A Study of Three Regulatory Policies for Bitcoin Mining

The paper presents a detailed analysis of Bitcoin mining in China, and models Bitcoin’s carbon emission by combining Bitcoin’s PoW consensus mechanism and issuance principles, and proposes a model called BBCE (Bitcoin blockchain carbon emission model).

A Study of Three Regulatory Policies for Bitcoin Mining

The cryptocurrency market is still running in the bottom range. the June 2 symposium ended without a word, no short or positive. English proverb, no news is good news. The rumors are more positive in attitude. Bitcoin pulled up 5 points in the evening, back above 38,000, still in the 35-40 low range. The less determined are still hesitating, waiting and wandering, the long-termists have been quietly moving forward through thick and thin.

Regarding many people’s concern about the direction of the regulation and control policy of the mining industry, let’s take a look at this research paper published in Nature Communications (Nature Communications, 2019 Impact Factor = 12.121) on April 6th of this year. The paper is titled Policy assessments for the carbon emission flows and sustainability of Bitcoin blockchain operation in China. Policy assessments for the carbon emission flows and sustainability of Bitcoin blockchain operation in China. The paper is the result of a joint study by researchers from the School of Economics and Management and the School of Mathematics and Systems Science at the Chinese Academy of Sciences, the Department of Economics and the Department of Statistics at Cornell University, the Department of Earth System Science at Tsinghua University, China, and the University of Surrey Business School and the Centre for Predictive Science at the Chinese Academy of Sciences, UK.

The paper presents a detailed analysis of Bitcoin mining in China, and models Bitcoin’s carbon emissions in the context of Bitcoin’s PoW consensus mechanism and issuance principles, proposing a model called BBCE (Bitcoin blockchain carbon emission model). The model is used to predict three possible regulatory policies, called MA (Market Access), SR (Site Regulation) and CT (Carbon Tax), and concludes that MA and CT policies, i.e., raising the market access threshold, engaging in one-size-fits-all, and imposing a carbon tax, are not conducive to achieving the carbon reduction goals of the Bitcoin mining industry in the long run. Only SR location regulation, i.e., “persuade” or “suggest” mines to relocate from coal to hydroelectric areas, as the paper suggests, in order to achieve carbon emission reduction goals while maintaining an increase in electricity consumption This is a more feasible and effective policy.

The paper points out that China, as a signatory to the Paris climate agreement, must meet its commitment to reduce carbon emissions per GDP by 60% by 2030 compared to 2005. And the potential impact caused by the bitcoin mining industry can no longer be ignored. China currently provides over 75% of Bitcoin’s computing power (by mining pool). According to the Cambridge University Bitcoin Electricity Consumption Index, Bitcoin consumes 128.84 TWh of electricity globally, more than Ukraine and Argentina.

Simulations suggest that in China, Bitcoin’s power consumption and carbon emissions peak in 2024, placing it among the top 10 carbon emitting industries in China. The forecasted 2024 Chinese bitcoin electricity consumption of 296.59 TWh exceeds Italy and Saudi Arabia, and measured carbon emissions of 130 million tons, with carbon emissions of 10.77 kg per dollar of GDP. Thus, the paper concludes that bitcoin mining is a “potential barrier” and a “threat” to China’s carbon reduction goals.

A few interesting points from my reading of the paper.

First, in the paper’s model, the proportion of thermal power is 40% and the proportion of hydropower is 60%. The parameters of the three policies are MA, which cuts half of the mines without differences, SR, which cuts 40% of thermal power by half and transfers it to hydropower, and CT, which doubles the carbon tax. I think the ratios are more in line with objective reality and the parameter settings are more scientific.

Secondly, the thesis argues that currently the state does not have a separate account (account) for the Bitcoin mining industry to be regulated, and suggests that it be set up for better control.

Third, when talking about the MA one-size-fits-all policy, the paper makes a very interesting statement that profitable miners with low efficiency are forbidden to enter the Chinese Bitcoin market in the market access (MA) scenario, and policy makers are forced to maintain the network stability of Bitcoin blockchain in an efficient manner. The implication of this statement is that under the market access regulation policy, inefficient miners who do not meet the standards are banned from entering the Chinese Bitcoin market, and policy makers are forced to maintain the network stability of the Bitcoin blockchain in an efficient manner.

If the top brass heeds the advice of this thesis, then there is still a lot of care and consideration to be given to the stable operation of the Bitcoin network. After all, according to the thesis, Bitcoin is a very successful and important global application of the blockchain. Perhaps the bathwater and the baby, don’t splash together.

If the paper’s findings are heard and adopted by the top brass, then the logic of this regulation of bitcoin mining is based on the strategic requirement of carbon emission reduction, and will take a professionalism and scientism, precise policy, targeted screening of the different situations of thermal and hydropower mines, and separate policy implementation, focusing on cracking down on high carbon emission thermal power mines and prompting their relocation to low carbon emission hydropower areas. And this is the most effective policy.

Attachment: Link to full paper: https://www.nature.com/articles/s41467-021-22256-3

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/a-study-of-three-regulatory-policies-for-bitcoin-mining/
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