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Swedish Central Bank snipes at Bitcoin's energy-intensive PoW

Bitcoin enthusiasts were quick to react to the Riksbank report stating that the energy-intensive BTC mining should be prohibited

By Shashank Bhardwaj

Published: Jun 14, 2022 03:02:20 PM IST

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The oldest central bank in the world, Riksbank, aka the Swedish central bank, has published a report, ‘Cryptocurrencies and their impact on financial stability’, saying that Bitcoin (BTC) and crypto mining should be forbidden.

The report makes a case for a ban on Bitcoin mining owing to environmental concerns and that the proof-of-work (PoW) consensus mechanism consumes large amounts of energy for solving complex computational puzzles. The report stated, “Recently, some extraction of crypto assets has been established in northern Sweden, where it consumes as much electricity as 200,000 households do on an annual basis.”

In its examination, the paper cites peers at the environmental agency and the Swedish Financial Supervisory Authority, who said, “The proof-of-work method, which is used to confirm transactions and extract new crypto assets, should be banned in favour of other, less energy-intensive methods.”

Sweden is home to several Bitcoin startups and is quite advanced in adopting Bitcoin. However, since the banks and governments regularly take aim at PoW energy use, the report did little to surprise people.

Prominent Bitcoiners like Christian Ander, the founder of BT.CX, a Swedish Bitcoin exchange, and Bitcoin author Knut Svanholm, who wrote the ∞/21M, quickly refuted the report. Svanholm shared a YouTube video demonstrating how “none of the energy used for Bitcoin mining goes to waste.”

Svanholm also said, “A central bank has no business telling people what they can and cannot do with their electricity. If they really cared about the environment, they’d shut their own operation down for good tomorrow morning.”

Ander stated that the report was “highly inappropriate.” In one of his tweets, he implied that energy consumption must be neutral with regulations on production. However, what people do with it should not be a regulatory subject.

Another report examining the energy efficiency of crypto transactions stated, “When the Bitcoin Lightning layer is compared to the Instant Payment scheme, Bitcoin gains exponentially in scalability and efficiency, proving to be up to a million times more energy efficient per transaction than Instant Payments.”

This report is in concurrence with the proposed ban by Swedish central bankers. Research from Cambridge Center for Alternative Finance has found that an estimated 15GW of electricity is consumed each day by Bitcoin. However, the global sports industry emits three times the emissions as the Bitcoin network.

The Bitcoin Lightning Network recently hit the 4,000 BTC target and holds great promise as a payment solution. Payments on the lightning network take place off-chain and consume far less energy than regular mining operations. In 2021, Bitcoin attained the status of the cleanest industry in the world, given its high renewable energy mix.

The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash