New York State wants to limit cryptocurrency mining using a proof of work protocol. The state is one of the major bitcoin production hubs in the country.
On the night of Thursday June 2 to Friday June 3, 2022, New York State senators signed a piece of legislation that could impact the entire mining industry in the United States. It is a moratorium that frames and regulates the establishment in the State of companies specialized in cryptocurrency mining, using a proof of work protocol. And the cryptocurrency industry is particularly concerned.
A moratorium to regulate mining farms
The text signed by the senators is rather severe. It would prohibit the establishment of new companies or the expansion of established ones for at least two years, if the latter operate on cryptocurrencies using a proof of work protocol, and if the mining farms do not operate with 100% renewable energy.
Now that the senators have signed the text, there is one last step before it takes action: it must be signed by the governor of the state, Kathy Hochul. For the moment, the Democrat has not indicated what she intends to do: Kathy Hochul is strongly committed to protecting the environment, but she would also have received a donation of $ 40,000 from a company that specializes in bitcoin, the New York Times revealed. . Her decision could be influenced by these two factors.
Once approved by the Governor, the text would immediately take effect. The scope of such a text would be extremely broad: New York State is one of the largest producers of cryptocurrencies in the United States. A Cambridge University study shows that the state alone provides 9.8% of the US hashrate (computing power) for bitcoin, which places it in 4th position, behind Georgia, Texas and Kentucky.
After the total ban on mining in China in June 2021, the United States has established itself as the fallback country for companies looking to relocate. And New York State, a major producer of hydroelectricity, has quickly become one of the country’s major bitcoin mining hubs, The Verge says.
Proof of work protocol criticized
If New York State bans part of the mining companies from setting up on its territory for at least two years, the repercussions on the crypto ecosystem in the United States could be significant. Senators told CNBC that the moratorium was motivated by a desire to limit the state’s greenhouse gas emissions, particularly by cracking down on mines that don’t use enough renewable energy.
The proof of work protocol, covered by the law, is a process used in the production of some cryptocurrencies, including bitcoin and Ethereum, the two most popular in the world. This mechanism, which requires a large number of computers to solve an equation in order to validate transactions, is extremely energy-consuming and often criticized for it.
If Ethereum plans to switch to another type of protocol, called proof of stake, by the end of 2022, that’s not the case with bitcoin. Cryptocurrency is very difficult to produce and so far only Norway uses 100% renewable energy to power its mining farms, just 1% of the global hashrate.
But the arguments used by the senators to justify the institution of the moratorium do not convince the experts in the sector. The energy mix used by bitcoin miners around the world today is 60% renewable, according to CNBC, while those based in New York would use 80%.
” Regulation in New York will stop bitcoin mining farms that have a high carbon footprint, but will also discourage 100% renewable farms from setting up Thinks John Warren, the manager of a mining company interviewed by the American newspaper. Above all, the legislation could inspire other American states to do the same – and that’s what worries us most.