New York State strongly wants to curb the mining of cryptocurrencies using a proof of work protocol. The state is one of the most important bitcoin production hubs in the country.
On the night of Thursday, June 2, to Friday, June 3, 2022, senators in the state of New York signed a piece of legislation that could very well affect the entire mining industry in the United States. This is a moratorium that hits and regulates the installation in the state of companies specializing in the extraction of cryptocurrencies, using a work certificate protocol. And the crypto industry is particularly concerned.
A moratorium on regulating mining
The text signed by the senators is quite strict. It will prohibit the establishment of new businesses or the expansion of established businesses for at least two years if the latter work on cryptocurrencies using a proof of proof of work and if the mines do not work with 100% renewable energy.
Now that the senators have signed the text, there is one last step before it gets underway: it must be signed by the governor of the state, Kathy Hochul. At the moment, the Democrat has not stated 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 cooking company specializing in bitcoin, the New York Times revealed . His decision may be influenced by these two factors.
Once approved by the governor, the text will take effect immediately. The scope of such a text would be extremely broad: the state of New York is one of the largest producers of cryptocurrencies in the United States. A study by the University of Cambridge shows that the state alone supplies 9.8% of the hash rate (computing power) in the United States to bitcoin, which places it in fourth place after Georgia, Texas and Kentucky.
Since the complete ban on mining in China in June 2021, the United States has established itself as an emergency country for companies wishing to relocate. And New York State, a major producer of hydropower, has quickly become one of the nation’s best bitcoin mining hubs, says The Verge.
The evidence for the working protocol criticized
If the state of New York bans some of the mining companies from establishing themselves in their territory for at least two years, the consequences for 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, especially by hitting mines that do not use enough renewable energy.
The protocol of proof of work, which is covered by the law, is a process used in the production of certain 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 to validate transactions, is extremely energy-intensive – and often criticized for it.
If Ethereum plans to switch by the end of 2022 to another type of protocol, called proof of stake, this is not the case for bitcoin. Cryptocurrency is very difficult to produce, and so far only Norway uses 100% renewable energy to run its mines – almost 1% of the global hash rate.
But the arguments used by the senators to justify the establishment of the moratorium do not convince the experts in the sector. The energy mix used by bitcoin miners around the world today is made up of 60% renewable energy, 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 CO2 footprint, but it will also deter 100% renewable farms from establishing themselves », Considers John Warren, the head of a mining company interviewed by the American newspaper. Above all, the legislation could inspire other US states to do the same – and that is what worries us above all.