EU to Grade Cryptocurrencies Based on Energy Consumption: Report
The EU plans to design a grading measure for cryptocurrencies in an effort to address growing concerns over their high energy consumption, according to a Bloomberg report. The aim of the move is to promote greener consensus algorithms, such as the Proof-of-Stake (PoS) model Ethereum recently shifted to.
EU Wants to Encourage Greener Crypto with New Grading Measure
The European Commission and its international partners are set to develop an energy efficiency measure for cryptocurrencies, according to a report by Bloomberg News. The grading measure is meant to “encourage more environmentally friendly crypto systems” and reduce cryptocurrencies’ rampant energy consumption, the report says.
“Just as their use has grown significantly, the energy consumption of cryptocurrencies has more. In harnessing the use of cryptocurrencies and other blockchain technologies in energy markets and trading, care must be taken to use only the most energy-efficient versions of the technology.”– European Commission told Bloomberg.
Furthermore, the European Union (EU) will also urge countries to rein in crypto miners’ energy consumption as the bloc heads into winter with significantly less Russian gas. Even though only 10% of Proof-of-Work (PoW) crypto mining comes from the EU, the organization believes the move could encourage other global leaders to take similar action.
Additionally, the EU intends to publish a report that analyzes the crypto industry’s impact on climate change by 2025, while calling for members of the bloc to halt tax breaks for crypto mining firms. Moreover, the EU may also prompt member countries to suspend mining activities in case of an electricity shortage.
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EU Voices Support for PoS Consensus
With the new grading measure, the EU seeks to encourage more energy-efficient consensus mechanisms used by blockchain networks such as the Proof-of-Stake (PoS) model. In September, Ethereum transitioned from the PoW to the PoS consensus mechanism, a move that is expected to reduce the blockchain’s energy consumption by over 99%.
On the other hand, the world’s biggest cryptocurrency blockchain Bitcoin still uses the PoW model, which has sky-high energy consumption. Following the switch to PoS, Ethereum no longer relies on miners but rather on the so-called ‘validators’ to verify transactions.
Earlier this year it was reported that Bitcoin accounts for 0.08% of global CO2e emissions. Similarly, a recent report by congressional Democrats stated that U.S. crypto miners consume nearly as much electric energy as every home in Houston, Texas.
Do you think the EU’s upcoming crypto grading system could encourage other countries to come up with similar measures? Let us know in the comments below.