European Securities Regulatory Authority proposes ban on proof-of-work digital currencies

Erik Thedéen, vice-president of the European Stock Exchange, described the way bitcoins were mined as a risk to achieving the goals set to tackle climate change.

To Report CryptoSlit, the European Securities and Exchange Commission, is concerned about the dangers posed by bitcoin mining to achieve the goals of the Paris Agreement. In this agreement, governments pledged to tackle climate change.

In an interview with the Financial Times, Eric Tadayon said that the amount of renewable energy consumed in the process of extracting digital currencies has increased significantly. He added that the current way of extracting digital currencies has also become a national issue for his country Sweden.

Tadayon also said he was not in favor of a total ban on digital currencies; Rather, his proposal is to ban only digital currencies based on the Proof of Work (POW) algorithm. Religiously, the ban will lead the digital currency industry to use a stock-proof model that consumes far less energy.

The extraction of digital currencies has become a big business in the last decade and there is no sign of a slowdown. Despite the ban on the extraction and exchange of digital currencies in China, one of the largest digital currency markets, the computing power of extractors reached unprecedented levels at the end of last year.

Proof of work versus proof of stock

Proof of work is the process by which a blockchain authenticates valid blocks that typically contain transactions. Extractors solve complex problems that require high processing power to validate transactions. They compete to solve these problems and are rewarded with digital currency.

In the proof-of-work model, each blockchain participant can verify transactions. This requires a lot of energy.

On the other hand, in the stock proof (POS) model, fewer people are needed to confirm the exchanges. People in these blockchains share their digital currencies to create validation nodes to validate transactions.

Which of these two mechanisms of consensus is better?

Both consensus mechanisms are used in different digital currencies, and both have proven to be somewhat successful. However, there are strengths and weaknesses in both mechanisms.

Also read: War of extraction and proof of stocks; Is proof of work ultimately marginalized?

In the proof-of-work mechanism, although the cost of energy and extraction equipment is higher, it is instead more secure; Because a malicious attacker has to acquire a lot of resources to be able to control the authentication of transactions by controlling 51% of the network. The disadvantage of this method is the costly and slow scalability of this method; Because the amount of energy consumed and the equipment needed increases over time.

Proof-based blockchains that use digital currencies or tokens as validators have high speed and scalability; Because they do not need energy and extraction equipment. However, the disadvantage of this blockchain is that it is easier to gain network control. All it takes is more money.