Robert Steinadler, a month ago

EU will introduce energy efficiency labels for blockchain technology

The EU is regulating all kinds of things like the size that a cucumber should have or the heat isolation of houses. Different industries already had their struggle with this regime and many people believe that some attempts are overreaching and not useful. Determining the size of vegetables is not the only idea that Brussels is incubating. Blockchain technology has once again come under scrutiny, not by financial regulators, but for the impact, it creates on the environment.

What is the EU planning and how could an efficiency label impact the future of blockchain technology?

Energy efficiency labels for blockchains

The EU Commission is looking forward to introducing energy efficiency labels for the ICT sector. This includes blockchains such as Bitcoin, Ethereum, or Solana. This is part of the EU’s wider plans to control energy consumption in this sector.

An energy label would bring more transparency and provide better visibility of the industry’s consumption. This also includes more financial support for research and development of new technologies like smart grids or other digital solutions that could help to reduce energy consumption and make ICT-related businesses more efficient.

While these plans are on the table, there are no statements available of how much money will be spent on researching blockchain tech. Judging by the wide scope of these plans it is only likely that blockchain is to be included but not necessarily a primary concern for two reasons. First, the blockchain industry in Europe is very small compared to the U.S. and Asia. The second reason is the size of the European blockchain industry compared to other industrial sectors that fall under the umbrella of ICT. Telecommunications for instance is much bigger in size and consumption. Therefore, it makes sense to put in more effort to improve this industry.

Is this good or bad for Bitcoin?

All the proof of stake blockchains would obviously profit from a label that certifies their energy efficiency somehow. The last remaining proof of work blockchain that is noticeable is the most successful in the world. Bitcoin is facing a lot of criticism from environmentalists, and it is not clear whether such a label would be helpful or not.

Bitcoiners fear that this could be another attempt of attacking Bitcoin for what it is and trying to ban it, not by an outright prohibition, but through the backdoor.

In this context, it is important to remember that Bitcoin’s blockchain can still be considered environmentally friendly if the majority of miners are opting for green energy standards. Of course, one could argue that this would require sacrificing a lot of energy, but that is exactly the point of Bitcoin. Its security and value are derived from the energy that is consumed. Nobody can fake the energy that is needed to add another block to the chain. It seems that at least the market is getting this idea and despite the fact the proof of stake is dubbed as the environmentally friendly alternative, Bitcoin is still the number one cryptocurrency.

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