Proof-of-work crypto mining should be banned in the European Union (EU), according to the vice chair of the European Securities and Markets Authority (ESMA).
- Erik Thedéen said that EU regulators should nudge the crypto industry towards the less energy-intensive proof-of-stake mining in an interview with the Financial Times.
- “The solution is to ban proof-of-work,” he said. “Proof-of-stake has a significantly lower energy profile.”
- The proof-of-work model involves miners using scores of powerful computers to solve complex mathematical problems in order to record transactions on the blockchain an be rewarded with new coins. The world’s largest two cryptocurrencies – bitcoin and ether – both use this model.
- Proof-of-stake mining is less energy intensive in that users win the right to record transactions based on how much investment – or “stake” – they have in the network. Ether has plans to migrate to a proof-of-stake model later this year.
- The EU does not currently account for a particularly significant share of the proof-of-work mining industry. Bitcoin mining is currently dominated by the U.S. (share of 35.4%), Kazakhstan (18.1%) and Russia (11.23%), according to the Cambridge Centre for Alternative Finance.
- However, with mining banned last year in the previously dominant China, there may be concerns among EU administrators that its previously small share of the mining industry could naturally grow as miners search for new homes.