Could bitcoin mining actually be good for the environment?

Could bitcoin mining actually be good for the environment?
A token representing Bitcoin virtual currency among cables and LED lighting inside a ‘mining rig’ computer in this arranged photograph in Budapest, Hungary. (Photo: Akos Stiller / Bloomberg via Getty Images)

I was careful to put on my helmet and goggles while writing this because I expect a flurry of projectiles to come my way. But here is the proposition I will present — bitcoin mining may soon become a net positive for the environment.

Let’s roll back to 2018. A twentysomething Ukrainian named Sergii Gerasymovych was looking to expand his small bitcoin mining company in the US. While travelling around the country, he become intrigued by one of the waste products of gas fracking in thinly populated areas of the country, like rural Texas. These were the huge, angry flames leaping out of the top of the “chimneys” (called flare stacks) during extraction operations.

It struck him that this was wasted heat energy. Worse still, a large amount of methane was being emitted into the atmosphere — a gas with 84 times the global warming impact of carbon.

He thought, if I can capture this emission and redirect it through a heat turbine to power a bitcoin mine in a portable container next to the flare stack, there would be an upside for the environment and no energy would be stolen from other uses and wealth would be created.

Win-win-win. It looked too good to be true. 

He was not the only one to see this opportunity. Rolling forward to today, we see several companies deep into this space — EZ Blockchain (Gerasymovych’s company), Crusoe Energy Solutions (“stranded” energy solutions, get it?), Upstream Data, Equinor, Wyoming Oil and Gas and others. All mining bitcoin while removing methane and capturing unusable energy.

The data

C’mon, you may say. How could this possibly be a substantive help to our environmental challenges? So here is the data from a paper that came across my newsfeed. It is startling:

“Using Bitcoin mining to combust leaking methane sources [could mitigate] 23% of all global methane emissions: more than half the UNEP’s [United Nations Environment Programme’s] targeted reduction of methane of 45% by 2045. That means that Bitcoin mining has the potential to avoid nearly 0.15°C of warming by 2045.” 

There are certainly some questions to be asked here. The most obvious is: why can’t we redirect this energy capture to provide power to hospitals or houses? And the reason is that the flare stacks are usually very far from the main electricity grids and it is far too expensive to build powerlines to join the grid. So until now, the heat and methane simply get wasted and expelled as air pollution.

Other criticisms can be levelled, like whether our energies (excuse the pun) shouldn’t be directed at nuclear or renewables, and not at squeezing gas by-products for trapped energy. The paper that I read addresses these questions and others, rather convincingly, I thought.

Aside from gas flares, there is a deeper confused narrative around energy and bitcoin mining. Because almost the entire cost of bitcoin mining is the cost of electricity, miners are aggressively incentivised to go where mining is cheapest. And that is increasingly where there is the lowest demand — like hydroelectric plants at upstream dams, volcanic heat vents and other renewable sources where energy just leaks into rivers and air, far from population centres.

These explorations take advantage of the most important fact about bitcoin mining. It is cheaper to go to a power source where there is energy wastage because of oversupply. And that is further fuelled by the unique fact that bitcoin mining is about the only energy-intensive commercial activity that doesn’t need to be near an electricity grid. I can’t think of any other.

This continuing drive to “cheaper and more efficient” can be seen in the energy usage ascribed to bitcoin mining over the past few years. In 2020, bitcoin mining was estimated to use 2% of global energy — an alarming figure if it was growing year on year. But it is now somewhere between 0.12% and 0.6%, depending on which research you follow. Either way, downtrend. Fast. 

Carbon emissions? 0.08%. A rounding error.

Cleaning up

And most importantly, about 34% of bitcoin mining was “clean” in Q1 2021. It is now 58% clean. This makes the energy used in the production of bitcoin cleaner than the manufacturing of your phone and your computer and your car. So clean that Elon Musk has reversed his environmentally driven ban on accepting bitcoin a little over a year after imposing it.

Consider that a 2003 Fortune magazine article had the internet gobbling up all the world’s power within a decade. And a Newsweek report in 2017 had crypto mining gobbling all the world’s power by 2021.

These headlines are the result of the foolish application of linear extrapolation without considering the human ability to innovate and re-engineer. The bitcoin mining industry has been in the fishbowl for some years now, with environmentalists applying very public and loud pressure, which has filtered down through the media. What has happened, as it always does, is that the industry and its engineers responded. 

The need for energy to power bitcoin mines is also being touted as a catalyst for the development of renewable energy plants, like wind and solar. The builders of these plants have long been financially disadvantaged by the fact that there are times of the day when their surplus power is not required. 

And now, instead of having to suffer dead energy time, a new revenue stream is suddenly there for the taking — a bitcoin mine in a container. Portable, cheap and instantaneously profitable, suddenly making the financial model much more attractive. This means more solar and wind plants will be funded.

But even if we ignore all of this, consider that the bitcoin mining industry uses about as much energy as the cruise-ship industry. One provides a short fun distraction for 150,000 affluent humans and can’t scale. The other services nearly 200 million people, scales easily, and provides an entirely safe, open and uncensorable monetary system, especially for those excluded from the financial halls of power. Which is arguably much more useful to humanity. It is not an energy question. It is a value question.

Energy cost

As this article was going to press, a piece of research dropped that has blown the top off this debate. No one had ever done an apples-apples comparison of what it costs to transact payment on the bitcoin network vs the same transaction in traditional finance. The authors took absolutely everything into account — air conditioning for ATMs, the number of servers in banks, the cost of printing and transporting paper money, the cost of POS tills, etc.

Here is what popped out of the calculations, which are quite dense. Crypto payments are 56 times more energy-efficient than the traditional financial system, and over one million (!) times more energy efficient if the Lightning network is used (a new payments system built on top of the bitcoin network). Here it is.

So let me make a rash prediction — within two years the great crypto energy debate will be resigned to the quaint museum of forgettable brouhahas. DM/OBP 

Steven Boykey Sidley is a professor at JBS, University of Johannesburg.

Absa OBP

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