White House Seeks Public Input On Digital Assets Effects on Environment

The rapid growth of the digital asset industry in the past few years has seen a free market filled with fraud, scams and get-rich-quick schemes. With these controversies, it has been the recommendation of many law enforcement bodies and policymakers for it to be regulated.

Now, despite the objections of many within the digital asset and blockchain space, it appears that the United States government is determined to push through with implementing digital asset and blockchain legislation. This is marked by President Joe Biden signing the Executive Order on Ensuring Responsible Development of Digital Assets on March 9.

The executive order is a “whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology,” which is blockchain. Listed as six key priorities are “consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.”

In complying with the responsible innovation priority of the executive order, the White House Office of Science and Technology Policy (OSTP) has been given the responsibility of compiling information about whether or not digital assets and blockchain technology are eco-friendly. The White House OSTP has been given a deadline of May 9 to submit the report to President Biden. 

Thus, the White House OSTP has released a notice requesting comments from the public and interested parties “on the protocols, hardware, resources, economics, and other factors that shape the energy use and climate impacts of all types of digital assets.” This is in line with the country’s goal of achieving net-zero greenhouse gas emissions by 2050.

“The Executive Order tasked the White House Office of Science and Technology Policy (OSTP) to submit a report to the President that examines the potential for digital assets to impede or advance efforts to tackle climate change and the transition to a clean and reliable electricity grid,” the White House OSTP notice stated. 

Information and comments may be sent to DigitalAssetsRFI@ostp.eop.gov with < RFI Response: Climate Implications of Digital Assets > in the subject line of the email. The White House OSTP will not accept snail mail due to time constraints. 

Measuring Energy Efficiency

The probe into the eco-friendliness of digital assets and blockchain comes from Bitcoin Core (BTC) being publicly criticized for being energy inefficient due to its high electricity consumption which contributes to the emission of greenhouse gases into the atmosphere. 

This is because the original Bitcoin uses Proof-of-Work (PoW) to maintain competition between miners or nodes on the network. Miners need to solve a highly complicated mathematical equation in order to earn the right to add a new block on the blockchain and reap the block reward of newly minted Bitcoin. This requires supercomputers and hi-tech cooling systems that use up a massive amount of electricity. 

PoW’s extremely high energy consumption has led many to believe that Proof-of-Stake (PoS) is the answer to digital assets and blockchain technology being environmentally friendly. However, BSVBlockchain.org Public Policy Director and SmartLedger.solutions Co-Founder & Chairman Bryan Daugherty, begs to differ.

“In Proof-of-Stake, the concept is to continually bring on new nodes to validate transactions, which over time results in a direct increase of electricity, with no end in sight. Having 50,000 nodes, especially when most of these nodes do not participate to validate transactions or produce blocks, is unnecessary and unsustainable,” Daugherty explained. 

While it is true that BTC and many popular digital currencies, such as Bitcoin Cash (BCH) and Ethereum (ETH), are energy inefficient, it is not due to PoW, but  due to their inability to scale. Scaling means being able to continuously increase the blockchain’s data blocks and throughput. 

“Without intimate technical knowledge and access to the latest research on the competing Bitcoin protocols, it is likely that regardless of how well-intentioned policymakers are, their pending regulations will lead to stifling blockchain innovation,” Daugherty said. 

To illustrate more concretely in numbers, BTC has a data block size cap of 1MB at a throughput of only seven transactions per second (tps), while BCH has 32MB block caps and processes a maximum of 116 tps. ETH, on the other hand, can complete about 70 tps. 

According to the Digiconomist's Bitcoin Energy Consumption Index, one BTC transaction expends 1,544 kWh, which an average American household consumes for 53 days. This is because BTC processes only seven tps. If the throughput is increased, electricity spent on each transaction will be lowered. 

This is because energy efficiency is not measured on electricity consumption alone. When it comes to blockchain, a very simple calculation would be the electricity consumed per transaction processed. The utility of the technology must also be looked at in order to measure true energy efficiency and create better blockchain legislation.

Limitless Scaling is the Answer

Does the technology benefit only the privileged few who can afford to buy BTC or ETH, for instance, or does the technology have the potential to be adopted by the global masses? This should be one of the focal questions when measuring a technology’s energy efficiency. 

And this is what Satoshi Nakamoto has answered since he released the Bitcoin white paper in 2008 by stating that Bitcoin needs to scale in order to survive. Bitcoin Satoshi Vision (BSV) is committed to this, and has since unleashed the ability of the original Bitcoin protocol for limitless scaling.

At present, 4GB blocks are already being mined on the BSV blockchain and throughput is 50,000 to 100,000 tps at fees of tiny fractions of a penny per transaction. This means that electricity consumption per transaction is decreased by more than 10,000 times, and the figure will become even lower as the network scales.

With the ultimate goal of terabyte-sized blocks and millions of tps, coupled with fees that can hardly be felt, it can be said that the BSV blockchain is capable of global enterprise adoption. This means that it has utmost utility for businesses from all kinds of industry—something that goes way beyond what the Internet has accomplished. 

“It is a matter of national and public interest to assure that stable, secure and sustainable blockchain technology has the unobstructed lane to meet its inherent design to scale and handle the world’s data and financial growing needs, improving beyond the capabilities of today’s limited digital infrastructure,” Daugherty pointed out. 

And this is why in order for policymakers to draft a balanced blockchain legislation and allow the innovative technology to flourish, Daugherty is recommending them to utilize a framework based on comparative measures of security, stability and sustainability.

According to Daugherty, this proposed framework “utilizes terms that do not require a deep technical understanding of blockchain technologies, but rather provide an even-handed framework for policy makers to identify sustainable, utility-based blockchain offerings.”

“By using a balanced, unified, and standardized approach to review and compare blockchain technologies, I am confident that policymakers will find it entirely unnecessary to forfeit the future security of a nation’s network as well as financial and data infrastructure by seeking less secure models of consensus mechanisms than proof-of-work,” Daugherty added. 

Limitless scaling is the answer for blockchain to become both sustainable and environmentally friendly, and not switching to PoS. As digital asset and blockchain providers scramble to develop second- and third-layer solutions to mitigate the base layer not being able to scale, BSV has already found the solution. And that is by restoring the original Bitcoin protocol and unlocking unbounded scalability.