There’s no question that Bitcoin and other cryptocurrencies have gotten a bad rap over the years. The year 2022 in particular has been a rough one as the house of cards has fallen for various crypto platforms, leading to a brutal bear market.
All the while, questions remain over the sustainability of Bitcoin and the practice of “mining” it. While I agree that there are legitimate environmental concerns with Bitcoin mining, I also think that the media has blown some worries out of proportion. In my opinion, evidence points more toward a bright, sustainable future for Bitcoin, with the state of Texas leading the way for the U.S.
What does Texas know that the rest of the country doesn’t? And what are the social, economic and environmental sustainability impacts of this?
Ignoring the speculative investment side of Bitcoin, there are some interesting questions that the technology powering it presents. One of the larger ones that the media have raised over the last few years is whether Bitcoin is environmentally sustainable. It’s a good question because, assuming you haven’t been living under a rock, you know we’re currently on the cusp of some serious climate tipping points. In the coming decades, we will likely be forced to adapt to a new climate world. Some will benefit from this new world, and others will not, but overall we and future generations will be facing climate challenges we have never before imagined.
Add to that a whole new digital financial system that appears to be producing enough CO2 emissions to make it much harder for us to reach specific climate goals, and you can see why Bitcoin is concerning.
In case you have, in fact, been living under a rock, most scientists agree that human-caused CO2 emissions are leading to a runaway greenhouse effect that will warm the planet to alarming temperatures. Current climate models show we can expect some concerning tipping points closer to a 2°C global temperature increase. Several nations have come together as a result of these studies to form the Paris Climate Agreement. The agreement is for all major CO2-producing countries to reduce their emissions and bring the expected global temperature change under 1.5°C.
But here’s the problem. Mining for Bitcoin requires the use of powerful computers that race to solve (useless) equations that help secure the network. And as a reward for solving these equations, a miner (computer) is granted some fraction of Bitcoin. The issue is that as the price of Bitcoin rises, the motivation to mine Bitcoin increases, and thus a highly competitive market is created.
Nowadays, profiting from Bitcoin mining requires massive warehouses of computers that are all competing for Bitcoin rewards. This has led large companies to invest heavily in mining equipment so that they have more computers and thus more chances of earning Bitcoin. Unfortunately, while this creates an incredibly secure network, it also produces enormous emissions as these computers run all day to produce Bitcoin.
Estimates suggest that mining Bitcoin collectively consumes about 121 terawatt hours a day. For comparison, Argentina produces about 125 terawatt hours, and the Netherlands produces 110 terawatt hours. In fact, Bitcoin consumes more electricity than 188 different small countries. All of this equates to about 22.9 million metric tons of CO2 released in a year. None of this includes the e-waste produced by mining operations continually refreshing their electronic equipment and disposing of the old.
Despite all of this, Texas has been welcoming cryptominers into the state with hopes of capturing the new mining boom. Texan politicians are seeing some economic and social benefits associated with this. Based on the research I’ve gathered, I tend to agree with them.
I don’t think Bitcoin is going anywhere anytime soon. Instead, it’ll likely become deeply integrated with our existing financial and internet infrastructure. As nations and states try to ban or ignore it, miners will just move to more welcoming regions. China’s ban on Bitcoin mining in 2021 is part of the reason miners are migrating to the U.S. in the first place. We might as well take advantage of this.
What’s more, I think there are environmental benefits associated with the arrival of Bitcoin. The media’s treatment of the crypto industry’s environmental impacts is valid but construes its value and potential for future improvements.
Here’s a brief summary of the current state of cryptomining in Texas. In May 2022, cryptomining company Mawson Infrastructure announced it’ll build a four-site mining facility in Texas with a five-year lease. The facility should be operational by the end of the year.
The Texas Tribune also reports that rural counties generally welcome the new wave of cryptominers establishing operations in Texas. Counties hope that the new industry will create jobs and produce tax revenue. Some citizens complain about noise pollution, but these issues are being addressed with solutions such as submerging mining rigs in liquid. The liquid dampens noise while also cooling the machines.
In terms of environmental and social sustainability, most of the discussion has been concerned with Texas’s unique power grid. The Electric Reliability Council of Texas (ERCOT) is the organization responsible for managing the Texas power grid. In 2021, an intense winter storm acted as a major stress test on the Texan power grid, and it didn’t do so well. So understandably, there is some concern over how ERCOT and cryptomining will affect each other.
Senator Elizabeth Warren recently asked the ERCOT what impact cryptomining would have on energy costs for families and businesses. Miners argued that mining would help with Texas’s energy demand response and produce lower energy costs for residents.
As previously mentioned, I think there are actually environmental benefits to Bitcoin mining. The media has tended to focus on Bitcoin’s CO2 emissions, often comparing its usage to that of small countries. It begs the question of whether or not Bitcoin is at fault for its own emissions or if this speaks to a more fundamental issue: the fact that we rely so heavily on fossil fuels to power our grids. My main argument in favor of embracing Bitcoin mining is that I think it incentivizes an overall transition to renewable energy sources.
Renewable energies such as solar and wind can only be captured at certain times of the day. Without adequate battery storage, this leads to curtailment as grids attempt to reduce output during certain times of the day and manage oversupply. Otherwise, that surplus energy could end up wasted.
Studies have specifically looked at how plugging Bitcoin mining operations into ERCOT’s power grid could help with curtailment. Basically, miners could utilize the excess energy. Lessening curtailment could increase profits by $239 million – $605 million because the state would not have to invest in expensive curtailment-reduction solutions such as energy storage. At the same time, lessening curtailment could further incentivize the use of renewable energy sources with the understanding that power-hungry Bitcoin mining operations can utilize surplus energy—a massive win for environmental and economic sustainability.
It seems that Texas is looking to increase profits, increase jobs, and strengthen its power grid by embracing Bitcoin mining. This is an excellent move considering the looming threat of climate change and the desire to switch to renewables, paired with the potential economic crisis headed our way post-COVID and inflation.
I hope that more U.S. states and international countries see Bitcoin mining as a legitimate industry with the ability to hedge against climate and economic threats, rather than something to see as a threat and ban outright. Overall, cryptomining is a new industry with ample opportunity for improving environmental, social and economic sustainability.