The Bitcoin mining community, just like everyone else in the crypto space right now, the Bitcoin mining community is undergoing turmoil that has resulted in some high-profile bankruptcy filings. In light of the pervasive criticism it has faced regarding the use of fossil fuels, along with the rising cost of electricity, it might be in the best interests of the Bitcoin mining companies to shift towards green energy to ensure sustainability and profitability.
Going Green Best Bet For Crypto Mining Industry, Why?
Following Elon Musk’s announcement in May that Tesla would no longer be taking payment in BTC due to the increasing use of fossil fuels in mining, the industry went into crisis mode. A trade group, Bitcoin Mining Council (BMC), was set up to tackle, among other things, climate issues. One of the members of the BMC, TeraWulf, has pledged to run crypto mines using over 90% zero-carbon energy. Its CEO said, “everyone I talk to is now talking about carbon neutrality. The language has absolutely changed.”
In recognition of the environmental impact of the energy-intensive nature of Bitcoin mining, more than 200 companies and individuals came together to launch the Crypto Climate Accord in 2021, committing to net-zero operations by 2030 primarily by switching to renewable power sources. According to its website, the Crypto Climate Accord‘s overarching objective is decarbonizing the global crypto industry by prioritizing climate stewardship and supporting the entire industry’s transition to net-zero GHG emissions by 2040.
Notably, until recently, renewable energy sources did play a significant role in Bitcoin mining – up to 74% of BTC’s global energy consumption in 2019- since they are usually the cheapest option. Much of these renewables were from Chinese hydropower. Still, since the Chinese government’s 2021 ban on crypto, partly due to their enormous energy consumption, the proportion of renewable energy usage in the market has dropped to 38% in 2022.
In Texas, tech company Lancium is constructing Bitcoin mines that will run on renewable energy. Instead of competing with classic power consumption, they are marketing the product as a way of grid stabilization. Lancium offers its Bitcoin mining operations as an alternative to fossil-fueled power stations that may be scaled up or down to balance renewables-heavy power systems and promote their growth.
Only some people, however, view the shift from crypto mining to green energy as the best course of action. Economist Alex De Vries states that expending precious renewable energy on “random computation” rather than sectors that provide employment and other economic perks to a national economy can be problematic. Sweden has called for a ban on European cryptocurrency mining as it diverts renewable power that could be used to decarbonize other sectors, jeopardizing climate change mitigation efforts.
What is Ailing the Crypto Mining Industry?
Use of Fossil Fuels
Bitcoin utilises the proof of work consensus mechanism to validate and record transactions on the network. Bitcoin mining aims to solve complex mathematical problems for new coins. Other cryptocurrencies and NFTs also use proof of work, thereby contributing to the overall energy usage of the sector.
Bitcoin mining apps are energy intensive by design, and have garnered much criticism from environmental groups and politicians alike over the carbon-intensive process since much of the energy used comes from fossil fuel sources. Energy consumption for Bitcoin mining peaked at the end of 2021 and early 2022, consuming more than 200 terawatt hours.
Problematic Huge Energy Consumption
Due to its vast energy consumption, Bitcoin’s adverse environmental impact is comparable to those of other big polluters, such as the beef industry and the burning of crude oil to generate fuel, in a study published by the Journal Nature. The study found that the Bitcoin network uses as much electricity as entire countries; for instance, Bitcoin’s energy consumption for 2020 was 75.4 TW yr-1 pf electricity, as much energy as Argentina and more significant than the energy used by Austria and Portugal that year.
In the United States, fossil fuels account for more than 60% of energy production, some of it comes from coal, but natural gas is the primary fuel source for mining. In 2020 the US accounted for only 5% of the world’s Bitcoin mining, which rose to 35% just a year later. As mining rigs produce more energy, nearby plants need to produce more electricity, raising the likelihood of using fossil fuels.
Fossil fuels made up 62% of Bitcoin’s energy usage as of January 2022, according to the Cambridge Bitcoin Electricity Consumption Index (CBECI), down from 65% the previous year. As per the CBECI, while the reliance of miners on coal fell from 47% to 37%, the industry increased reliance on gas as it accounted for 25% of its energy usage compared to 16% last year.
With struggling coal power plants, certain states, like Kentucky, New York, and Montanaith struggling coal power plants, are consequently trying to attract mining firms. Others jurisdictions have grown concerned and banned cryptocurrency mining outright in the case of China.
Rising Electricity Prices
Energy prices have risen significantly across many markets, meaning miners’ expenses are at an all-time high. The increase comes at a time when Bitcoin miners have found it particularly tough, with the price of Bitcoin down 56% compared to last year, in addition to historically low hash prices, which are down to about $70 as compared to $361 last year.
Bitcoin mining machines use fossil fuels to maintain the network and has garnered much criticism for its role in the accumulation of GHGs and exacerbating climate change. Additionally, electricity prices are soaring, and hash prices are at an all-time low. Going green and adopting renewable energy sources is the course of action the mining industry needs to take to reduce its adverse impact on climate change and increase profitability for participants. Establishing the Bitcoin Mining Council and the Crypto Climate Accord is undoubtedly a step in the right direction.