community and industry opposed previous efforts to forbid Proof – of – work mining under the planned Markets in Crypto Assets (MiCA) framework since it equated to a prohibition on Bitcoin.
Although the contentious clause was ultimately removed from the most recent draft of the law, other texts impose obligations on service asset providers to report the energy usage and environmental impact of the assets they use.
The Ethereum network just switched to a proof-of-stake consensus mechanism, which requires a lot less energy than proof-of-work mining. Bloomberg stated that any new rules the 27-member union enacts in this sector may affect the entire world, even though the EU only accounts for around 10% of the world’s PoW crypto mining.
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