Experts from the European Central Bank (ECB) have criticized cryptocurrencies based on the Proof of Work (PoW) algorithm. According to them, projects using Proof-of-Stake (PoS) are one of the few options for sustainable development of digital assets.

The ECB highlighted that the average electricity consumption of Bitcoin and Ethereum networks in 2021 exceeded the figures for Austria, the Netherlands and Spain in 2020, as well as the installed capacity of the Three Gorges Dam, the world’s largest gravity hydroelectric dam.

“Estimations of the carbon footprint of Bitcoin and Ethereum also indicate that the combined annual emissions [сетей] It invalidates past and planned greenhouse gas emission reduction activities for most eurozone countries from May 2022,” the report says.

According to analysts, bitcoin has “questionable” benefits for society, but the blockchain technology itself has great potential. The ECB emphasized that a possible solution to the problem is to encourage projects based on PoS by states.

Experts explained that the Proof-of-Stake algorithm uses digital assets (stake) as a resource and does not use computing power. Therefore, the use of such networks will consume significantly less electricity.

“It is hard to imagine how the authorities decided to ban internal combustion vehicles in a transitional period, but turn a blind eye to assets like bitcoin built on the basis of PoW. […]. Continuing the analogy with cars, government agencies have a choice – to promote the cryptocurrency version of the electric vehicle (PoS and its variations) or to restrict/ban fossil fuel vehicles (PoW), ”the analysts wrote.

In recent years, politicians and the public have been actively discussing the impact of miners on the environment.

In April 2022, a position similar to that of ECB experts was expressed in the US Congress. Authorities have asked the Environmental Protection Agency to check the mining industry for environmental risks. They also noted the “less energy intensive” Proof of Stake technology.

In June 2022, the Bank of Sweden called for a ban on bitcoin for the sake of the environment. Previously, the country’s other regulators have made a similar proposal.

Recall that the same month, the New York State Senate approved a two-year moratorium on the production of cryptocurrencies using electricity generated from carbon sources.

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