Bitcoin Network Ireland, a not-for-profit organisation based in Ireland, is pleased to participate in this consultation process. Our organisation is dedicated to providing informed insights and guidance on Bitcoin to citizens, policymakers and regulators within Ireland and by extension the EU. In this submission, we address the Markets in Crypto-Assets (MiCA) Consultation Paper – 2nd Package, focusing specifically on the treatment of proof of work (PoW) consensus mechanisms within the proposed regulatory framework.

Our objective is to elucidate the positive impacts of PoW, rectify perceived inaccuracies in the current draft, and propose amendments for a more balanced and effective regulatory approach. This submission includes targeted comments on specific questions, referencing the “Technical Standards specifying certain requirements of Markets in Crypto Assets Regulation (MiCA) – second consultation paper, dated 5 October 2023” (the “Paper”).

In preparing this submission, we acknowledge and express our gratitude to Bitcoin Policy UK (BPUK) for their foundational work, which has significantly informed our approach. The collaboration and shared insights with BPUK underscore the collective effort within the growing European Bitcoin community to engage in meaningful dialogue with regulatory bodies.

Initial Abstract

1. We note that the paper and MiCA generally reference and require disclosure of ‘adverse’ effects and impacts of ‘consensus mechanisms used for the validation of transactions in crypto-assets [that] might have principal adverse impacts on the climate and climate and environment due to high energy consumption and greenhouse gas emissions.

2. We focus our responses primarily on section 3 of the Paper. In this context, we cite paragraph 3.1: “The consensus mechanisms used for the validation of transactions in crypto-assets might have principal adverse impacts on the climate and other environment-related adverse impacts. Such consensus mechanisms should therefore deploy more environmentally friendly solutions and ensure that any principal adverse impact that they might have on the climate” and paragraph 3.2.1: “ESMA understands that the primary objective of a consensus mechanism is to validate transactions in crypto-assets, and that the issuance of a crypto-asset can be the ultimate result of this operation of validation.

3. We wish to draw attention to the inaccuracy of the above [core] statements. ESMA fundamentally misunderstands how the Bitcoin network functions. The miners subject to the consensus mechanism do not ‘validate’ transactions, nor does the mining process. In absolutely no sense do miners ‘validate’ transactions. It is regrettable that the Regulation contains such a fundamental error in its drafting, particularly in its opening statements and it is hoped that this will be corrected in future amendments. Nodes validate, and miners determine the sequence of transactions.

4. Our submission emphasises the need for the Regulation to acknowledge and mandate the disclosure of the POSITIVE impacts of consensus mechanisms, particularly proof of work (PoW). We highlight PoW’s significant benefits in methane mitigation, demand response, grid stability, and in rendering new renewable or sustainable energy projects economically viable from inception, even before grid connection. We advocate for the Regulation to include requirements for disclosing these positive impacts, as they offer substantial, yet often overlooked, opportunities for the EU in achieving net-zero goals and potentially a carbon-negative grid. Our submission will present relevant examples to substantiate this perspective.

Energy Consumption Perspective: Bitcoin’s energy usage is inconsequential, with its peak energy consumption representing less than 0.1% of global energy consumption (University of Cambridge). This is a small fraction compared to the world’s total energy usage, which exceeds 141,400 TWh annually. Furthermore, research from the University of Cambridge indicates that Bitcoin mining in the EU accounts for less than 6.67% of global hashrate, a figure that is grossly inflated by VPN and proxy usage from China. In comparison, the United States leads with 37.84%, followed by China at 21.1%, Kazakhstan at 13.2%, Canada at 6.5%, and Russia at 4.66% (University of Cambridge).

BTC mining consumes only a fraction of the energy required to power industries, such as construction (3.77%), finance and insurance (4.45%), shipping (5.41%) and aviation (5.43%). It even takes nearly 2.6 times the electricity to mine gold than to secure the Bitcoin network (Bitcoin Mining Council, 2021).

Efficiency and Wasted Energy: A notable portion of Bitcoin’s energy consumption is sourced from energy that would otherwise be wasted. Additionally, Bitcoin’s network is progressively becoming more energy-efficient.

Long-term Energy Usage Outlook: In scenarios where Bitcoin achieves widespread success, its energy consumption, though increasing, would still remain a minor fraction (several tenths of one percent) of global energy usage. Conversely, limited growth in Bitcoin would likely result in a decrease in its energy consumption.

5. We are concerned about the ESMA’s approach to regulating Bitcoin, a technology we believe is not yet fully understood in its complexity and potential. Equating Bitcoin’s significance to that of the telephone, the internet, and AI, we caution against premature regulation that could hinder its integration into the global economy, echoing Europe’s past regulatory missteps in technology. Our submission advocates for a nuanced, forward-looking regulatory framework that acknowledges Bitcoin’s economic potential and its emerging role in environmental sustainability, particularly in energy efficiency and grid stability. Such an approach could help Europe regain its status as a leader in technological innovation, steering clear of stifling regulations that have historically impeded progress.”

6. In the following responses, we offer in-depth commentary and additional references. We present various examples demonstrating how Bitcoin mining can positively influence sustainability, contribute to net zero goals, and generally reduce the global carbon footprint:

(i) Mini Hydro plants being subsidised by Bitcoin mining in Kenya:

(ii) Bitcoin mining energizing sustainability through green innovation:

(iii) Farms being able to reduce methane emissions using Bitcoin mining: 

(iv) Nation-state mining being undertaken by Bhutan, in a sustainable way and being used to develop energy independence: 

(v) KPMG producing a detailed report relating to Bitcoin’s role in the ESG imperative: 

(vi) Marathon Digital Holdings reducing methane emissions from landfill gas using Bitcoin mining: 

(vii) Cornell University researchers recently investigating planned renewable energy projects across the U.S. and calculating each project’s potential to profit from bitcoin mining during the pre-commercial development phase, when a wind or solar farm is generating electricity, but has not yet been integrated into the grid: ”From Mining to Mitigation: How Bitcoin Can Support Renewable Energy Development and Climate Action” (

(viii) Bitcoin miner Marathon tests BTC mining with methane gas from a waste landfill site. The 280 Kilowatt (kW) pilot project in Utah is already operational and directly reducing emissions.

(IX) Biomethane derived from local pig slurry and maize, powers mining operations, slashing the carbon emissions in the process. 

(X) Bitcoin fixes water shortages in the middle east by accelerating the build-out of new solar energy capacity, Bitcoin mining can help UAE to transition to renewably-powered desalination, meaning that UAE can meet its water security goals without endangering its emission-reduction goals. 


Do you agree with ESMA’s assessment of the mandate for sustainability disclosures under MiCA? 

With regards to new cryptocurrency projects initiated by identifiable teams or individuals, we concur with the principle that sustainability disclosures should be a fundamental component of the MiCA framework. Whilst disclosures are important, they should not be overbearing, so as to prevent European companies being competitive globally.

We note that the existing regulation and its related documents focus exclusively on the ‘adverse’ impacts of cryptocurrency mining, a perspective we find too limited and, in our opinion, misguided. This approach fails to recognize the fundamental role of proof of work Mining in securing the property rights of asset holders, be they individuals, companies, or other entities.

Such a narrow viewpoint also neglects the considerable ‘positive impacts’ of Bitcoin mining. These benefits extend beyond the reduction of greenhouse gas emissions, particularly methane, to include the pivotal role this industry can play in the development of sustainable electricity grids, generating income for isolated power sources, among other advantages. This perspective risks missing the potential for the Bitcoin network to evolve into a carbon-negative entity in the future. We intend to explore these opportunities more thoroughly in our following responses and strongly recommend that disclosure requirements should cover both the negative and positive impacts of Bitcoin mining.

Bitcoin mining is a zero-emissions business, and Bitcoin miners themselves emit zero CO2. The issue that we as a society face is how we generate our electricity, and whether such generation is via sustainable means or not. As we will note below, Bitcoin mining is uniquely placed to support and foster the growth of a sustainable grid and we hope that the Union will not miss the opportunity to take advantage of this fact.

The surge in production and consumption activities, particularly since the Industrial Revolution, is widely acknowledged as a key factor in the increase of Greenhouse Gases (GHG) in the atmosphere. Inflation exerts significant growth pressures on economies, notably on public companies bound by quarterly growth obligations to their shareholders. This dynamic positions inflation as a primary driver of CO2 emissions. A recent study highlights this link, showing that a 1% change in GDP can lead to a 0.072% change in CO2 emissions. The demands inflation places on consumption are substantial and directly impact emission levels.

Bitcoin presents a deflationary alternative for two main reasons: it is a technological innovation and its supply is capped. As Bitcoin’s adoption continues to grow globally, it could address the issue of inflation, thereby reducing the global imperative for growth at any cost. This shift could potentially lead to a decrease in CO2 emissions, aligning economic practices more closely with environmental sustainability.

Measuring the second-order deflationary pressure resulting from Bitcoin’s properties involves a complex analysis of various economic and market factors. Analysing the velocity of Bitcoin transactions vs Euro transactions – how frequently Bitcoin is traded or used for transactions. A lower velocity might indicate hoarding, which can contribute to deflationary pressure. Whilst this is a crude measurement and difficult to account for, it would provide a meaningful insight to its deflationary nature. We encourage patience from the ESMA to allow the deflationary pressure to grow, which comes with increased adoption.

Q2: In your view, what features of the consensus mechanisms are relevant to assess their sustainability impacts, and what type of information can be obtained in relation to each DLT network node?

As noted above, in its practical application the Regulation should attempt to distinguish between a new cryptocurrency project, launched by an identifiable group of persons (natural or non-natural) and subject largely to the founder team’s guidance and direction, and Bitcoin – the most well-established and the only truly decentralised and distributed cryptocurrency system. Most simply, Bitcoin should be viewed as a neutral internet money, absent a team and a founder, while all other cryptocurrencies should be viewed as venture capital tech companies, and regulated accordingly.

Nodes vs Miners:

In the case of Bitcoin, it is functionally impossible to request information from or in relation to ‘each DLT network node’. We are concerned that this terminology in the Regulation demonstrates a misunderstanding evident on the part of ESMA as to the way in which the Bitcoin network functions (please refer back to our description in the abstract above).  As we set out, Bitcoin nodes are not miners and while they maintain copies of the distributed ledger and validate transactions, they do not timestamp these transactions or determine their order via the mining process. It is estimated that there are currently circa 50,000 global nodes on the network, distributed across the globe and across dozens of jurisdictions. Many of these nodes are run by individuals at home and as a starting principle it should be understood that it is completely infeasible to attempt to gather any information (other than freely available transaction data) from these nodes or from the people who run them. Individuals and hobbyists build nodes with simple little Raspberry Pi’s and old computers. To enforce sustainability reporting upon citizens is misguided and unenforceable.

Miners, on the other hand, can and do provide information to regulatory bodies all the time. Many are listed entities and already subject to market standard disclosure requirements as demanded by the rules of their respective listing authorities. 

Proof of work systems: 

Every technology initially has a carbon footprint and Bitcoin is no different. If Amazon economically replaced all of its warehouse employees with robots, carbon accounting would determine Amazon’s higher energy bill as an environmental concern. However, robots would be consuming raw energy more efficiently than humans receiving a salary to buy energy. Bitcoin automates global settlement in a similar manner to robotization — trading energy-intensive people for more efficient and cost-effective machines that have a more transparent energy bill.

As Nikola Tesla opined more than a century ago, efficiency savings from machines leads to human progress and an ever-increasing demand for energy. As efficiencies drive down costs, people have the ability to consume more resources. He believed it was imperative to keep humanity moving forward by enabling cheaper and cleaner forms of energy — a vision embodied by proof of work, but not proof of stake or legacy financial systems.

Recognising that Bitcoin does consume energy, and that energy consumption is becoming more “green”, we would suggest that the following features be requested in relation to consensus mechanisms in order to assess their sustainability impacts. We shall elaborate on each, and give suggestions as to the type of information that may be obtained, below.

Methane Mitigation: The extent to which the consensus mechanism is able to use or combust wasted or stranded methane gas either from landfill waste, agriculture, or in conjunction with the oil and gas industry.

Methane is a greenhouse gas that is about 84 times more potent by weight than carbon dioxide. Methane from human activities accounts for about 60% of overall global emissions; of those, about 95% come from the agriculture and food (41%), energy (35%), and sanitation and waste (20%) sectors [27]. Mitigating methane emissions offers one of the most promising opportunities to rapidly reduce carbon dioxide equivalent (CO2e) emissions. Meanwhile, the Environmental Protection Agency (EPA) has said that municipal solid waste emissions accounted for approximately 14.3% of all methane emissions in the United States in 2021.

There is a growing body of evidence to suggest that Bitcoin mining presents a unique opportunity to address and reduce the amount of methane that is released into the atmosphere. 

We refer to paragraph 7 of the evidence submitted to the United Kingdom Parliament below for additional summary details. We also refer to the recent detailed paper from the World Bank “Financing Solutions to Reduce Natural Gas Flaring and Methane Emissions” , which includes a very detailed case study on Crusoe Energy Systems, a Bitcoin mining and flexible compute company that is currently using Bitcoin mining to reduce greenhouse gas emissions in the form of methane, using modular generation units and mobile computing equipment. We highlight chapter 4 of the World Bank’s report in particular, and would also cite the recent video case study on Crusoe that was released by the World Economic Forum, further demonstrating the positive impact Bitcoin mining can have on sustainability efforts. We would suggest that Bitcoin mining firms be encouraged to disclose the extent to which their operations are currently mitigating methane emissions, together with estimates of the amount of GHG or CO2E that are mitigated as a result. 

Sustainable Grid build out: Sustainability reports should detail how a consensus mechanism can act as both an initial and ongoing purchaser for energy produced by new sustainable energy facilities, such as wind, solar, or other renewable sources. This is crucial for plants that are not yet connected to the grid or are not economically viable on their own. Currently, only Bitcoin, utilising the proof of work consensus mechanism, has demonstrated the capacity to fulfil this role at a significant scale. The ESMA is likely aware of the extensive delays many low-carbon projects face before grid connection, sometimes extending over a decade. We propose that mining companies should disclose the nature and scope of their involvement in sustainable grid integrations, specifying the types of energy sources used, such as wind, solar, hydro, or geothermal. This information could also provide valuable insights into areas where sustainable projects lack grid connectivity or infrastructure and are thus resorting to Bitcoin mining or flexible computing to maintain economic viability.

Grid Stability: The capability of a consensus mechanism to act as a guaranteed purchaser, both initially and continuously, is crucial for maintaining a stable power output from a sustainable grid during periods of both excess and insufficient supply. Bitcoin miners excel in this role by promoting the construction of sustainable grids with an intentional oversupply, ensuring their economic viability. Simultaneously, these miners serve as an ideal interruptible load, capable of relinquishing power back to the grid when demand surges. This dual function ensures a balanced and efficient energy distribution, supporting the overall stability and sustainability of the grid. The effectiveness of this system is measurable through the analysis of megawatts utilised by miners to stabilise load demand under grid stress. Additionally, the impact is observable in the moderation of spikes in marginal wholesale electricity prices.

Sustainable use of waste heat: Bitcoin mining, much like all data centre operations, produces a considerable amount of heat. Interestingly, many human activities necessitate heat, and the mining sector is increasingly finding ways to synergize with these activities. This integration offers a more cost-effective method of heat provision, as the expenses associated with generating the necessary heat can be counterbalanced by the revenue generated from the Bitcoin mining process. There are many such examples, several of which we set out here:

  1. Mining heat being used to dry timber:
  2. Breweries and distilleries using mining heat:
  3. Domestic heating appliances coming to the market for use in the home: or 
  4. A New York spa that is heating its pools with Bitcoin mining:
  5. People are heating their homes with Bitcoin mining equipment:
  6. Amid Europe’s energy crisis, this Dutch tulip farmer is swapping gas for heat from Bitcoin mining

Wasted and/or Curtailed Energy: wasted energy is energy that has been mechanically generated but goes unused, or underutilised. Approximately one third (50,000 TWh/annum) of the world’s energy usage (154,750 TWh/annum) is wasted. Global Bitcoin Mining consumes just 0.44% of the world’s energy and 0.14% of the world’s wasted energy. As a grid support mechanism, bitcoin mining has nascent signs of being a cost effective enhancement to grid robustness, and works in harmony with other grid support technologies like batteries. Indeed in other modern grid jurisdictions bitcoin miners are playing their part in making the local energy industry more robust and efficient, which is something that should be measured, compared, and if proven true, encouraged.

If and to the extent that a Bitcoin mining operation is involved in a comparable activity, we would recommend that relevant disclosures also be made as part of the disclosure process. If nothing else, this will illustrate the ongoing synergy between the Bitcoin mining industry, the energy sector, the heating industry and the financial services industry. It is relatively unique for such synergies to form and such disclosures will doubtless provide great insights into the ongoing and nascent innovation in the space. By way of additional example, certain Bitcoin miners are also diversifying their business into generative AI. It is likely that in the near future Bitcoin mining, AI computation and other data centre functions may be co-located, using the same power source and the same geographical data centres. The Union should therefore consider whether it is either equitable or economically sensible to block or restrict some forms of computing but not others, let alone whether this is even practically feasible.

Again, we emphasise that at present only the location agnostic and interruptible proof of work consensus mechanisms can offer these positive sustainability benefits. Proof of stake as a consensus mechanism is entirely dissociated from the real and tangible world and is essentially useless for any such purposes. 

Proof of work fosters renewable energy innovation and reduces waste harmful emissions, this is not a feature of proof of stake systems. As proof of stake is legacy technology, there is no upside to these systems, at least from energy consumption and emissions points of view.

Proof of stake systems: 

PoS systems, including Ethereum’s, currently consume less energy than Bitcoin’s PoW, but this dynamic may not be permanent. Ethereum’s Co-Founder, Vitalik Buterin has indicated that Ethereum might eventually surpass Bitcoin in terms of its security budget. This suggests an expectation that Ethereum’s validators could command greater energy-purchasing power compared to Bitcoin miners, given that a network’s capacity to buy energy is constrained by its security budget – derived from user fees, rewards, and revenues. In PoS, ‘energy’ consumption translates to the financial investment needed to acquire and stake Ethereum tokens. The security budget here is essentially the aggregate value of ‘staked’ Ethereum. As Ethereum’s value rises, so does the cost of validator participation, inflating the network’s overall security budget. This implies an indirect form of energy usage, as capital itself embodies ‘energy’. Capturing this second order energy usage is the challenge the Regulation must be acutely aware of.

Q6: Do you agree with ESMA’s description on the practical approach to assessing the sustainability impacts of consensus mechanisms? If not, what alternative approach would you consider suitable to assess these impacts?

“ESMA understands that the primary objective of a consensus mechanism is to validate transactions in crypto-assets, and that the issuance of a crypto-asset can be the ultimate result of this operation of validation. “ – ESMA is misinformed. We refer back to the description of the proof of work mining process in our Initial Abstract above and note that this terminology is once again erroneous.

“Proof of work consensus mechanisms, typically associated with incentives based on the use of computing power, can be deemed more impactful from a sustainability point of view.” – We refer to the Executive Summary, point 4: The Regulation to acknowledge and mandate the disclosure of the POSITIVE impacts of consensus mechanisms, particularly proof of Work. We highlight PoW’s significant benefits in methane mitigation, demand response, grid stability, and in rendering new renewable or sustainable energy projects economically viable from inception, even before grid connection. We advocate for the Regulation to include requirements for disclosing these positive impacts, as they offer substantial, yet often overlooked, opportunities for the EU in achieving net-zero goals and potentially a carbon-negative grid. Our submission will present relevant examples to substantiate this perspective.

We also highlight in particular the erroneous but often quoted ‘energy cost per transaction’ metric. This has been repeatedly debunked as a faulty indicator of energy use, not least by the University of Cambridge Judge Business School: “Bitcoin’s energy footprint is linked to block production, not transaction processing. This means that the number of transactions within a block has no impact on its energy expenditure: for a given difficulty level, a full block containing thousands of transactions has the same electricity footprint as an empty block with no transactions. The widespread misconception that Bitcoin’s energy consumption rises with a growing number of transactions seems to have its origins in the popular energy cost per transaction metric. Often used to compare the ‘energy efficiency’ of different payment systems, it is a purely theoretical measure that has little practical relevance without additional context.”

Given the fact that data is ‘purely theoretical’ and has ‘little practical relevance’, we would suggest that this erroneous metric is not used or requested as part of the disclosures. Instead, we might suggest some or all of the following sustainability requests to be made of DLT networks:

(i) How and to what extent are miners using sustainable, renewable, or stranded energy? (

(ii) Are the miners co-located with new renewable energy plants in order to act as providers of flexible load/demand response so as to balance the renewable energy grid? (

(iii) How and to what extent are miners using and repurposing the waste heat generated by the mining process, whether in heating pools, growing crops in greenhouses, or heating homes?

(iv) Are miners actively contributing to GHG reduction by mining using landfill methane or generated from anaerobic digestion on farms? (We refer to Crusoe and Scilling as cited in our response to Q2). 

The practical approach also fails to take Bitcoin’s innovative layer two solutions into account. As Bitcoin prioritises security and decentralisation on the base layer, confirming blocks every ten minutes. More expedient transactions are pushed to layer two’s (including; Liquid, Lightning, Fedimints, Ark). Layer two is Bitcoin’s P2P solution to scaling transactions by moving transactions off chain.

Q7: Do you agree with the definitions proposed in the draft RTS, in particular on incentive structure and on DLT GHG emissions? If not, what alternative wording would you consider appropriate? 

Any consideration regarding the incentive structure for Bitcoin miners should first and foremost consider that miners are commercially incentivised above all else to find the cheapest and most plentiful source of electricity possible. It is for this reason that they tend to co-locate near sources of surplus, wasted and stranded energy, for which there is no other buyer, and without Bitcoin mining cannot be commercially exploited. Additionally, as we have noted elsewhere in our responses, Bitcoin mining goes further and can incentivise further investment into solar and wind power generation. The latest data shows that the global Bitcoin mining industry’s sustainable electricity mix is 59.9%, making it one of the most sustainable industries globally. We would therefore support the ESMA proposal that detailed information regarding energy mix be requested, albeit from individual miners rather than in respect of the entire network, and then only those miners operating in a jurisdiction where the Regulation is applicable.

Given the increasingly important and well-documented trend for Bitcoin mining to reduce GHG emissions, whether mitigating flaring on oil fields, reducing methane emissions from landfills, or cutting farm biogas emissions, we would also recommend that the ESMA disclosure indicators also provide an opportunity for miners or networks to disclose the extent to which they or their operations are actively involved in reducing methane gas emissions. ESMA will be aware that methane has more than 80 times the warming power of carbon dioxide over the first 20 years after it reaches the atmosphere and that cutting methane emissions represents the most efficient means available to us of immediately slowing the rate of global warming, as we decarbonize our economy.  At present, and particularly since the shift of the Ethereum network to a proof of stake consensus mechanism, the Bitcoin mining industry is the only real-world example of an electricity buyer capable of reducing methane emissions at scale and in such a flexible way. ESMA and the Union should therefore gather data on this capability with a view to promoting and supporting the Bitcoin mining industry as a potent tool in the Union’s wider efforts to meet net zero targets.

Should the Regulation result in diminishing the already modest levels of Bitcoin Mining, it’s important to acknowledge that such a regulatory action may inadvertently lead to heightened Methane Emissions, a counterproductive effort. Bearing this in mind, we suggest that the Regulation should view the environmental benefits of the proof of work consensus mechanism positively. Consensus mechanisms that do not positively contribute to reducing methane emissions could, merely exacerbating the issue.

Q8: In your view, are the proposed mandatory sustainability indicators conducive to investor awareness? If not, what additional or alternative indicators would you consider relevant? 

We refer to our responses in relation to Q7. It is key that investors understand the sustainability mix of the BItcoin mining network, and the potential it has to monetize both standard and early stage renewable and sustainable energy generation projects, and additionally to understand its great potential as an industry capable of greatly reducing harmful GHG emissions in the form of methane. 

Q9: Do you consider the proposed optional sustainability indicators fit for purpose? If not, what additional indicators would you consider relevant? Would you agree to making these optional sustainability indicators mandatory in the medium run? 

We refer to our responses in relation to Q7 and Q8 above and earlier in our submission. Table 2 does not currently include provision for industry participants to include details on the positive impacts that the Bitcoin mining industry has on the environment and on sustainability in general. Given the many and manifest examples provided in our submission, we recommend that these be included as additional indicators in future.

Table 2 also does not have any means of recording the negative of proof of stake systems which merely replicate the existing legacy systems. As per the Amazon analogy provided in response to question 2, the second order effects of energy inefficient systems (people, legacy technology, proof of stake) are not captured by carbon counting. 

Q10: Do you consider the principles for the presentation of the information, and the template for sustainability disclosures fit for purpose? If not, what improvements would you suggest?

We refer to our responses to Q7, Q8 and Q9. ESMA must include provision for industry participants to provide disclosures on the positive impact the Bitcoin mining industry does and will have on sustainability targets, GHG emission reduction, and net zero goals in general. 

Q13: Is the definition for permissionless DLT in Article 1 sufficiently precise? 

There are two references to defining a permissionless DLT in Article 1. 

“According to the ISO definition, ‘permissionless’ implies the DLT system does not require authorisation to perform any particular activity; this applies to both the DLT users and administrators.” 

“Permissionless (public) DLTs are non-exclusionary and rivalrous (meaning congestion raises gas prices and hence the ability of others to consume the DLT’s services). This is unlike certain types of non-exclusionary, non-rivalrous open-source software (e.g., Linux), whose quality does not diminish the more it is consumed by others (i.e., a public good).”

We do not believe the definition is precise enough. In a permissionless DLT, every participant, or node, has equal rights to contribute to the network. This includes activities like validating transactions, participating in consensus mechanisms, and contributing to the network’s security and integrity. The most prominent example of permissionless DLT is Bitcoin, which allows anyone to join the network as a miner, node operator, or user, fostering an environment of inclusivity and decentralisation.

For a blockchain to be permissionless, it must be decentralised and remain decentralised. The best way to do this is via a consensus algorithm that requires competition. (Ie: miners competing in POW). In order to have a meaningful competition, you need risk and reward. In order to have a meaningful reward, you need an intrinsic token of value. This keeps the miners operating fairly, which maintains the security. So if you take the token of value away, you don’t have the basis for the competition, then you don’t have the security, then you have to validate the process centrally, eventually leading to a permissioned system. This is the case with proof of stake.

In PoS, the probability of validating transactions and creating new blocks is influenced by the amount of cryptocurrency a validator stakes. This could potentially lead to a concentration of power among a smaller number of participants with large stakes.

Q29: Is there any other information, specific to crypto-assets, that should be included in the tables of Annex II of the draft RTS? Please provide reasons for your answers.

We refer to our responses to Q7, Q8, Q9 and Q10. Positive impacts on sustainability must be included as well as any negatives.