This week, the future of cryptocurrencies has teetered on knife edge as bad news flooded in from all opposing sides. Amongst stern comments from Christine Lagarde, the biggest blow came in the form of Google following Facebook‘s suit by banning crypto adverts, not surprisingly, Bitcoins value once again steadily dropped. Whilst some might’ve thought that surely the worst must be over by now, today‘s most recent blow sees America‘s first city inflict an outright ban on cryptocurrency mining. The battle is far from over.
Plattsburgh, New York became the first city to ban Cryptocurrency mining for 18 months after the city council ruled on Thursday night‘s monetarium, reiterating the governmental bid to curtail and regulate the power of the cryptocurrency global trade. The law has entertaining reasoning behind the judgement, pointing out that the city’s low costs energy has brought the miners flooding to Plattsburgh and then quickly suggested the ban will give the community extra time to establish yet more regulations.
‘It is the purpose of this Local Law to allow the City of Plattsburgh the opportunity to consider zoning and land use laws and municipal lighting department regulations before commercial cryptocurrency mining operations results in irreversible change to the character and direction of the City‘.
The notion of cryptocurrency mining is paramount to the progression of digital currencies and serves as the backbone which props up the entire system. A group of miners essentially interpret the blockchain, verify the legitimacy of transactions and resolve and technicalities and encryptions on the block and as a result receive digital currency as payment for ensuring the steady flow of the blockchain. Their fees depend on the amount of computer work that was completed by the miners and essentially new currency is created for them. The process is also no easy feat, described by Forbes as ‘solving maths puzzles‘, the entire community hinges upon a smooth process.
The process doesn‘t come without its setbacks however, and requires a powerful server and thus a steady amount of electricity, which is where this law apparently centres. According to Plattsburgh Mayor, Colin Read, the city saw electricity bills rise because as a collective, so much energy was being used. Forbes explained that Bitcoin mining uses 4 gigawatts of energy, ‘equivalent to three nuclear reactors’ production levels‘, however the hike in prices, experienced in January also chimes with the usual winter surge in energy worldwide.
Although the ban is set to only affect a single American city – and one which boasts about having the lowest electricity prices in the country, at that – the restrictions do bring into question a number of technicalities and have also seen the crypto community scoff at the announcement. The tariffs that the council hopes to impose on miners – in a bid to prevent the movement altogether – serve as just a temporary solution to the heightened energy use. Secondly it is yet to be seen how such a ban would be effectively orchestrated and monitored and what repercussions Miners would face, if any.
This new announcement follows the footsteps of China, though the country recently hinted at a prospective state-run digital currency it has already attempted to carry out further limitations on energy by essentially banning cryptominers. However as China demonstrated, it wasn‘t simply energy fears that led to a decision that was also fuelled with the desire to possess more control and thwart the rate of fraud and crime utilised by the online currency world. It‘s doubtless that the decision in Plattsburgh might resemble a similar train of thought in the U.S.
It is without question that energy use is an important and concerning feature of digital mining, and a topic that the community should be trying to address as developments move forward. However the bigger picture here, in reality, is that central government bodies have slapped a ban on mining as it figures out how to regulate, charge and eventually benefit from cryptocurrencies. The likes of the Winklevii predicting that regulations are seeping into the future of cryptocurrency, and it certainly won‘t be long before we hear of other cities orchestrating a similar ban – now the question is if a compromise, and working relationship, can be forged between the legal and cryptic worlds.