Chris Larsen calls for changes to the Bitcoin consensus mechanism

Bitcoin has a reputation that is harmful to the climate. Ripple co-founder Chris Larsen is therefore proposing a radical change.

The crypto space is growing. The fact that politics and business are now seriously grappling with digital assets is due, among other things, to the enormous price developments that various crypto currencies have recorded in recent months – with the exception of the most recent wave of sell-offs.

Of course, the number of critics also increases with increasing attention. In terms of climate protection, crypto projects whose protocols are based on the Proof-of-Work (PoW) principle are repeatedly handed out. The best-known representative here is the industry leader Bitcoin, because the current annual electricity consumption for the operation of the Bitcoin network is around 110 terawatt hours (TWh). This corresponds to the energy requirements of 27.5 million four-person households. And although a large part of the electricity is generated from green energy sources, sticking to the PoW consensus process could mean a disadvantage for the adoption of Bitcoin.

PoW consensus mechanism is “out of date”

At least that’s what Chris Larsen thinks. In one Blog post the Ripple co-founder shared his opinion on the Bitcoin consensus mechanism and directly provided a possible solution. Although many players in the crypto space have committed to being 100 percent climate neutral, this is just a drop in the ocean. Within the Bitcoin network, one has to think much more about whether switching the consensus procedure from PoW to more climate-friendly methods such as proof-of-stake (PoS) or federated consensus might be a better alternative.

Bitcoin’s PoW process is simply out of date, according to Larsen. He does not want to criticize the use case of the cryptocurrency, but only the proof-of-work technology behind it. More precisely he writes:

We should see PoW for what it is – a brilliantly designed technology that is out of date in today’s world. However, that in no way means that Bitcoin and other PoW cryptos themselves are out of date.

Chris Larsen on medium.com

The crypto boom can mainly be attributed to the entry of institutional investors. At the same time, more and more companies committed to developing and complying with climate protection measures. The Ripple co-founder now believes that consumer or government firms could come under pressure to reduce their own PoW crypto holdings.

Chris Larsen: “Bitcoin advocate ‘greenwashen’ the problem away”

In his letter, Larsen also goes into the arguments of the other side, which is sticking to the previous concept. Most proponents of the PoW process justify that the consensus mechanism used consumes a large part of unused energy that would otherwise be lost. The Ripple co-founder allows this argument, but in his opinion this use will soon no longer be possible because research is already being carried out into other possible uses.

Furthermore, the argument that PoW is stimulating the renewable energy market is “threadbare”. Large solar or offshore wind power plants are already economically very attractive today. As an example, Larsen cites Next Era Energy, which would have developed into the third largest energy company in the USA.

The justification that PoW has access to an unlimited global supply of renewable energy sources could also not apply to the future. Larsen believes that the steel, transport and agricultural industries will also soon switch to green energies. Bitcoin and Co., in principle, do not need a significant amount of energy to function. However, the aforementioned branches of industry do.

Solution approach difficult to apply to Bicoin

Larsen’s reasoning sounds conclusive on many points and is certainly applicable to some PoW cryptocurrencies. With Bitcoin, however, things are still difficult. PoW forms the fundamental core of the Bitcoin network, which is why it has those value-storing properties for which many appreciate it. If the consensus mechanism is no longer based on energy intake, these properties could be lost. In the event of a switch, Bitcoin would shed one of its most important protective shields from attack. In addition, it is questionable whether such measures would even find acceptance in the Bitcoin network. Hardly any miner would agree with that.

As in many other areas of the economy, future success in the crypto sector will also depend on how quickly and intensively renewable energies can be expanded. A high energy requirement does not mean a high level of CO₂Emissions. Politicians must also be held accountable here in order to create more incentives.