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- The European Union (EU) rejected a proposed prohibition on Proof of Work.
- One of the EU's primary objectives is to maintain its competitiveness.
- According to transaction volume, Europe was the largest cryptocurrency market in the world in 2017.
A ban on proof-of-work Cryptocurrencies will be the subject of legislation by the European Union in 2020. The 'Markets in Crypto Assets' (MiCA) law has the capacity to determine the future of the developing technology in Europe.
It took 168 pages to draft the MiCA measure, which aims to control the activities of cryptocurrency exchanges and blockchain technology companies. During the week of March 14th, the EU suggested a vote to prohibit assets based on proof-of-work, such as Bitcoin (BTC). Voting was swayed by concerns about the environmental effect of crypto mining, one of the key causes.
There were 24 votes in favor and 32 votes against the proposal's passage.
The crypto community fought back hard against the prohibition on PoW mining. It might have also stifled the growth of Bitcoin, Ethereum (ETH), and other similar digital assets. Step Finance co-founder George Harrap compares the legislation to Albert Einstein's mass-energy equivalence formula.
Trying to outlaw a mathematical formula is a ridiculous idea, and it's a good thing that it was rejected." After outlawing E = mc2..., what's next? This law should have received a far higher percentage of the vote than it did, Harrap told BeInCrypto.
The CEO of Boba Network, Alan Chiu, said that this will allow more individuals to benefit from the emerging technology.
In light of the EU's statement that it is open to further blockchain innovation, we are pleased." Because of this, the European Parliament is now in a position to lead the maturing of these technologies, opening up new possibilities for billions of people around the globe. Chiu told BeInCrypto that he hopes to collaborate with all regulatory authorities to find legislation that encourages efficient energy use and allows inventors to produce world-changing goods.
More opportunities because of the restriction on requiring proof of work
In terms of transaction volume, Europe will have the largest crypto market in 2021, according to a Chainalysis analysis. The crypto transaction volume on the sixth-largest continent surpassed $1 trillion last year.
The goal of MiCA is to create a legal framework for digital assets and their service providers. In addition, the law will help Europe maintain its position as a global leader in the field.
Will Harborne, DeversiFi's Co-Founder and CEO, believes that "billions of individuals in the long run" can benefit from decentralized finance (DeFi).
People who have been shut out of the banking system and other services will be able to get credit through DeFi." Those in this situation lack the means to save or earn interest.
It is the goal of this regulatory framework to instill trust in consumers and to promote the growth of digital services and payment alternatives. "It can open the door for millions of individuals to start taking advantage of the DeFi opportunities and collectively produce money that can better their life," Harborne said.
Central bank digital currency (CBDC) tracking by The Atlantic Council shows that 87 nations are exploring the possibilities of digital currencies. In addition, Nigeria's e-Naira is the most recent of nine nations to completely establish CBDCs. Since September of last year, El Salvador has accepted Bitcoin as legal cash.
There is still no comprehensive regulation of crypto assets in the EU. If MiCA is approved, all of the states that have signed on will be able to use it immediately without the need for a federal mandate.
One of the many ways to look at it
It is clear that the PoW permit will open up new opportunities for the EU, but it also has the potential to have a severe environmental effect. Miners aren't rewarded in the Proof of Stake (PoS) mechanism, though. Network validators are compensated according to the quantity of crypto they commit or stake. Compared to other forms of distribution, electricity and energy aren't a factor in PoS, according to Harborne.
The Bitcoin network used 90.86 TWh of power between September 2020 and the end of August 2021, according to a research by the Frankfurt School. Approximately 0.05 percent of the world's electricity is utilized by the project. A further 0.08 percent of the world's carbon footprint is accounted for by BTC.
“We believe Layer 2 technology, combined with the Proof-of-Stake mechanism, can make blockchain transactions far more sustainable and reduce the environmental impact of DeFi. The Proof-of-Work mechanism that Bitcoin and Ethereum use currently involves miners competing to solve puzzles. This results in increasing computational power requirements.”
Layer 2 solutions that rely on PoS have simpler procedures, according to Harborne. They reduce transaction expenses while speeding up the process. Many DeFi platforms, especially DeversiFi, take environmental sustainability very seriously. Besides making sure our goods give customers a secure financial future, we're also concerned about how our actions may affect the environment in the long run.
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