Why Bitcoin Mining Is Great for The Planet
Turns out bitcoin mining can solve our energy concerns rather than contribute to them
This research was sponsored by Luno, a platform that allows users to buy, save and manage cryptocurrencies.
Bitcoin makes no apology for the power it consumes.
It is, in fact, a feature rather than a bug. The proof-of-work (POW) algorithm that bitcoin uses is designed to solidify the concept of hard money by locking its creation and management within the laws of thermodynamics, a concept that is thoroughly explained in this article.
Despite the genius of this approach, many outside the crypto industry hold a negative perception of bitcoin mining — something made clear by the sheer number of opinion articles with that perspective distributed by mainstream media platforms.
Some of those articles make spectacular and outrageous claims, often based on dubious research and without a proper understanding of how the network provides value. In many ways, they are reminiscent of the “throw another lump of coal on the power station fire, someone just ordered a book on Amazon” type headlines from the early days of the internet, all of which have long since been debunked.
Perhaps surprisingly, however, there are also those within the industry who would make similar claims. Generally, these are people who are looking to promote “their coin” as the “new bitcoin” or are trying to replicate the same hardness of money using alternative, more power friendly solutions, such as proof-of-stake (POS).
For reasons explained in the thermodynamics article mentioned above, this is simply not a viable option. It can never be that a global reserve currency or true store of value will ever run on that protocol, although I concede it is a perfectly reasonable system for applications, tokens, pictures of apes and coins with specific goals, if that’s your thing.
So, if we agree — just for the duration of this article if nothing else — that bitcoin’s POW solution will continue for as long as the network itself does and accept that bitcoin itself has value, then there is a no question that using power to create and run it is justified.
However, there is a clear moral and environmental obligation for all bitcoiners and bitcoin miners (I fall into both camps) when it comes to how that power is generated, distributed and diverted from other resources.
And that is where things become fascinating.
Not only does bitcoin have the opportunity to radically and completely change the entire global financial system as we know it for the better, it also has the potential to deliver substantial benefits for the environment at the same time.
If correct, this is truly revolutionary, so we need to examine the evidence.
The problem
It surprises people to learn that we have enough energy to fulfill all of the planet’s current and future needs. In fact, we could never hope to use all the power available to us, even if the human race survived another billion years and we all turned on our hair dryers at the same time.
Even better, all of this energy comes from one single, clean source — the sun. In other words, even without factoring in hydroelectric, wind, tide and other renewables, we already have it covered. The math, if you’re interested in the actual numbers of this, is presented in this detailed document from the U.S. Department of Energy.
Our problem is not actually power per se, but the collection, management and distribution of that power. For years we have been relying on legacy technology built around the incredibly old fashioned idea of burning fossil fuels, implemented long before we understood the impact of doing this on a global scale. The process of transition still has many years to run.
It is therefore correct to say that mining bitcoin should not be justified operating on, for example, a power grid that is built on coal-fired plants pumping CO2 into the atmosphere. This is not because bitcoin does not provide significant value to the people it serves (since we know it does), but because it is entirely unnecessary to do this.
Further, not only can bitcoin operate on a carbon neutral basis, it should actually reduce our carbon output significantly if we manage this properly. It could also drive significant efficiencies in our national power grids that can help regulate prices and stabilize power draws in busy times.
Bitcoin, almost certainly by accident rather than design, provides us with an opportunity we have never had before to accelerate renewable energy networks in a way that is both reliable and cost effective.
It seems a utopian solution that not only satisfies all parties, but actually overdelivers. Such a thing is incredibly rare, so how could this be done?
Phase One — Transition to green energy
The latest CoinShares research report, released in January 2022, concludes that 0.05% of all power produced on the planet is used for bitcoin mining, and the entire industry produces only 0.08% of global CO2 emissions. (Power consumption does not necessarily equal CO2 emission.)
The first obvious point, therefore, is that even if we ceased all bitcoin mining on the planet simultaneously, the difference it would make to CO2 output would be no more than a rounding error.
That said, there is no reason why mining should have any CO2 output at all.
As Nic Carter famously puts it, miners are “non-rival” consumers of energy. In the vast majority of cases and on an increasing basis, miners use power that is unwanted by others, stranded, wasted, produced in the wrong place or even at the wrong time.
Bitcoin miners have a huge advantage over almost any other industry on the planet in that they are truly mobile. They can set up anywhere there is room to stack a few ASICS (Application Specific Integrated Circuits — the specialist equipment used by miners) and a power connection. The only other requirement, internet, can be provided via satellite.
Since miners are incentivized to use power that is cheap to maximize margins and can be set up in any location, they are able to absorb these significant pockets of extra power that would otherwise be generated, but lost. Therefore, in many individual cases, the incremental increase of CO2 from having the bitcoin network operate is effectively zero.
My own operation actually falls into this category using, as it does, excess power generated from a hydroelectric dam built to supply an aluminum smelting industry that has since been vastly scaled down and no longer has the same power footprint.
Some have offered the analogy of bitcoin miners being the “dung beetles” of the energy world, slipping into places where other industries can’t (or won’t) go, finding pockets of wasted power deep in the crevices of over supplied substations and local networks. It may not seem complimentary, but it works.
At the same time, as I have written before, there is a general trend toward renewable energy across the industry anyway. I’d love to say this is because miners are an especially environmentally aware group who really want to do the best for the planet (although many increasingly are), but the reality is because it is now the cheapest way to generate power.
Miners like cheap, so even if their goals may not be exactly aligned with the environmental, social and governance (ESG) narrative, the final result is. That’s good enough for our purposes.
Of course, there are still miners operating with cheap — and very nasty — operations using coal or other pollutants, and they probably will be for some time, but these are no longer the norm, nor representative of newer, more efficient operations.
This transition is already well underway and will probably continue as least as quickly as the transition to clean power happens globally. There is also increased public scrutiny, better reporting and ongoing ESG pressure to keep that process in check, all of which will almost certainly lead to a positive outcome.
But it’s not enough for bitcoin to be carbon neutral. We already have the technology to be carbon negative as well.
Phase Two — Using Bitcoin to reduce global CO2 emissions in the short term
While the gradual transition to renewables is undeniably underway anyway, there have also been developments in using mining as a way to reduce C02 emissions and as a way to save power that would otherwise be used in day-to-day activities.
The most significant of these is the reduction of gas flaring in oil production areas.
Natural gas is often regarded as a byproduct of oil production, especially in areas like Texas which are so vast that a distribution network simply isn’t economically viable. As a result, excess gas is often vented and burned off (flared) for safety or production reasons.
The act of flaring is extraordinarily bad for the planet, producing large quantities of methane, a gas that is far more damaging than the CO2 created when it is used for electricity production. In fact, over a period of, say, 20 years, it’s believed to be 80 times more potent in terms of potential damage.
Miners have found a way of solving several problems at once with one solution; connect generators directly to the well caps, use the excess gas to generate electricity and install mining apparatus next to it, literally right there on the site.
Miners get very cheap power, the oil company gets to keep operating without intermittent shutdowns for flaring thereby increasing efficiency, and the environment avoids being filled with a gas that would have created havoc for decades. It’s a win-win-win.
At the same time, people have wised up to the fact that miners produce heat and have begun redirecting it to power greenhouses, swimming pools, garages, hot water systems, homes or even commercial spaces, thereby avoiding extra power requirements from the grid.
Any simple Google search reveals a veritable feast of entrepreneurial ideas based around using heat, many of which are in early stages of development or deployment. Some of these will ultimately become mainstream solutions.
The reduction, if any, in CO2 is harder to quantify here since the power being replaced is usually drawn from the grid in the first place, but nevertheless, increasing efficiencies in this area may well lead to some extra benefits.
However, this is nothing compared to what we can achieve in the medium or long term. Bitcoin can actually drive renewable deployment and significantly reduce our overall CO2 production.
But how?
Phase 3 — Using Bitcoin to reduce global CO2 emissions in the medium-to-long term
Many people have the idea in their minds that energy grids are a perfect match between supply and demand, but this is absolutely not the case.
In reality, it’s a patchwork quilt of inputs and outputs and a never-ending balancing act to juggle the two. Wastage, overproduction and transmission loss are the norm.
In the ideal world, we’d like to switch all power production to renewables, but this is not so straightforward. Renewables like turbines or solar do not produce consistent power like coal burning or nuclear stations do, so this simply exacerbates the problem. Now, instead of just fluctuating consumer demand, you also have fluctuating power production that you can’t control.
One solution would be to massively overproduce different types of renewable energy so if the wind stopped blowing, we’d hope the sun was shining. Over large enough areas, it’s almost certain one or the other would make up any redundancy.
But this is not cost effective or efficient. You might, perhaps, solve the problem of constant supply, but what about when the sun is shining and the wind is blowing? What do you do with all that excess power? It can’t be transported far by nature of the beast, so what do we do? Waste it?
What if we had the technology to produce giant “batteries” (or lots of smaller ones) that could be placed in strategic locations specifically for the purpose of balancing that load at all times? In other words, on a windy night when power consumption is slower, but production is higher, these batteries could absorb that excess power over the base load and ensure no wastage.
Even better, we could overproduce as much as we liked, knowing that the excess power would never be wasted. Over time, as the renewables network grew, the batteries could keep drawing so that the base load on its own was always enough for consumer demand. But, should extra power be required in times of crisis, that draw could be reduced or stopped altogether, allowing extra power to flood the grid.
You might think we don’t have the technology to produce batteries of that scale and efficiency at the moment — and you’d be right. But, for the first time in human history, we do have the next best thing: bitcoin mining.
Not only are bitcoin miners incredibly flexible in terms of where they set up, they are also incredibly flexible about how they operate.
In any other industry, shutting down power mid-process can have devastating effects.
Consider being halfway through building a car on a production line or running a huge distribution center like Amazon’s. You can’t simply pick up from where you left off — there is a significant cost to bear and an amount of time required to get back up to speed.
But that doesn’t apply to bitcoin mining.
It is effectively a binary process — on or off. Not only that, but by mining collectively through pools, the miners are still paid for all the work they do for the bitcoin network right up until the very second of power loss, and then from the very second they switch back on.
This means we have an opportunity to do something unprecedented.
If the grid had a baseline load from, perhaps, nuclear energy (also classed as “green” based on CO2 emissions) we could produce vast amounts of variable power — literally as much as we can possibly site in an area — because we would now have a way to balance the load effectively and quickly.
Miners would be rewarded with below-cost power in return for agreeing to certain periods of power reduction, and the network could operate far more efficiently.
More importantly, it is theoretically possible to do all of this on entirely renewable energy. Incredibly, this scenario would simply not be feasible without bitcoin mining.
Power companies and networks have started to realize the power of this arrangement, as this recent soundbite from Electric Reliability Council of Texas CEO Brad Jones makes clear:
Texas is a great example because it not only carries significant amounts of stranded natural gas and has an independent energy grid, it also has more wind turbines than any other state in the U.S., according to this report from the U.S. Energy Information Administration (EIA).
It’s easy to understand why Jones would like to find a way to balance that load while enabling him to build more renewable power sources.
And it’s not just America.
Last year, the Swedish state owned power company, Vattenfall, defended bitcoin mining against its own country’s environmental protection agency, as it had drawn the same conclusion about efficient energy production and management.
As it happens, this concept has now been in the public domain for some time, as this 2020 Springer report confirms. If you want to see the underlying math of the models, this is the report for you.
And while these reports are excellent, nowhere have I heard the concept explained better than it was by Troy Cross on Peter McCormack’s “What Bitcoin Did” Podcast located here.
Conclusion
The inevitable conclusion is that the more bitcoin mining there is on a particular power grid, the better the likelihood of delivering more of our power via renewables overall.
Even better, this power will be for general consumption, and not just for the bitcoin mining that is driving the adoption in the first place, another win-win.
In other words, if we want to get to net-zero carbon emissions, we should be encouraging bitcoin mining and not be scared of doing so.
So, does that mean we’re in the clear? No more burning coal or diverting power from other resources to power mining rigs?
Well, not yet.
Like everything on a global scale, turning stuff around is about as easy as stopping and turning a fully laden oil tanker, something that also seems to be a fitting metaphor. It takes time.
But we now have a mathematically proven roadmap that is beneficial for miners, power producers, power consumers, bitcoin users and everyone on the planet. Everyone can benefit, be it through fresh air, new employment or redistribution of wealth.
And when things of this magnitude align and gather momentum, they become simply unstoppable.
I, for one, am very excited about the possibilities that lay ahead.
Disclosure: The author of this opinion piece has been heavily involved with bitcoin for several years and holds a substantial cryptocurrency portfolio, including bitcoin. He also has a mining operation running the SHA-256 algorithm based in Siberia and is a published author on the subject of promoting the understanding of cryptocurrency.
Disclaimer: This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. The author of this article may hold assets mentioned in the piece.