In a recent report published by the Climate Portal at the Massachusetts Institute of Technology (MIT), the potential benefits of Bitcoin mining were brought to the fore, particularly its role in supporting the Electric Reliability Council of Texas' (ERCOT) curtailment program for large flexible loads (LFL). This program, which was formally implemented in 2022, has seen Bitcoin miners play a crucial role in managing energy consumption during unexpected demand surges, thereby contributing significantly to maintaining grid stability.
A case in point was on December 24, 2022, when Winter Storm Elliott swept across North America. Bitcoin miners curtailed approximately 100 EH/s at peak, which accounted for 38% of the total Bitcoin network hashrate for that day. This incident underscored the role of Bitcoin miners as reliable flexible load sources for energy grids within the U.S.
The MIT report also delved into the potential climate advantages offered by Bitcoin mining. The researchers pointed out that Bitcoin mining could reduce global methane emissions, a byproduct of natural gas extraction. Often, oil producers find it uneconomical to use or transport this gas due to costly and insufficient infrastructure, leading to venting or flaring on-site, which releases harmful methane into the atmosphere. However, the report suggests that if this gas were combusted in electrical generators, the Bitcoin mining sector could reduce equivalent CO2 emissions by up to 25%, with potential reductions of up to 63% if accounting for flare outages.
Another environmental benefit highlighted by the researchers is Bitcoin mining's potential to utilize abandoned oil and gas wells. The report states that 59% of the 3.7 million abandoned wells in the U.S are left unplugged, emitting 6.9 million tons of CO2 annually. By establishing operations near these orphaned wells, Bitcoin miners could subsidize the cost of sealing these wells, harnessing the otherwise wasted energy to generate electricity. This strategy could generate revenue to fund well-sealing initiatives, consequently mitigating climate impact. Given its location-agnostic requirements, Bitcoin mining is ideally positioned to leverage flared gas and abandoned oil wells, marking a transformative moment in the industry's trajectory towards sustainable operations.
The report also underscores the increasing incorporation of renewable energy into Bitcoin mining activities. This trend suggests that the industry could play a pivotal role in bolstering the renewable energy market by driving up demand. A testament to this trend is the landmark partnership between Tesla, Block, and Blockstream, who collaborated to establish a 3.5 MW off-grid, solar-powered Bitcoin mining operation in Texas. The MIT researchers posit that through creating partnerships like these, investments in new renewable energy infrastructure can become more economically feasible.
In conclusion, the MIT report presents a compelling case for the potential benefits of Bitcoin mining, not only in terms of supporting grid stability but also in contributing to environmental sustainability. As the industry continues to evolve, it will be interesting to see how these potential benefits are realized and what impact they will have on the broader energy landscape.
The Criticism
Bitcoin mining is frequently denigrated for its "wasteful" energy use, which implies that the end Bitcoin network is not useful, a claim that Bitcoin's 100's of millions of users might find good reason to challenge. The energy, and associated costs, required to secure the network are precisely how Bitcoin generates its security. If there was no cost, then there would be no security.
The Bitcoin network provides a freely available, censorship-resistant, debasement-protected, human rights-preserving monetary network for the entire world. Within that context, we believe the amount of energy used, and the associated relatively small addition to global GHG emissions, is absolutely worth the cost, and clearly, so do the hundreds of millions of Bitcoin users globally; who are all voluntarily sharing the energy costs of the mining network, while foregoing alternative consumption.
The Bitcoin Network’s energy efficiency & utility is not comprehensively understood by focusing entirely on the particulars of mining; broadly, it is essential to appreciate the societal merit of non-state money. This view is widely shared among Bitcoin proponents, and to be clear, we count ourselves among them. The gross and systematic distortion of price signals caused by costless and arbitrary monetary inflation creates malinvestment, economic inefficiencies, and waste on a scale that would dwarf Bitcoin’s approximate 0.05% share of global energy consumption.
Observing Bitcoin’s energy consumption to be similar to that of a small nation makes sense when one sees the utility Bitcoin is offering. Bitcoin is programmable, permissionless, sound money; something which many nations are not able to provide their citizens with. There is a sense in which Bitcoin is a small, digital nation, in virtue of its facilitating commerce and settlement for millions of people. Being among the world’s top 10 currencies, without borders, a government, or a military to secure its value, is no small accomplishment.
Viewing Bitcoin’s monetary utility strictly as that of a ‘store of value’, similar to gold, it is noteworthy that the global gold mining industry consumed some 265 TWh of power in 2020. Bitcoin has a meaningful claim to monetary use as a ‘means of exchange’ and ‘unit of account’, in a way that gold arguably does not in the 21st century. In any case, Bitcoin mining uses a fraction of the energy required to mine Gold.
In addition to the direct financial utilities of Bitcoin, which can comfortably justify Bitcoin’s energy usage in and of itself, Bitcoin also serves as a global timestamping utility. This is because the Bitcoin network has to reach consensus on the ordering of transactions (to prevent double-spend attacks). A global and incorruptible timestamping service has immense use for the global economy; knowing when data existed is immensely important. As DeFi takes off, tethering data to a reliable timestamp, that isn’t provided by a single (corruptible) centralized entity, will continue to be of fundamental importance.
