Good Morning Everyone,
The EU parliament voted yesterday on a bill titled “Cryptocurrencies in the EU: new rules to boost benefits and curb threats”.
Included in this bill was a a rule relating to Proof-Of-Work mining which reads:
“ 1. Crypto-assets shall be subject to minimum environmental sustainability standards with respect to their consensus mechanism used for validating transactions, before being issued, offered or admitted to trading in the Union.
Crypto-assets that are issued, offered or admitted to trading in the Union before [please insert the date of entry into force of this regulation] shall set up and maintain a phased rollout plan to ensure compliance with such requirements, in accordance with the conditions and criteria referred to in paragraph 3.”
Essentially this was a direct attack on PoW mining as an acceptable method of achieving consensus.
The notion that a regulatory body can ban PoW is frankly laughable, and demonstrates how far behind these people are, and how deeply they have descended into some kind of clown-world psychosis.
The process that we call Proof-of-Work is simply the process of a computer guessing random numbers. That is literally it. So the EU were proposing they could potentially outlaw the use of a computer to guess random numbers? If you’re not familiar with PoW, how it works and why it’s essential - I wrote about it previously here.
What is obvious at this point is that the EU can not really ban PoW or force bitcoin to change its consensus mechanism - remember, bitcoin is an inanimate object - rather all they can really do is ban themselves from the bitcoin network.
We really are at peak stupidity (in terms of governance) when we have people that have no technical capabilities voting on something, that they 1) clearly do not understand and 2) is as fundamentally absurd as banning guessing numbers.
If you want to read more on some of the specifics there is a great thread from Patrick Hansen that covered the situation in some detail.
In what is essentially inconsequential for bitcoin, the proposal was voted 30-23 against. Keeping the provision out of a draft of the proposed Markets in Crypto Assets (MiCA) framework.
Interestingly, this kind of a proposal if accepted could hurt something like Ethereum which still runs using PoW (despite planning for years to transition to a PoS model) as they have a centralized body of humans (the Ethereum foundation) where regulators could attempt to impose such a change. Bitcoin on the other hand being truly decentralized, does not. Thus any such attempt is futile.
The larger theme that stands out to me is that of energy usage. It seems obvious at this point that some nation states are at war with bitcoin, and the energy usage is the battle ground and current attack vector of choice.
This is of no major surprise given that bitcoin empowers the individual and disincentives the political rent seeking that many of the pseudo-elites in power have become accustomed to.
Ultimately the choice each nation-state will need to make is not whether or not they approve of the consensus mechanism or any other protocol level development, but whether or not they want to ban their citizens from plugging into the most powerful monetary network in human history and disproportionately harm their society as a result. If they were to ban it, not only would they harm their society in the short term, it would most likely be the catalyst for significantly higher prices in whatever local shitcoin currency as a result which would only amplify the problem, as we saw in the US when they banned gold in the 30’s.
Ultimately, scarcity drives value and eventually everyone will capitulate. The EU could never really ban PoW mining and infact situations like these just further highlight how far in front bitcoin really is.
Open networks win.
Hope you have a great start to your week. I’ll talk to you tomorrow.
AK
