Ethereum is going to change its model of how the trust in the network consensus is created fundamentally this week. Proof of stake seems to be the next big thing and many other cryptos already adopted this model because it is easier and cheaper to kickstart a blockchain by selling token allocations and offering proof of stake. Starting with proof of work would require attracting miners who have other options at hand and is eventually also less attractive to venture capital since investment firms take staking into account when making the decision if they invest in early rounds.

Bitcoin is resisting this mainstream trend and the hashrate is at an all-time high. How is this possible?

The market does not reflect the growth

Currently, Bitcoin’s price is under heavy pressure due to the fact that all markets shrinking equally. The correlation with the US stock market is still high and after the CPI for August didn’t meet expectations a huge sell-off occurred, causing Bitcoin to drop around 10 % within 24 hours.

This shouldn’t faze investors one bit, since the price did not reflect the growth of Bitcoin during the last 10 years. In fact, there were times when the hashrate was growing at a fast pace while the price kept moving down or sideways.

There is a saying that price will always follow hashrate. The idea behind this statement is that miners have to constantly invest more, therefore there is more value attached to the network and the entry barrier is higher. In order to participate in mining, one needs to throw in more and more hardware while at the same time Bitcoin gets scarce. Of course, there is no guarantee that price will follow, but many Bitcoiners assume that history will repeat itself and that the price will catch up at a later point in time as it did many times before.

Mining is still a viable option

With the Merge just being around the next corner, many people wonder if mining still has a future. Environmental concerns are still driving the debate about proof of work. What most critics fail to understand is that sustainable mining is possible.

There are several ways for the Bitcoin mining industry to become carbon-neutral. One is simply offsetting carbon just as all other bigger industries do. While carbon credits require a commitment from all market participants, they are not changing how technology works.

That being said, energy-efficient mining equipment, as well as green energy resources, are both things the industry is looking forward to adopting. It is true that this adoption is not equal when looking at the mining industry at a global level. But it becomes clear that the mining industry in the US has to make a move to become completely sustainable. The Biden administration has made it crystal clear that the White House will closely monitor the impact of mining. If the industry is not going to change, a mining ban could be the result. It is safe to assume that many businesses will rather go for carbon neutrality than face their own shutdown.