Time and time again, the same argument keeps coming back. Whenever Bitcoin experiences any meaningful growth, critics resurface to pan it as an environmentally wasteful network that can’t persist over the long term. Over the last month, in particular, they have picked up steam once again. The New Yorker, for example, penned a piece that concluded: “forward-thinking politicians should be about ways not to buoy bitcoin mining but to bury it.” Fueling the fire above all else has been the idea that Elon Musk is no longer a Bitcoin supporter since he recently announced that Tesla is putting a halt on accepting Bitcoin as a payment option. On the heels of his announcement, scores of publications worldwide decided to pen opinions on how his flipping of the script means people will now realize “the reality of Bitcoin.”
This is, however, incredibly short-sighted.
In terms of Bitcoin’s energy usage, recent research reports show both a meaningful shift towards green energy sources powering the bulk of the Bitcoin network, as well as potential methods for “recycling its emissions.” Here, we make inroads into both of these areas, starting with the arguments against them. All in all, our aim with this series is for you to feel more confident over time in how Bitcoin can and should persist in the face of its critics. If that interests you, then read on!
The New Yorker and numerous other widely-read publications have recently penned opinions that when it comes down to it, all make the same conclusion. Using statistics related to how much energy Bitcoin uses, they believe the network is wasteful and will not be able to persist at the rate it has been growing. Some even suggest that it should be “taken care of” by governments, though there is little to no evidence they would be interested in doing so.
One critic even claimed that the computers mining Bitcoin(ASICs) produce 11,500 tons of hazardous electronic waste a year. While it isn’t exactly clear where this statistic comes from, the general point behind it is valid. Going forward, the electronic waste created by mining operations is one area that needs to be addressed. Below we dig into theory on how that might be done as well as how all of the other criticisms of Bitcoin might be answered with the same kind of innovative thinking that brought the crypto space to where it is today.
First, by reframing Bitcoin as a utility(power grid), it’s easier to understand how its electricity usage might be harnessed for the greater good. At the Crypto Mining Forum last month, Mike Colyer, the CEO of Foundry Digital, a leading American crypto mining firm, said, “Bitcoin mining provides a steady baseload, and yet, it’s still intermittent enough to allow grids’ stability. This creates a really powerful economic dynamic for renewable energy products.” What Colyer is pointing out here is that the energy produced by Bitcoin mining could be tied to an actual renewable energy-dependent power grid. In other words, Bitcoin mining, itself, could kickstart a more meaningful global shift to sustainable energy. If we consider the fact that in 2019, mining was 74.1% driven by renewable energy, then it becomes clear that the “input” is already trending in the right direction for this to eventually occur. It’s the “output,” however, or Bitcoin’s carbon footprint, that will continue to fuel the same recycled arguments against crypto’s leading network for the time being. Research published in April by Nature Magazine suggests that if the current incentives for Bitcoin miners are not reworked over the next 3 years, the network’s emissions will outpace those of the Czech Republic and Qatar. To understand what sort of changes might be introduced, it is important to first highlight the facts about Bitcoin mining today.
Due to the sheer costs of running a Bitcoin mining operation, miners are obliged to seek out the cheapest energy sources possible. Contrary to popular belief, this does have to mean they will be strictly “non-renewable,” i.e., something like coal power. As Bitcoin has grown, countries like Sweden, Iceland, and Norway have become popular destinations for Bitcoin mining operations due to the prevalence of renewable energy sources there. Iceland, for example, is 100% dependent on renewables, while Norway sits at 98% and Sweden comes in with about 80%. Even so, China reportedly still accounts for approximately 70% of Bitcoin mining, while possessing only a 16%dependence on renewables. In the end, it all comes down to costs. Mining is a thin-margin activity as it is and generally, the longer Bitcoin has been around, the harder it has become to sustain a profitable business as a Bitcoin miner. All in all, the key to doing so has always been cutting costs, which has historically centered around finding the cheapest possible energy sources to plug into. Today, this does not have to mean coal and other non-renewables will continue to win out. As Cale Moodie, the CEO of Neptune Digital Assets, a cryptocurrency mining company from Vancouver, Canada recently pointed out, “Green power is getting cheaper and cheaper.” This, in turn, is one of the key drivers for Bitcoin miners moving to sources with cheaper energy and in most cases, cleaner energy sources. While the Nordics have been one of the most popular locations in this respect, they are now potentially running low on “surplus electricity.”
Consequently, it is high time for Bitcoin miners to look to diversify their operations to further locales to prevent over-concentration. Texas, for example, is one area that is growing in popularity due to low energy costs plus opportunities for miners to attach themselves to wind farms. Canada, as well, is another viable option with Moodie’s company already setting up shop in the province of Alberta, planning a mining operation that will be “90% dependent on solar energy.” All in all, numerous examples of mining operations being built in clean-energy friendly locales, but as the numbers point out, it is still too early to say we have fully reached the time of a “Green Bitcoin.”
Though Bitcoin’s energy usage appears to be strongly trending towards clean sources, miners still aren’t completely dependent on such options yet. Additionally, addressing the crypto network’s energy input is only half of the battle. As an industry, we should be asking ourselves: what could we do with all of the energy Bitcoin produces? Why not, for example, bring together miners and clean energy providers to recycle it into a full-scale clean, power grid? What then to do about the material waste generated by new grids and the electronic waste generated by miners? All of these questions can and should be addressed. As consumers of all kinds become more interested in ESG measures, companies and crypto networks alike will be obliged to do so. Pyrolyzing the waste generated by mining hardware, then using a process like “catalytic upgrading” could even turn it into clean fuel, as some research suggests. In the interim, perhaps it would be best for miners to lead the charge through, as Colyer suggests providing clean energy plants/farms with the capacity they need to get profitable quickly and consequently, expand quickly.
If there’s one key takeaway from this discussion, it’s that criticisms should not be taken as threats to Bitcoin’s existence, but areas to improve with the same gusto that crypto professionals have applied in the current DeFi movement. The future is now, and we are here as your trusted guide to track all of these developments as they progress over time.
This text is intended to inform and is not an investment recommendation.