New York Bitcoin Mining Ban and its Wider Crypto ImplicationsJune 7, 2022
Several days ago, the Senator of New York state made an important decision not just for the US-based crypto industry, but for its global presence as well. The same legislative body passed a clearly defined moratorium on bitcoin mining in this big state. The moratorium does not stop all proof-of-work mining pools from operating but instead institutes a freeze on starting any new mining facilities that utilize energy from carbon-based sources. That ban will be in place for 24 months. The bill previously passed two different legislative bodies and now it waits for the signature of Governor Kathy Hochul.
Presently, it is hard to say whether or not it will pass, but an aspect of mining is still completely secure either way. That includes both home mining rigs and new industrial facilities for crypto mining that use some form of a renewable source of power. The same options are completely safe and excluded from the ban, so they are a very potent option for anyone who is interested in creating a green bitcoin mining operation. That itself has big implications not just for the crypto industry, but also for the energy sector as a whole, especially in the post-pandemic, post-Ukrainian invasion world of energy uncertainty.
A big part of the moratorium will be applied research on the proof-of-work networks. During the time when no new carbon-based mining pools will be created in New York, the state will study the effects of this method of creating digital currencies. The insight into the same operations also triggered the creation of the bill. Its sponsors are saying that they are mainly concerned with the use of carbon-based power plans. These have been often decommissioned, but only to see some of them get back online to provide power for bitcoin and other digital currency mining.
Greenidge Generation located in Dresden, New York is a good example. It is trying to go completely carbon neutral, but presently, it is using fuel that has a big carbon footprint. The legislators in New York worry that the same could happen on an even bigger scale and thus threaten any state-wide process of reducing the use and presence of fuels that produce a huge amount of excess carbon that then gets dumped into the atmosphere.
The critics of the mining ban are quickly pointing out that the process of getting crypto through mining rigs is not some kind of a black box that its critics make it out to be. The world has a very clear understanding of how crypto mining operates and how mining pools and even individuals use it. That completely applies to the process of using digital currencies. A Federal Reserve survey found out that around six million US residents used cryptocurrencies for some kind of payment.
Out of these 60 percent have an income that is below 50,000 USD on an annual level. So, there is support for this undertaking in the wider public and the reason why so many individuals employ crypto in their everyday life. Of course, that is still a small minority but the numbers are steadily growing. The backbone of that activity is the mining process and it is no mystery that needs to be figured out on the field of actual mining facilities and among the processing racks that churn out the hash power.
The number of issues related to the mining ban also includes a straightforward issue of economic development that no nation in 2022 can ignore. The mining industry does not support just its small niche, but often an assortment of other industries as well. In New York, that included restarting relatively isolated parts of the state with a flurry of economic activity. Plants like Greenidge Generation, previously completely closed, operate a crew of engineers and technicians, along with other staff members. Some of them are there to support the generation of energy, while others are there to support the generation of cryptocurrencies.
Both support the local economy when it comes to the most basic stuff like accommodation, food, and entertainment. Yet, at the same time, crypto mining is very nimble and adaptable to a range of changes. For example, China tried to create a full ban on its crypto mining companies. They packed up their mining rigs and moved to Kazakhstan. Once disturbances appeared there, the same part of the mining industry moved further on and relocated further on. Some of these reached locations like New York. The companies working in this US state will find ways to overcome that ban as well, usually on the account of economic activity in that part of the world. Of course, New York is not Kazakhstan, but that implication goes both ways.
The process of mining tokens through a proof-of-work system is both energy-intensive and comes with a clearly bad public image. However, it is important to recognize that it is precisely what is providing value to the bitcoin network in the first place. In many ways, bitcoin is a system that takes that energy and transforms it into a new means of holding value. The debate behind that process is complicated, as many esports forums, scientific IT publications, and many other online locations clearly show. But, it is still important to recognize that the energy invested in the network gives out many essential benefits for its users.
These are distributed across the globe and offer a means of getting BTC tokens in places like El Salvador and New York in an equally streamlined and easy manner. The proof-of-work future is by no means certain – things like the ETH 2.0 network are promising the possibility of moving on to the proof-of-stake systems. For now, proof-of-work is here to stay. Moratoriums like the one in New York will not turn the clock back. Instead, countries across the world should think about how they can help crypto move onto renewable sources of power. But, they should be thinking the same for all industries in existence as well.