Bitcoin and other "Proof of Work" cryptocurrencies face an uncertain future

From Dallas Becker:

Not only do cryptomining facilities have a negative impact on the environment, due to that negative impact, the cryptocurrency industry is shifting away from the transaction model that uses them.  It is very plausible that due to consumer/investor demand and government regulation, proof-of-work currencies (which use cryptomines) will be replaced by proof-of-stake currencies in the very near future.  This change is happening quickly in the cryptocurrency industry right now - the proposed facility may only operate for a year or two.

My attempt at a summary:

Proof of work:

• Uses cryptomines, like the proposed facility.  Many computers crunch away at complex mathematical problems, and finding the "answer" is rewarded with cryptocurrency.  But this is like a race - in that many (ie, 100,000 computer clusters) are competing and only the winner gets the cryptocurrency
• Effectively, the process is electricity->computational power->cryptocurrency - for the winner.  Many other computers have just converted electricity into calculations, with no result or reward.
• "Baked into the code is a reduction of the reward over time, and there is a fixed supply of Bitcoin that will ever exist, so the mining becomes likely more difficult over time depending on how many computers are competing at any given moment."
• Environmental impacts are due to the large computational power and equipment needed.
• This is the older method; it is criticized for the poor energy efficiency.  Newer cryptocurrencies use proof of stake and some older cryptocurrencies are moving to proof of stake.
• China banned cryptomining in 2021

Proof of stake:

• Instead of racing to solve a mathematical problem, the verifiers have an investment stake (ie, money) - in a way, a bond for good behavior.  There is a lottery, based on the size of the stake, for who verifies a transaction and is rewarded.  
• "Proof of stake is expected to reduce the electrical consumption of crypto-mining by well over 99%." and "Proof of stake offers a way to set up such a network without requiring so much energy. And if all goes as planned, Ethereum, which runs all sorts of applications in addition to the world’s second-largest cryptocurrency, will transition to it in the first half of 2022. The shift has been projected to cut energy use by 99.95%."
• One of the biggest cryptocurrencies, Ethereum, is planning to fully convert to proof of stake this year
• This model is much faster than proof-of-work and more scalable.

Editors Note: For a description of "Proof of Work," see our previous blog post "Once you realize what Proof of Work is really about, you'll get even more angry" - PROTECT PEND OREILLE

Here are some articles:
https://www.thomsonreuters.com/en-us/posts/investigation-fraud-and-risk/5-questions-crypto-mining/

https://www.fool.com/investing/stock-market/market-sectors/financials/cryptocurrency-stocks/what-is-staking/

https://www.pymnts.com/cryptocurrency/2022/can-proof-of-stake-solve-cryptos-esg-problem/

https://www.cnbc.com/2022/03/09/heres-whats-in-bidens-executive-order-on-crypto.html

https://www.forbes.com/advisor/investing/cryptocurrency/proof-of-stake/

Ms. Becker is a resident of Pend Oreille County who loves the beauty of our county and wants to ensure this pristine place that is our home is preserved for generations to come.