Will Bitcoin mining ever be environment-friendly?
Bitcoin mining takes up a lot of electricity, which is why it’s even prohibited in some parts of the world. In fact, very recently, the Abu Dhabi Agriculture and Food Safety Authority announced it’ll levy penalties of up to AED10,000 on anyone found mining cryptos in agricultural farms.
“At Gryphon Digital Mining, we’re focused on off-grid mining solutions that significantly reduce the environmental impact of Bitcoin mining,” says Rob Chang, CEO and co-founder at Gryphon Digital Mining.
Chang says one compelling approach is the use of nuclear energy. He views it as a stable, powerful energy source with a lower carbon footprint when compared to conventional energy sources.
Another sustainable method he’s looking at is hydroelectric. Chang believes mining powered by hydroelectricity is particularly suitable in regions with abundant water resources. These places offer a reliable and renewable energy supply that can be used for continuous mining activity.
Utilizing waste
Chang also suggests capturing excess natural gas from oil drilling sites, which would otherwise be flared off. He believes this could also provide an efficient and eco-friendly power solution for mining operations.
Phil Harvey, CEO at Bitcoin mining consulting firm Sabre56, is also gung-ho about reclaiming excess gas.
“A significant advancement in this area is the use of flared gas recovery, where otherwise wasted energy from flaring is captured and subsequently used for mining—reducing environmental impact and increasing efficiency,” says Harvey.
He firmly believes off-grid mining mechanisms, particularly those utilizing stranded gas, can help enhance the environmental sustainability of Bitcoin mining. “These mechanisms involve using energy sources that are either untapped or have excess capacity not being utilized by the grid,” says Harvey.
Stuart Connolly, chief investment officer at crypto investment firm Deus X Capital, agrees. He points to companies such as Crusoe and Giga, which are actively developing off-grid mining projects for utilizing flared gas.
However, he adds that these off-grid sites face challenges such as low uptime and high operational maintenance costs. This leads to lower revenue compared to larger on-grid sites, which is why there aren’t many such installations.
Sustainability facilitator
Contrary to popular belief, our experts argue that Bitcoin mining helps facilitate the growth of clean energy.
Environmental groups usually pin the blame on Bitcoin’s proof of work (PoW) consensus mechanism that makes it an energy guzzler.
Nathaniel Harmon, co-founder at OceanBit, explains that PoW is intentionally wasteful as a means to secure the network from attack.
“The intentional waste from PoW disproportionately favors renewables due to their inherently lower marginal cost, with each progressive halving cycle increasingly incentivizing a shift to renewables,” reasons Harmon.
This resonates with Michael Ashley Schulman, founding partner and chief investment officer at Running Point Capital Advisors. He argues that Bitcoin mining may actually help renewable energy sources be more economically viable.
“Renewable energy sources like wind, solar and hydro often generate excess ‘stranded energy’ when consumer demand is low,” says Schulman. “Bitcoin mining provides a constant demand for this stranded renewable power.”
Moreover, as a flexible and perpetual buyer of excess renewable electricity, Bitcoin mining increases revenue potential for green power providers. Schulman believes this incentivizes further investment and buildout of green infrastructure to take advantage of the Bitcoin economy’s steady demand.
“In this way, Bitcoin facilitates the growth of clean energy production,” reasons Schulman.
Harmon adds another dimension to this. He argues that all forms of renewable energy are location dependent and often do not coincide with large population centers. This is why in concert with the generation buildout, these projects also need new transmission networks.
This is exactly where you need the high energy density and modular containerized build capacity of Bitcoin mining, says Harmon. A Bitcoin mine can be quickly deployed at these locations to “provide a revenue stopgap to these stranded generation assets”.
But mining is already green
According to environmental, social and governance (ESG) analyst Daniel Batten, a majority of Bitcoin mining is done using renewable sources. In a primer Batten counters common but incorrect Bitcoin mining claims with evidence-based rebuttals.
In the document he shows that most of the studies on Bitcoin’s carbon footprint are outdated. Batten also argues that the dynamics of Bitcoin mining have changed substantially after it moved out of China.
He points to charts by Bitcoin analyst Willy Woo that are based on contemporary data.
Contrary to common perception, these charts show that 55.8 percent of energy for Bitcoin mining comes from sustainable sources.
Connolly wholeheartedly agrees. He believes energy usage in the Bitcoin network is not inherently negative.
“Because Bitcoin is quite transparent with its energy usage it’s easy to point to a single number,” argues Connolly. “However other systems (banking, mining gold, and such) do not provide for that same type of transparency.”