Bitcoin News
Banning Proof of Work? – Bitcoin SV solves the EU’s concerns about energy efficiency
The EU has decided not to ban Proof of Work. While Bitcoin’s inability to scale persists – Bitcoin SV has already solved the EU’s concerns about energy efficiency.
The EU’s decision not to ban the Proof of Work consensus mechanism is a decision to not smother innovation in its cradle. It allows time for blockchains like the BSV blockchain to prove their value and utility. However, this is time on probation only, as there are plans to readdress the issue by 2025 latest. The reason is that the underlying problem – Bitcoin Core’s (BTC) inability to scale – still persists.
Energy inefficiency – a Bitcoin Core problem
The problem of energy inefficiency is not inherently a problem of proof of work by itself. Instead, it is a problem that primarily concerns Bitcoin Core (BTC). The BTC community decided to change the underlying Bitcoin protocol to limit the maximum block size, throttling the transaction throughput of the network – a drastic change to the original protocol in favor of an off-chain solution called Lightning network. However, there is reasonable doubt that the Lightning network will ever be able to scale. As is, the BTC community decided to opt out of a working consensus mechanism in favor of an alternative that is supposed to scale in the future.
Through BTC, the public is exposed to a half-baked version of Bitcoin with a poor user experience and an efficiency that is disastrous in comparison to the original protocol implemented by BSV. This shows both in absolute and relative numbers. The total energy consumption of the BTC network per day was 140,462 MWh compared to BSV´s 262 MWh (data from 20th April 2022 – coincarboncap.com). BSV has a much lower market capitalisation and is much less discussed in the media but it still processes more transactions than any other network. This makes it a much more relevant blockchain when it comes to real-world utility for enterprise and government applications.
BSV scales and becomes more efficient the more it is used
Bitcoin SV’s utility is represented by the fact that the BSV blockchain processes far more transactions than other blockchains on a daily basis. BSV accounts for a majority of all transactions among the top 10 blockchains (transactions over the last 24 hours – 11th April 2022). This translates to a much better efficiency in both energy consumption and CO2 produced. BSV handles about 20,996.5 transactions per MwH used and produces only 0.1g of CO2 per kB transferred. This is in stark contrast to the BTC network, which processes only 157 transactions per MwH and produces 2,316.5 g per transferred kB.
This aligns also with the findings of an independent report by MNP which compared the energy efficiency of BTC, BCH and BSV:
‘BSV is more efficient due to block size and number of transactions (throughput) currently available on the network and limitations of other protocols. So long as the size or number of transactions on the BSV network exceeds the limitation of the other protocols, BSV is the most efficient in this group,’ the report states.
‘As more businesses and consumers adopt blockchain technologies, and regulatory requirements towards green and renewable energy continue to become more stringent, it is important to understand the impact blockchain has on the environment — especially related to the energy consumption issue.’
The energy efficiency of the BSV blockchain improves as transaction throughput increases as the report notes:
‘Transactions are the ultimate measure of throughput. The number and size of the transactions in a block will affect the size of the block. BTC has a strictly limited block size approaching 4MB. BCH has a much more permissive limit of 32MB. BSV is unbound by block size. Since mining is what consumes energy, and blocks are the product of mining: the more transactions in a block, the lower the energy consumption per transaction. Similarly, the larger a block can be (measured in megabytes), the lower the energy consumption per megabyte,’ the report states.
In other words, the energy efficiency of Bitcoin SV increases the more businesses, governments and individuals use the blockchain. This negative proportionality regarding transactions and average energy cost is an amazing feature of Bitcoin SV that should not be taken for granted. The community behind Bitcoin Core discarded this feature with the fatal decision to scale off-chain.
Proof of Work: an invaluable consensus mechanism – if used in the right way
Scaling with larger blocks will become more and more urgent in the future, as the subsidies for mining are becoming smaller due to the halving process in which the reward for successfully mining a block halves over time. This energy-efficiency is accompanied by the cost-efficiency from the user perspective. The average transaction fee is predictably low on the Bitcoin SV network and often remains below $0.01. If realised in the way it is implemented in the original vision of Bitcoin, proof of work is invaluable as it is the only tried and tested consensus mechanism that is needed to run a public blockchain which is regarded as a key technology for a new data economy that will support other technological innovations like AI, IoT, VR and Web3.
Bitcoin SV scales already and is used by companies, organizations and authorities as a public ledger for a variety of purposes. As a universal source of truth, it is important that transactions on the blockchain are predictably low to allow usage for micropayments, smart contracts and other applications from healthcare data, IoT, AR/VR and many other sectors connected to the data economy.
Proof of work is a functioning mechanism that is proven to be secure and reliable. Realised through the BSV blockchain, it can serve as vital infrastructure of Web3 and thus be a part of useful innovations with a yet unforeseen amount of use-cases.
