The Biden administration has proposed a new tax intended to make cryptocurrency miners pay society back for the damage they cause. That’s actually how the White House puts it, with the so-called DAME tax intended to encourage actually talking specifically about “the harms” such crypto companies can inflict on society as a whole.
“Currently, cryptomining firms do not have to pay for the full cost they impose on others, in the form of local environmental pollution, higher energy prices, and the impacts of increased greenhouse gas emissions on the climate,” the White House says of the proposal.
“The DAME tax encourages firms to start taking better account of the harms they impose on society.”
DAME stands for Digital Asset Mining Energy, and the DAME tax would force “firms” to pay a tax equal to 30% of the cost of the electricity they use in cryptocurrency mining. Which would undoubtedly eat away at profits massively, if not entirely, and likely make the whole venture practically pointless. Note the use of the terminology there, however: “firms.”
Currently the tax appears to be more of a drive to impose the levy on large mining operations over at-home prospectors. But then there’s hardly any of the latter left.
The reason being that these cryptomining operations not only require massive amounts of electricity, but also increase risks of local authorities over-provisioning for demand that may come and go rapidly, increase prices for others in the area, and suck up what green energy capacity there might be.
“Alongside these known costs and risks, cryptomining does not generate the local and national economic benefits typically associated with businesses using similar amounts of electricity. Instead, the energy is used to generate digital assets whose broader social benefits have yet to materialize.”
Ethereum, the largest cryptocurrency responsible for most graphics card-based mining, no longer supports the actual process of mining. Ever since “The Merge” late last year, it has shifted from a proof-of-work algorithm, which used mining to verify transactions and generate fees, to a proof-of-stake algorithm, which doesn’t.
Essentially, ethereum took matters into its own hands long before the US government did anything about it.
But there is still cryptocurrency mining today, and that’s mostly for non-ASIC-resistant cryptocurrencies, such as bitcoin. The bitcoin mining network is in a bit of a lull right now, due to a wider slump in crypto’s value, but bitcoin is still expected to suck up plenty of power.
The Cambridge Bitcoin Electricity Consumption Index expects the entire global bitcoin mining network to use a little more power per year at 133 TWh than the country of Pakistan (132.3 TWh) and just a touch less than Ukraine (134.3 TWh).
The CBECI’s regional power data only goes up to January 2022, but at that point in time the US was the single largest bitcoin mining region globally, following a dramatic dropoff in China due to strict local mining legislation.
The White House offers up an idea of US-based cryptocurrency mining power usage. Using data from the U.S. Energy Information Administration and U.S. Office of Science and Technology Policy, some of which are estimates, US crypto power usage was expected to exceed all power usage by computers in 2022. Let that sink in.
The Biden administration expects the DAME tax, which is only a proposal today, would raise $3.5 billion in revenue over 10 years. Though, clearly, that will massively depend on what cryptocurrency mining will be left operating over that time.
