PoW vs. PoS as European Parliament rejects clause in MiCA

PoW vs. PoS as European Parliament rejects clause in MiCA

The crypto industry loosened up as the European Parliament rejected a clause in MiCA. Furthermore, the crypto industry weighs the pros and cons of PoW vs. PoS.

The clause in Markets in Crypto Assets (MiCA) would have banned PoW protocol-based cryptocurrencies, including bitcoin. 

However, Solana and Cardano stand on PoS, where miners can “stake” cryptocurrencies to join the network. 

As per the University of Cambridge’s Bitcoin Electricity Consumption Index – bitcoin mining consumes over 121.36 Twh per year. 

PoW and its effects on Bitcoin mining

Blockchain platforms such as Bitcoin and Ethereum use a consensus protocol called PoW. 

What is the function of PoW? 

While the first miner to validate a transaction gets rewarded with new crypto, PoW is a platform for miner competition. 

Now, to be the first miner to validate a transaction, vast amounts of computing powers are put to use. 

Bitcoin mining consumes more TwH per year than Malaysia, Sweden, and Argentina. 

The MiCA bill and the clause rejected by the European Parliament

The MiCA bill issued in 2020 aimed to curb the toxic effects of crypto mining on the environment. 

The European Parliament rejected the clause asking for “minimum environmental sustainability” standard implementation. 

This standard implementation requires all PoW-based platforms to submit environmental compliance plans. 

Furthermore, PoW based platforms failing to do so will face a ban on all mining or trading. 

However, since various cryptocurrencies function on a public network without a central operator, the required data is challenging to achieve. 

Crypto platforms using PoS

Cardano and Solana are newer crypto platforms compared to others based on PoS. 

Furthermore, the ‘proof-of-stake’ system allows miners to stake their crypto. 

The highest stake validates transactions, reducing massive energy consumption. 

As per the second largest crypto globally, Ethereum Foundation, PoS can reduce 99.5% of energy needs. 

However, while Ethereum is presently on the PoW system, it aims to switch to the PoS system in 2022.

Ethereum 2.0 platform will launch with the new PoS system. 

India on banning and mining cryptocurrencies

As per the Bitcoin Electricity Consumption Index, merely 0.05% of monthly computing power put into mining Bitcoins worldwide comes from India. 

Furthermore, the number of traders surpasses miners in India, adding to lower computing power. 

Moreover, the ban on PoW in the EU could have shot up bitcoin prices, affecting Indian traders. 

While a complete ban on crypto is unlikely in India, the anticipated crypto bill will state rules and penalties on crypto mining in India. 

Additionally, in 2017 India imposed a ban on imports of specific machinery for crypto mining. 

However, as Indian law permits barter, if cryptos become an asset class, bartering crypto will become an option. 

Nevertheless, finance minister Nirmala Sitharaman says that NFTs and crypto will never become legal tender in India. 


While India struggles to adjust to cryptocurrency, the PoS system seems like a step forward for the environment. 

As leading crypto platforms use PoS, worldwide computing powers can reduce drastically.

Also Read – Indian Crypto Industry seeks a revision on 30% tax rate

Johannah is a passionate traveler. She is seeking remote places across India and exploring the benefits of being a Nomad. She has completed her bachelor's in Psychology Hons and diploma in Graphology. Being able to write helps her to share her experiences and be independent to travel anywhere.

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