Frequently asked questions about energy-intensive mining of cryptoassets

What is the problem with Proof of Work?
The method requires enormous amounts of electricity. To mine, all participants in the blockchain simultaneously conduct extremely capacity-intensive guesses of a text string, whereupon only one of the guesses is used when new transactions are to be written into the blockchain. All other capacity-intensive guesses are thrown away.

But other financial systems also require a lot of electricity?
Yes, but in comparison to other payment solutions, Bitcoin's total energy consumption is much, much higher. Bitcoin use an estimated 105-130 TWh/year. The same services that Bitcoin offer can be offered with newer and more efficient blockchain techniques.

Why a ban and not some form of carbon dioxide tax or similar means?
We have carefully evaluated all of the various means for reducing the climate impact and together with the Swedish Environmental Protection Agency reached the conclusion that a ban against the Proof of Work blockchain technology would give the best effect. That is why we want this ban proposal to be evaluated by the EU.

Is it possible to forbid Proof of Work?
Yes, both the EU and Sweden's government have previously banned technologies that are judged to be harmful and dangerous for the environment, for example Freon, which is used in cooling processes. But to have a global impact, coordination at the EU level is required, and the ban also needs to be taken up by international bodies to achieve its full effect.

If the method is banned here but used in other countries, won't that mean that the ban is of no practical value?
For the EU and Sweden, it will be very valuable in that our renewable energy will be fully available to the climate transition of essential services. We hope that this will put pressure on other countries to implement similar measures.

Isn't it better for the mining to be carried out in Sweden than in parts of the world that use a lot of fossil fuels?
Activities that are harmful to the climate should not be conducted in Sweden, even if they can be carried out in a less harmful way here. Our renewable energy is needed for the transition of essential services.

Has the ban been recommended or implemented anywhere else?
China banned mining of cryptoassets in May 2021, and Iran and Iceland implemented temporary bans in 2021 due to a shortage of electricity. The OECD and the European Commission have recommended that the use of blockchain technology with low or no emissions be promoted. USA, Norway and Iceland are also discussing how the environmental impact can be reduced.

What alternatives are there to Proof of Work?
Byzantine Fault Tolerant and Proof of Stake are examples of methods that are more energy efficient. The cryptoasset Ethereum's change from Proof of Work to Proof of Stake in September 2022 reduce their energy consumption by 99.99 per cent with maintained functionality. Proof of Stake uses a consensus method where one actor at a time performs the calculation that is required while the rest of the actors only verify that the calculation is correct.

How do FI and the Swedish Environmental Protection Agency know that the alternatives to Proof of Work are just as good?
We naturally cannot guarantee this, but there are today no new cryptoassets that are based on the first generation's blockchain technology Proof of Work. Some of these newer cryptoassets now have a market valuation that is on par with bitcoin's valuation from mid-2020. And the fact that the Ethereum network decided to change to Proof of Stake is also an proof that it is implementable and that the shift in technology is necessary. The Ethereum network switched method due to capacity and security reasons, but energy efficiency also factors in. This can be seen as evidence that other consensus methods do work just as well.

But is the problem so big? Don't they say that Christmas lights also require a lot of electricity?
The electricity that the largest cryptoasset Bitcoin is using right now is estimated to be as much as half of all data centres in the entire world together, or one half per cent of all electricity globally. And this is at the same time as there is a noticeable shortage of both fossil-based and renewable energy. All activities therefore need to be made more energy efficient. This applies to both Christmas lights and cryptoassets.