https://ift.tt/3IiMmBE. Government Agencies and Ripple’s University Blockchain Research Initiative Have Teamed Up Against Proof-of-Work Mining

Jan 19, 2022 at 14:00 UTC

The Department of Treasury, National Bureau of Economic Research, and Ripple’s University Blockchain Research Initiative published a paper in May last year that analysed the effect of cryptocurrency mining on local electricity price increases. 

The document, authored by Berkeley researchers Matteo Benetton, Adair Morse, and Giovanni Compiani from the University of Chicago focused on effects observed in mining cryptocurrencies. Their studies found that “cryptomining leads to the representative household and small business in NY paying $71 and $144 more in their electricity bills per year.”

The figures above are determined by using the amount of power consumed prior to 2017 to what was consumed in 2020 and early 2021. 

The article also suggests that mining will boost tax revenue for local governments stating that “higher tax revenues recover approximately 15% of the losses for households and small businesses.”

The trio of researchers concluded by stating “We estimated the local community’s demand for electricity and used this to quantify the welfare losses incurred by the community as a result of higher electricity prices. We find that the magnitude of the welfare losses is large.”

These results were also determined with their case study in China. The main difference between China and Upstate New York are the fixed prices for electricity costs. In contrast, U.S. electricity prices will vary. Local economies in China were also boosted by increased tax revenue from bitcoin mining.

The re-circulation of this document occurred after a tweet from Nic Carter stating “we’re at the point where the government is teaming up with ripple to create paid opposition research on Bitcoin mining”.

Ripple’s Track Record

Ripple’s XRP token does not rely on Proof of Work but on a consensus mechanism that requires banks to confirm transactions and account balances. This type of network is very similar to ACH or SWIFT payment. Other consensus mechanisms also exist. Proof of Stake being one that is often posited as a like-for-like alternative to Proof of Work. Proof of Stake proponents often fail to mention the trade-offs involved in implementing a proof of stake system when compared to proof of work.

Bitcoin’s Proof of Work mechanism has faced a barrage of criticism from climate advocates, politicians, Wall Street, and founders of other cryptocurrencies. However, many of these detractors are incentivized to paint a negative picture of bitcoin and its consensus mechanism as they stand to benefit from adoption of alternatives. 

In December of 2020, the SEC charged Ripple Labs Inc. and two of its executives for an unregistered securities offering. By failing to register their ongoing offer and sale of XRP tokens, adequate disclosures to retail investors were not met. The lawsuit has been ongoing since then and is planned to be settled in the latter half of 2022. 

Meanwhile, Ripple founders continue to sell their XRP holdings as evidenced by Co-Founder Jed McCaleb’s recent sales.