Bitcoin (BTC) mining often finds itself at the heart of a heated debate concerning its environmental ramifications. Recent research, notably the study "Leveraging Bitcoin Miners as Flexible Load Resources for Power System Stability and Efficiency," co-authored by Nick Carter and the late Brad Jones, offers a fresh perspective on this topic. This study posits that Bitcoin mining, contrary to popular belief, may not only be less harmful to the environment than perceived but could also play a pivotal role in advancing renewable energy sources.
Bitcoin Mining and Environmental Sustainability
The primary argument against Bitcoin mining has been its perceived extensive energy consumption, raising concerns about its environmental sustainability. However, Bitcoin mining could facilitate the development of greener energy infrastructures. It draws parallels between the energy demands of BTC mining and those of data centers integral to the internet, an analogy that aids in contextualizing the energy usage within a broader technological framework.
Context Matters
Inarguably, Bitcoin mining utilizes electricity to power its PoW mechanism. Whether it is a lot or a little depends on your frame of reference. But remember, PoW is essential to a decentralized consensus, network security, and the issuance of new BTC (i.e., Bitcoin’s predictable monetary policy). Bitcoin is Bitcoin without PoW.
In absolute terms, Bitcoin mining used an estimated 82 TWh of electricity in 2021, a 9% increase from 2020, according to CoinShares’ 2022 on the Bitcoin mining network. As of December 2021, the current annualized draw is 89 TWh. To put this in perspective, the Bitcoin network consumed 0.05% of the total global electricity consumed in 2019, essentially a rounding error when it comes to global energy consumption. For comparison, NYDIG in Q3 2021 that domestic tumble dryers and data centers used 108 TWh (0.07%) and 204 TWh (0.13%), respectively, in 2020.
Therefore, yes, Bitcoin consumes approximately the same amount of energy as a small nation-state, such as with its ~5 million inhabitants…. Or clothes dryers. Both are true. But strangely, there aren’t many (any?) campaigns targeting clothes dryers, data centers, cruise lines, video games, gold mining, etc. In fact, when Bitcoin’s electricity consumption is plotted against major polluting countries, the popular argument appears tenuous.
Observing Bitcoin’s energy consumption to be similar to that of a small nation makes sense when one sees the utility Bitcoin offers. Bitcoin is a programmable, permissionless, sound currency, something that many nations are not able to provide to their citizens. It is a top-10 base money in the world today. In contrast, the Finnish markka is not one of the , nor used by anyone outside of the 5 million people in Finland.
Despite these eye-opening statistics and comparisons, Bitcoin critics remain unconvinced because they do not see the utility of Bitcoin. However, just because one person doesn’t benefit from something, does it give that person the right to try and take it away from those who do? What if this same stance was taken with the above examples? Many people do not play video games or go on cruises. Should they, therefore, cease to exist, too? The fact that these industries exist at all proves that someone somewhere values them. So, why is Bitcoin any different?
Mitigating Methane Emissions through Bitcoin Mining
An intriguing aspect of the study is its focus on methane emissions, a byproduct of oil production. The traditional method of dealing with this byproduct, flaring, contributes to pollution. The study proposes an alternative use for this methane – employing it in Bitcoin mining. This approach not only helps in reducing pollution but also aligns with policy objectives aimed at curtailing methane emissions.
What is “stranded energy”?
Because drilling for oil generally takes place in remote locations where pipeline and powerline infrastructure is non-existent, the natural gas that is a byproduct of oil drilling is often left “stranded.”
In an ideal world, that gas would be captured and routed to a gas processing facility to become natural gas that we use to heat our homes and businesses. However, the reality is that there is not sufficient infrastructure to capture and route that gas to processing in all geographies, and there are operational instances in which gas capture is simply an inadequate solution. This gas is considered “stranded” because it has been brought to the surface but has no viable use case.
In the oil production process, natural gas flows up the wellbore along with the coveted oil and the water byproducts. Oil producers have to do something with that “associated” gas. It should absolutely not be released to the atmosphere because of potential health effects and its global warming potential (methane is a 25x more potent greenhouse gas than CO2).
Methane gas from oil drilling that cannot be economically brought to market or used for any other purpose is stranded gas. Since drillers cannot avoid producing this methane during drilling and cannot sell it, they can only vent or flare it. Venting is the worst option for the environment because it immediately releases methane into the atmosphere. This is avoided at all costs and is prohibited by the majority of regulations.
What is the process of “flaring” gas?
In situations where the gas cannot be utilized, the only thing that can be done is to flare – or burn – the gas so that the hydrocarbons are broken down in a combustion reaction to CO2 and water. When gas is flared, it is essentially wasted in the sense that the energy content of that gas was not put to good use.
Flaring requires combusting the trapped gas, which converts it to carbon monoxide (CO2), as opposed to merely releasing methane. Flaring is an improvement, but it continues to lose energy and emit carbon dioxide. A true solution would be to find a way to use and put to constructive use this stranded energy. Enter Bitcoin mining.
How can Bitcoin help?
Using relatively inexpensive, small-scale generators on-site, this stranded gas that serves no other function can be transformed into electricity to power Bitcoin miners. Due to their adaptability, Bitcoin miners are the best consumers for this energy. Unlike costly pipeline projects or stationary power plants, Bitcoin miners may be relocated to wherever they are needed with minimal environmental impact. The gas from the drilling site is sold to Bitcoin miners at extremely low pricing (as it would otherwise be wasted), generating additional cash for the oil producer.
Additionally, using the gas in a generator to power miners is significantly more efficient than flaring, resulting in a greater amount of methane being burned and less being released into the atmosphere. The oil producer earns more money and emits fewer pollutants. The Bitcoin miner receives inexpensive energy without increasing his or her net energy usage.
In reality, Bitcoin’s footprint is approximately 0.1% of total global emissions — again, a rounding error, it uses a higher proportion of renewable energy than most countries and industries. But can it do even better?
Methane is one of the biggest contributors to global warming thanks to its greenhouse effect. It has ~50x the greenhouse gas effect as carbon dioxide. Luckily, beginning around 2020-21, a subset of Bitcoin miners began using this stranded gas to power their miners, removing it and its atmospheric effects from the world. Companies such as Upstream DataGreat American MiningGiga EnergyCrusoe EnergyWesco Operating, Inc are leading the way, just to name just a few.
Bitcoin + Energy
Bitcoin and energy share several fundamental characteristics. Both are conserved entities; they cannot be created or destroyed. Their relationship to order and entropy and their absolute limits (like the maximum supply cap of Bitcoin) highlight a deep-seated parallel between the two. Bitcoin, in many ways, is a manifestation of energy in the financial domain. Its fixed supply and predetermined nature make it a symbol of increasing quality and value over time.
The notion that the quality of money reflects the quality of the society it serves is compelling. A society thriving on strong, quality money, like Bitcoin, is posited to be more robust and of higher quality. This theory suggests that civilizations with sound financial foundations tend to flourish while those reliant on weaker monetary systems falter.
Bitcoin's trajectory is seen as a pathway to a more meritocratic society where strength and excellence are recognized and celebrated. This paradigm shift emphasizes rewarding merit and achievement, shaping a society that values excellence and quality over mediocrity.
This research compels a reassessment of the general perception of Bitcoin mining's environmental impact. By offering a nuanced understanding of its role in energy consumption and its potential benefits for renewable energy development, the study provides a basis for a more informed discourse on the subject. For investors and users in the cryptocurrency domain, these insights are not just academically interesting but could also inform future investment and regulatory decisions in the field of digital currencies.
In conclusion, while concerns about Bitcoin mining's energy consumption are not unfounded, they need to be contextualized within a broader understanding of its potential benefits. As the cryptocurrency sector continues to mature, it becomes increasingly crucial to approach such debates with a balanced and well-informed perspective.
