Traditional banking requires 2.5 times the amount of power as Bitcoin (BTC) to produce the same amount of value, and only proof-of-work (PoW) provides “a truly trustless system,” according to Brian Brooks, CEO of major blockchain technology firm Bitfury and a former Comptroller of the Currency in the US.
“Put differently, the banking system requires 573 TWh of power to produce USD 1 trillion of value. That is about 2.5 times the amount of power required to produce the same amount of value in bitcoin,” Brooks said in his pre-published testimony for a hearing in the US House of Representatives on Thursday.
“[…] that differential may explain why the traditional banking system as an industry has generally been critical of cryptocurrency activities,” Brooks added.
The comparison between Bitcoin and the banking system came after Brooks first compared digital gold to its physical counterpart. Bitcoin mining and gold mining “consume approximately the same amount of electricity per year,” Brooks’ testimony said, adding that gold mining also “presents a host of other environmental concerns,” including solid waste, chemical consumption, and pollutants.
“Thus, for example, if bitcoin competes as a store of value with gold, then an appropriate question is whether the energy used in Bitcoin mining produces more economic value per unit of energy than gold mining,” Brooks noted, adding:
“If bitcoin and other cryptocurrencies compete with banks as a means of payment, then an appropriate question is whether the energy used in bitcoin mining produces more economic value per unit of energy than banking.”
Commenting on proof-of-stake (PoS) blockchains, which use less energy than proof-of-work chains like Bitcoin and Ethereum (ETH) (ETH aims to transition to PoS), Brooks said these are an “extremely important and valuable” part of the crypto ecosystem. However, he also noted that they differ from PoW in terms of decentralization and trustlessness.
“[…] only proof-of-work provides a truly trustless system of peer-to-peer exchange,” Brooks noted, explaining that PoS can be compared to “traditional corporate governance” where the entity with the most shares controls the system. (Learn more: ‘Fiat-Like’ Proof-of-Stake Chains Favor Centralization & Rich Players)
“Proof-of-work systems such as the Bitcoin network, by contrast, do not require trust that large shareholders will act in the interest of all,” the testimony said.
Further, Brooks, who also worked as the Chief Legal Officer for Coinbase before becoming a financial regulator in his role as Comptroller of the Currency, summarized what he called the “positive knock-on effects” of Bitcoin as follows:
- Potential to stabilize electric grids through flexible mining that can be powered up or down at the request of grid operators.
- “Dramatic increases” in the efficiency of ASIC mining machines.
- The development of promising immersion cooling systems for mining machines which can significantly reduce energy use for cooling.
The hearing today has already caused a stir in the crypto community after a published memo with background information on proof-of-work mining was accused of containing “basic errors” and praising proof-of-stake blockchains.
The same memo was also commented on by Coin Metrics Co-founder and Castle Island Ventures General Partner Nic Carter, who said during a presentation with the Bitcoin Mining Council on Tuesday that the memo contains figures relating to mining e-waste that “we know to be false.”
Later, Carter also took to Twitter to call out the hearing, saying he “won’t be tuning into the hearing.”
He explained his reason for not spending more time on the hearing by saying that none of the major US-based mining firms were invited to participate, adding that it is “telling that the committee specifically avoided them.”
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