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Governments are finding new ways to crack down on Bitcoin and other cryptocurrencies.
Case in point: One small manufacturing town in upstate New York is considering an 18-month moratorium on new commercial operations that mine Bitcoin and altcoins — the process by which individuals and companies can help verify cyrptocurrency transactions while earning digital coins as a reward.
Plattsburgh, N.Y. mayor Colin Read has proposed this novel ban to give the town time to establish regulations and zoning around mining operations.
The reason: massive energy consumption.
Cryptocurrency mining — which requires considerable computing power and therefore electricity — saps about 10% of Plattsburgh's monthly supply of power, Read told The New York Times earlier this year. The city receives its power at discounted rates based on long-standing contracts, so long as it does not go over certain thresholds.
He added that crypto mining's high energy use is forcing the town to purchase additional power, sometimes at costs that are 100 times higher.
The cryptocurrency miners that have set up shop in Plattsburgh use about the same amount of energy as a local plastics manufacturer. But while miners can operate as one-person shops — meaning they aren't likely to produce many jobs — that plastics plant employs 200 people.
It’s been well documented that the amount of energy needed to run bitcoin is tremendous. And that amount of energy is apt to grow as cryptocurrency prices rise — increasing the reward for mining and attracting more activity.
Iceland, a hot spot for miners due to the cold weather (which keeps their servers cool) will see these operations sap more electricity than is used to power all the homes in the country this year.
Based on the current price of Bitcoin, cryptocurrency analyst Alex de Vries estimates that Bitcoin miners will use 54 terawatts of energy per year. To put that in perspective, all of Israel uses 56 terawatts annually.
In small towns, this can squeeze the power supply and potentially increase costs for other local businesses.
For the miners, it’s an effort to uncover the approximately 20% of the 21 million Bitcoins that have yet to be mined from the code which manages the currency. As fewer Bitcoins are available, the miners require more energy to uncover the hidden treasure.
Despite these concerns, few cities or countries have taken measures to cease mining altogether.
In February, the city council of Chelan, Washington, which has attracted a number of miners, banned mining activity in residential areas for six months, citing safety and power concerns.
China has introduced rules to halt the practice, as it seeks to remove miners from the country. While it’s doing so by reducing electricity available to the mining companies, this move likely has a greater purpose in clamping down on cryptocurrency speculation than for protecting its power supply.
Canada, on the other hand, has recently welcomed miners in places like Quebec, where there’s extra capacity in its power grid.
One crypto miner in Plattsburgh, David Bowman, argues that it would be a mistake to disallow new mining operations. “It's basically in the early stages of development like the Internet was,” Bowman told Vice’s Motherboard.
“In my view an outright moratorium would hurt the city more in the long run because it would miss out on all that.”