European Central Bank researchers expect conflict between green transition policies and bitcoin investors.

With inflation on the rise, the European Central Bank (ECB) has taken the time to summarize its concerns about the “significant carbon footprint” of bitcoin (BTC) and other cryptocurrencies that require massive computing power.

The ECB has published a report titled “Mining the Environment – Are Climate Risks Considered in Crypto Assets?” July, 12. In the report, the ECB research team amplifies the environmental narrative of the battle of protocols, where the Proof-of-Work (PoW) concept poses a threat to the planet. On the contrary, Proof-of-Stake (PoS) is the only sustainable cryptocurrency option, experts say.

The article compares the amount of energy used by Bitcoin with the annual energy consumption of selected countries such as Spain, the Netherlands and Austria. The combined carbon footprint of bitcoin and ethereum (ETH) is claimed to negate greenhouse gas (GHG) emission savings for most eurozone countries as of May 2022.

Since the main reason for significant power consumption lies in the PoW consensus mechanism, the authors consider both Bitcoin and Ethereum blockchain-based tokens, including stablecoins such as Tether (USDT), to be particularly volatile and jeopardize the entire green transition project. In July, Ethereum completed a major merger attempt on the Sepolia testnet, bringing the platform closer to moving to a PoS consensus mechanism.

See also: New York Mayor Eric Adams opposes PoW mining law

At one point, the article escalates tensions between green transition goals and cryptocurrencies in general, to the point of a possible war. Political and social decisions regarding energy sources and levels of energy consumption may induce politicians to prioritize certain manufacturing activities, which in turn create risks for the valuation of cryptoassets.

According to the report, the usefulness of Bitcoin to society is in doubt, and therefore:

“It’s hard to imagine how the authorities could ban gasoline cars during the transition but turn a blind eye to assets like bitcoin powered by PoW technology.”
In another car analogy, the report argues that PoS is a cryptographic version of an electric car and an obvious candidate for policy stimulus.

Last week, the ECB published a report that analyzes the growth of the cryptocurrency market over the past decade and the risks it poses to the existing financial system. He concluded that the lack of regulatory oversight has contributed to the recent decline of stablecoin algorithmic ecosystems such as Terra (LUNA)—now renamed Terra Classic (LUNC)—indicating that such stablecoins may have an impact on the financial system.

Source: CoinTelegraph