I’m sure years ago the word “crypto” wouldn’t have gotten the same reaction out of you as it does now. Back then, you may have thought of “crypto” being short for solving codes as opposed to its nowadays reference to cryptocurrencies. Whether you find yourself supporting the evolving technologies of cryptocurrency or find yourself doubting its power, it is important to get a handle on the basic groundwork of this growing and influential industry.
According to Forbes, “A cryptocurrency is a digital, encrypted, and decentralized medium of exchange. Unlike the U.S. Dollar or the Euro, there is no central authority that manages and maintains the value of a cryptocurrency. Instead, these tasks are broadly distributed among a cryptocurrency’s users via the internet.”
The most notable cryptocurrency, Bitcoin, was founded in 2009 by a programmer under the pseudonym Satoshi Nakamoto after issuing a white paper first discussing a decentralized, peer-to-peer electronic exchange. Coming shortly after the brunt of the 2008 recession, as distrust of banks and the financial system became the mass consensus, this issued a new age of technology and digital currencies that seemed promising considering the specifications- a non-reliance on government and institutions to make financial transactions. The main purpose was to limit the inherent corruptibility and currency debasement (often resulting in rampant inflation) that is inherent in the legacy Central Bank and Wall Street systems. In addition to the creation of Bitcoin, this document also lays the foundation for its digital ledger that stores data in a secure way known as blockchain. While any “database” can store information, blockchain is unique in that the information stored is immutable and unable to be edited. Since no single person can alter the contents of the blockchain it is considered decentralized. They are maintained by a network of computers all over the world, that are each responsible for storing their own copies of the database, verifying new entries, and securing the database against potential hacks through a consensus mechanism. Blockchain technology didn’t really exist before 2009 and the origins of Bitcoin, and while it has been responsible for secure cryptocurrency transactions, it can be used to store other types of information as well.
While all of this information is helpful in understanding the basics (and I really mean basics) of the multidimensional world of crypto, recent legislation surrounds the practice of crypto mining that uses proof-of-work authentication methods. According to Coinbase,
In other words, crypto mining does two things: it generates new cryptocurrencies and also verifies existing transactions. While mining a decade ago could be done at a home computer, as the blockchain grows it requires a lot of specialized computer power to ensure the security of the transactions. And here lies the crux of why Bitcoin uses energy: to secure people’s investments. The 46 million Americans across the country who invest in this network believe they are entitled to the same security as Wall Street uses to secure their data and investments.
“Proof of work” is a consensus algorithm used originally by Nakamoto in the origins of Bitcoin. It requires miners to compete with each other to be the first to solve these mathematical puzzles in order to verify there is no corruption. The winner is selected to add the newest batch of data or transactions to the blockchain. However, the majority of the energy uses is for securing the network, much like the firewalls used by every company, government, and bank to protect their assets.
Understanding these basics will be influential in understanding the legislation surrounding cryptocurrency now and in the future, and are imperative to the advancement of technology in our state. Continue to follow along this week as Buffalo Rising has teamed up with Foundry Digital to review statistics and research surrounding crypto mining that uses proof of work for transactions.
The future of cryptocurrency in New York lies in Gov. Kathy Hochul’s hands after lawmakers passed two seemingly contradictory bills on Friday, June 3, 2022. We’ve teamed up with locally grown Foundry Digital to tackle this pressing topic and the potential impact on WNY.
About Foundry Digital:
Foundry was created to meet the institutional demand for better capital access, efficiency, and transparency in the digital currency mining and staking industry. As a Digital Currency Group company, Foundry taps unparalleled institutional expertise, capital, and market intelligence to provide North American bitcoin miners and global manufacturers with the resources to build, maintain, and secure decentralized networks. Foundry empowers miners with the tools they need to build tomorrow’s decentralized infrastructure. We are protocol-agnostic and seek to support like-minded blockchain entrepreneurs who share our mission to advance the industry.
Click to E-Mail Gov Hochul the message below.
Dear Governor Hochul,
I am a resident of New York who STRONGLY OPPOSES the Proof of Work digital mining moratorium bill. I believe that blockchain and cryptocurrency mining are essential new technologies for the third generation of the internet. New York missed out on the second generation of the internet, as all the jobs and tax revenue went to places like California that embraced the technology early. New York now has a chance to bring jobs, financial inclusion, and renewable energy production to New York through this new technology. I ask you to please veto this bill and embrace the Crypto Task Force Study Bill so we can learn how to promote this new technology for the betterment of NY while also understanding its environmental implications. It would be prudent to study this issue before we alienate the entire crypto industry through a blanket ban, especially since President Biden and California are also studying this issue and not banning the technology.
I thank you for your consideration.