How is Bitcoin Mining Renewable?
Bitcoin is impossible to ignore.
With a market cap of around $700 billion and growing support from investors and institutions, the rise of the world’s first cryptocurrency has been an event to behold.
Despite big victories occurring in the past several months, criticisms of Bitcoin still permeate many a discussion about cryptocurrency. One of the biggest criticisms has recently begun to make headlines – energy usage in Bitcoin mining.
Today we discuss why energy use in Bitcoin mining is a hot topic (not to mention an environmental concern) and highlight some key points.
We’ll also explore how Bitcoin miners work towards renewable energy for a more sustainable and profitable future.
Bitcoin Mining and Energy
While many newcomers to crypto don’t understand the connection between Bitcoin and energy use, early adopters have battled for years with the issue.
In short, the process of creating Bitcoin – called mining – requires large volumes of high-powered computers to decode complex, cryptographic equations.
This verifies transactions and adds to the blockchain, the technology which underlies Bitcoin and other cryptocurrencies. Energy is also needed to perform Bitcoin transactions, but not nearly in the same quantities.
How Much Energy Does Bitcoin Use?
As a whole, Bitcoin uses about 110 Terawatt Hours per year.
It’s a measurement that most aren’t familiar with, so look at it this way: 0.55% of the global energy production is attributed to Bitcoin, which is the same amount as a midsize country like Sweden, Argentina, or Malaysia.
Whether this is good or bad is the question on everyone’s mind right now, but as you might expect, the full answer isn’t so cut and dry.
First, consider that the number of miners has increased exponentially in the past few years, as hobbyists jump on the bandwagon and crypto mining companies find promising profit opportunities.
Next, it’s important to note that energy usage doesn’t equate to carbon emissions or harm to the environment. This is a key distinction that many critics need to remember.
In other words, the source of energy matters more than the amount of energy used. Coal is clearly less than optimal, while wind and solar are far better for many reasons. Context matters here, especially when making environmental arguments.
Recent Critiques and Responses
Speaking of critics, Bitcoin has never had a shortage, and the energy discussion is just the latest chapter in an endless book. Elon Musk, Janet Yellen, and Elizabeth Warren are a few amplified voices speaking out against Bitcoin as a resource concern.
The critique is simple – Bitcoin uses too much energy, and more specifically, the source of that energy is “unclean” and detrimental to the environment. Fair enough, but is there more to know?
An interesting side note is that these criticisms aren’t leveraged against a single company, individual, country, or region – just Bitcoin in general.
Who exactly are Musk, Yellen, Warren, and others speaking to when they make these statements, and what are their personal interests in the matter?
It’s also important to note that China is far and away the leader for mining operations worldwide, with nearly 2/3 of the global hash rate.
China may have issued an official ban on Bitcoin several times by now, but that doesn’t seem to stop Chinese companies from using their computing resources to earn crypto or US-based investors to offshore their operations.
When politicians and media pundits critique Bitcoin, they surely don’t remind us of the fact that the United States-based miners are responsible for only about 7% of the hash rate.
With so many layers to the conversation – political, economic, and otherwise – Bitcoin skeptics must remember that energy use is just one part of the picture.
Other Pressures to Go Renewable
We often think of renewable energy as a strictly environmental issue, but in the case of Bitcoin mining, it also has a bit impact on profits.
Consider a mining operation that starts from square one and must invest a large capital sum upfront to get things up and running. Aside from maintenance and other administrative needs, energy costs are the big roadblock in terms of profits.
Bitcoin mining is a business like any other, and profits are the main motivation. The incentive is clear: cheaper energy equals more money in the pockets of miners and investors.
That’s why many companies are looking for renewable energy sources to power their operations and clear higher margins year after year.
ESG-Focused Mining Gains Traction
While many Western countries take serious measures to reduce carbon footprints and enforce more eco-friendly policies, Bitcoin miners have their own motivations for using renewable energy.
Here are a few ways that ESG-focused Bitcoin mining is shaping up.
The Crypto Climate Accord
Using the Paris Climate Agreement as a blueprint, the Crypto Climate Accord is a recent initiative that focuses on decarbonizing the crypto mining industry.
The CCA is important for a few reasons. Firstly, it acknowledges the issues that have been discussed recently regarding the use of energy in crypto mining and operations.
By simply taking the initiative, the organizers and participants in the CCA are bringing awareness that the current model of energy usage is not necessarily sustainable, and the course must be changed for the health and longevity of the industry overall.
It’s not all talk, either – the CCA has two key objectives, as follows:
1. Achieve net-zero emissions from electricity consumption for signatories by 2030.
2. Develop standards, tools, and technologies with CCA Supporters to accelerate the adoption of and verify progress toward 100% renewably powered blockchains by the 2025 UNFCCC COP30 conference.
There’s no doubt that the goals of the CCA are lofty, but this is what’s needed to make positive changes in a rapidly growing industry.
While there are only a handful of signatories, the message is spreading and making waves across the crypto space. Be sure to stay tuned to announcements and metrics released by the organization each year to track their progress.
Sources of Renewable Energy
What are some of the solutions being implemented by CCA participants and other forward-thinking companies in the sector?
Decarbonization efforts are complex and require the coordination of infrastructure, as well as public and private cooperation to reduce footprints.
Efforts will likely start by moving away from sources like coal and petroleum while doubling down on solar, wind, hydroelectric, and more sustainable biomass fuels that do far less damage to the environment.
There are also some more experimental and exciting forms of renewable energy being used to power mining operations, like the cheap and clean energy supplied by El Salvador’s volcanos!
Still, considering that only around 12% of the US primary energy consumption is renewable (petroleum and natural gas make up nearly 70%), there is plenty more work to be done in crypto and the economy in general.
What is Next for Renewable Bitcoin Mining?
Is renewable energy Bitcoin mining a reality right now? Yes, but not to the extent that it should be. The challenges of sustainability are just one more thing to add to the list of obstacles facing crypto, but not something that can’t be overcome.
As of now, most mining operations are still powered by legacy energy systems and rely on traditional sources of fuel that are far from sustainable.
However, with developments like the CCA and pressures from media, politicians, and captains of industry, it’s clear that ESG crypto mining has only just begun and has the makings of a legitimate and influential movement.
Sources:
Renewable Energy Explained | US Energy Information Administration