On June 2nd, 2022 the cryptocurrency holders everywhere held their breath as word about a new bill to be passed in New York was announced. The new bill included several aspects which would severely restrict Bitcoin mining.
Now many are left to wonder what impact will this have on the cryptocurrency world. Not to mention there is fear about what this bill could do to the price of Bitcoin. Keep reading to learn more about what is included in this bill and what it means for the future of cryptocurrency.
What is in the New York Bitcoin Mining Bill?
Before you panic too much, you should know that this bill doesn’t affect all cryptocurrencies. In fact, it’s only a ban on those that rely on the proof of work consensus method in order to operate. Bitcoin is the most popular proof of work blockchain, while Ethereum follows as a close second(but this is about to change, more on this later).
The ban outlined in the bill is additionally not a permanent ban, rather it is a temporary one of 2 years. During this two-year period, the New York government would do some research to discover the impact of proof of work cryptocurrency mining on the environment. What’s more, is that this ban specifically refers to those cryptocurrency mining operations that rely on electricity that is produced using carbon-based fuels.
Mining operations that currently have a license don’t need to panic just yet, as this ban only applies to new companies looking to start up mining. Those who have a permit that expires within the next two years, however, should be worried as their permit will also not be renewed during the 2-year period.
As of the writing of this article, the bill has passed the house and the senate and has been sent to the New York Governor for signing. If he signs, this bill will become law.
Why is New York Cracking Down on Mining?
Surprisingly, after China banned cryptocurrency mining within its borders in 2021, many operations moved to Kazakhstan and the United States. While the first move may be an obvious one (as Kazakhstan has cheap electricity) the second one may surprise you. A little-known fact is that upstate New York has a large amount of cheap electric power as well as several empty coal processing plants that lend themselves to easily being converted to mining operations.
China issued the ban on mining because they were facing their own energy crisis, and mining takes quite a bit of energy. But the reality is, with the Chinese ban, they actually made mining worse for the environment. This is because China relies largely on hydroelectric power, while the US is one of the few countries still relying solely on carbon-based electricity. Thus this mass exodus of miners to New York was actually already a bad move for the environment. Currently, the US produces 38% of the world’s Bitcoin.
The sudden influx of miners to New York in the last year is definitely concerning, and therefore it shouldn’t be surprising that the government wants to slow down and even stop proof of work mining within the state. But will it work? Does stopping Bitcoin mining really save the environment?
The short answer is no. If New Yorkers really wanted to save the environment they would stop driving, stop hailing cabs, and would always take public transport or ride their bike to work every day. While this is a bit of a stereotype from NYC, the reality is, stopping Bitcoin mining operations in one state won’t save the destruction cars cause to the environment.
The bill isn’t all bad, however, as hopefully, it will encourage mining operations to look into more environmentally friendly forms of fuel, such as solar power, or maybe hydroelectric power as China was using before. But it could also mean that several mining companies could leave the United States as well. New York may even find itself on a raw end of a deal if these large companies end up going to another state nearby rather than staying in New York as these mining operations bring in some much-needed tax dollars.
What Does the New York Ban Mean For Crypto?
While you may be panicking, the New York ban on cryptocurrency isn’t but a blip on the map for the technology. Remember, this ban only affects one state and only a few cryptocurrencies. Many blockchains have already anticipated problems like this and have begun switching to the more environmentally friendly proof of stake consensus method. The most famous of which is Ethereum, which hopes to have completely switched over by the end of this year.
Of course, the main cryptocurrency that can’t be changed is Bitcoin, and this bill will affect it—it already has as the price of the coin fell on June 2nd when this bill was announced. But this is a temporary fall. Bitcoin miners won’t stop, they will innovate. Whether that innovation means moving to another state or funding another type of energy, they will find a way to continue, as this cryptocurrency isn’t going away any time soon.
Can Bitcoin Change to Proof of Stake?
Although it was easy for Ethereum to change to a proof of stake, Bitcoin doesn’t have this same luxury. Mainly because the creator of Ethereum, Vitalik Buterin, is still in the picture, while the inventor of Bitcoin, Satoshi Nakamoto, is not. This makes it difficult to make large changes to the Bitcoin software as all the miners must come to a consensus in order to do so.
Proof of work mining is still the safest and most secure type of mining, and even though it is bad for the environment, most Bitcoin supporters stand by the method and will not vote to work towards changing the blockchain to a different consensus method.
Overall, the bill on the table in New York isn’t a good thing for Bitcoin, but it isn’t a bad thing either, as it might force some much-needed innovation in the electricity world in the United States. Regardless of if this bill passes or not, you can guarantee Bitcoin miners aren’t going to quit and they will find a way to maintain their operations. It’s only a matter of time before they find a solution.