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US Congress holds hearing on 'Cleaning Up Cryptocurrency'

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On Thursday, January 20, 2022, the United States House Energy and Commerce Oversight Subcommittee held an investigative hearing titled “Cleaning up Cryptocurrency: The Energy Impact of Blockchains.” Topics discussed during the hearing included energy usage in blockchain technologies and its impact on grid infrastructure in the U.S., and environmental concerns over cryptocurrency mining. Joining the subcommittee as hearing witnesses were industry experts, including Ari Jules, John Belizaire, Brian Brooks, Steve Wright, and Gregory Zerzan. 

Energy Consumption and Grid stability

One of the primary concerns of the subcommittee was the energy consumption of cryptocurrency mining and its effect on power grids across the U.S. Committee members seemed particularly worried about cryptocurrencies that use energy-intensive proof-of-work mining protocols, like Bitcoin. Indeed, in the hearing opening, ranking member of the committee Morgan Griffith noted that “some experts estimate Bitcoin mining uses anywhere from 110 to 188 terawatts of the world’s energy annually, more energy than some small countries.” 

John Belizaire, CEO of Soluna Computing Inc., argued that the energy consumption of Bitcoin was a feature, not a bug. According to Belizaire, the computing-intensive proof-of-work protocol underlying the Bitcoin network is not a waste, as “the Bitcoin protocol serves as the crucible for the financial freedom of millions of people.” Belzaire added that “energy consumption is architected into the system to create certain types of behavior, protect the security of the network, and really lock in the value that ultimately the asset creates.” Brian Brooks (CEO, BitFury) echoed Belizaire, saying that “Bitcoin uses a certain amount of energy to produce a trillion dollars of value…the aviation industry uses something like fifty times more energy per unit of value than Bitcoin.”

Not all witnesses were supportive of the proof-of-work protocol, however. Ari Jules, professor at Cornell Tech and Cornell University, argued that less energy-intensive protocols like proof-of-stake offer better alternatives for securing blockchains. Indeed, in his opening statement, Jules stated that “we have far more energy efficient alternatives. For the sake of our environment and the energy infrastructure in the United States, I believe we need to adopt these newer options.” When asked why Bitcoin (and other proof-of-work networks) cannot simply switch to proof-of-stake, Brooks responded that the problem of proof-of-stake is that it “has at its core a dependence on trust of who the stakeholders are,” adding that “the original vision of Bitcoin was that it was the only trustless network.” He also pointed out the risk of a “51% attack” inherent to proof-of-stake protocols. 

Witnesses also noted that mining centers, unlike traditional data centers, can be paused and do not have to add non-stop load to the grid. Belizaire pointed out that the “ability to pause processes allows us to introduce a new type of load to the grid: flexible load.” The load from mining centers can be ramped up or down, depending on energy demand, which could help stabilize power grids in the U.S. Brooks added that large scale bitcoin mining operations can also act as “interruptible baseload consumers” for utility providers, essentially guaranteeing the provider a “base” level of consumption.   

Environmental Concerns

Another major focus of the subcommittee was the environmental impact of cryptocurrency mining. In her opening statement, chairwoman Diana Degette noted that energy-intensive mining protocols are at odds with the current administration’s climate goals and that “our focus now needs to be reducing carbon emissions overall and increasing the share of green energy on the grid.” 

Steve Wright, former CEO of the Chelan County Public Utility District and Bonneville Power Administration in Washington state, argued that economic incentives were driving cryptocurrency miners toward non-renewable resources, at least in the short term. According to Wright, “the cost of [renewable] resources, has been coming down substantially, but the value has been increasing because we have more clean energy legislation…and because of that we have more clean energy that’s needed in the market, so demand is going up and as demand goes up the price goes up.” Those same market dynamics  drive down the demand for non-renewable resources like coal, making it a cheaper resource for cryptocurrency miners. 

Brooks pointed out that bitcoin mining was already sourced more sustainably than other energy uses on average, saying that “the energy mix used by bitcoin mining was about 58% sustainably sourced…compared to 31% for the U.S. energy grid as a whole.” Belizaire argued that “cypro’s energy consumption” can be a “catalyst for clean energy development, which will reduce pollution and create local jobs.” Throughout the hearing both Brooks and Belizaire argued that the incentives built into the Bitcoin network will drive miners toward more renewable resources over time, with Belizaire going as far as saying, “if we want more wind and solar in this country, without the need for government subsidy, Bitcoin can be part of the solution.”

A further push toward sustainable sources is also more likely to happen if miners are located in the U.S., given their energy infrastructure and regulatory power. In one notable exchange, committee member Neal Dunn (Florida) asked, “if the goal was to clean up cryptocurrency mining energy, the best thing you could do is move it to the United States?” Brooks responded: “No question about that. We’re twice as efficient as the U.S. electric grid, let alone Kazakhstan.”  

Another notable point made by Brooks was that the incentives to become more energy efficient have “spin-off” effects, stating that “in the same way the space program created lots of benefits for other things in the world, bitcoin mining has produced a lot of other fundamental innovations for other parts of the world.” Among these, Brooks identified energy-efficient ASIC chips and immersion cooling as two technologies that have important applications across many other industries. 

This hearing comes just over a month after the United States Senate held their own hearing on stablecoins. Increased frequency of hearings coupled with the recent rise in politicians vocalizing support for Bitcoin, highlights a growing interest in cryptocurrencies among U.S. lawmakers. This, in turn, is likely to improve regulatory clarity, which may facilitate adoption by large institutions, both private and public.   

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Daniel is a data scientist who enjoys writing bitcoin and financial content. He is the co-founder of Green Candle Investments, a bitcoin and finance media company.

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