Over the past year, one company that mines cryptocurrency had what seemed like the perfect place for its thousands of power-thirsty computers working around the clock to verify bitcoin transactions: the land of a coal-fired power plant in rural Montana.
But with the cryptocurrency industry under increasing pressure to limit the environmental impact of its massive electricity consumption, Marathon Digital Holdings made the decision to pack up its computers, called miners, and move them to a wind farm in Texas.
For us, it comes down to the fact that we don’t want to run on fossil fuels, said company CEO Fred Thiel.
In the world of bitcoin mining, access to cheap and reliable electricity is paramount.
But many economists and environmentalists have warned that as the still largely misunderstood digital currency rises in price and popularity, the mining process that is central to its existence and value becomes increasingly energy-intensive. and potentially unsustainable.
Bitcoin was created in 2009 as a new way to pay for things that would not be subject to central bank or government oversight.
Although it has yet to widely catch on as a payment method, it has seen its popularity increase in speculative investing despite volatility that can swing its price wildly.
In March 2020, one bitcoin was worth just over $5,000. This amount hit a record high of over $67,000 in November 2021 before dropping to just over $35,000 in January.
At the heart of Bitcoin’s technology is the process by which transactions are verified and then recorded on what is known as the blockchain.
Computers connected to the bitcoin network race to solve complex mathematical calculations that verify transactions, with the winner earning newly minted bitcoins as a reward.
Currently, when a machine solves the puzzle, its owner is rewarded with 6.25 bitcoins with a total value of around $260,000. The system is calibrated to release 6.25 bitcoins every 10 minutes.
When bitcoin was first invented, the puzzles could be solved using a regular home computer, but the technology was designed so that the problems became harder to solve as more and more more miners work there. These mining operations today use specialized machines that have no monitors and look more like a high-tech fan than a traditional computer.
The amount of energy used by computers to solve puzzles increases as more computers join in the effort and the puzzles become more difficult.
Marathon Digital, for example, currently has about 37,000 miners, but hopes to have 199,000 online by early next year, the company said.
It is difficult to determine the amount of energy used by the industry because not all mining companies report their use and some operations are mobile, moving storage containers full of miners across the country in search of energy. Low cost.
The Cambridge Bitcoin Electricity Consumption Index estimates that bitcoin mining has used about 109 terawatt hours of electricity over the past year, nearly the amount used in Virginia in 2020, according to US Energy. Information Center.
The current usage rate would be 143 TWh over a full year, roughly the amount used by Ohio or New York State in 2020.
The Cambridge estimate does not include energy used to mine other cryptocurrencies.
A key moment in the debate over bitcoin’s power consumption came last spring, when just weeks after Tesla Motors said it was buying $1.5 billion worth of bitcoin and would also accept digital currency as a medium. payment for electric vehicles, CEO Elon Musk joined critics in calling out the industry’s energy use and said the company would no longer take payment.
Some want the government to intervene with regulation.
In New York, Governor Kathy Hochul is under pressure to declare a moratorium on the so-called proof-of-work mining method used by bitcoin and to deny an air quality permit for a project at a power plant modernized coal-fired engine that runs on natural gas.
A New York state judge recently ruled that the project would not impact the air or water of nearby Seneca Lake.
Refueling or expanding coal and gas plants to make play money in the midst of a climate crisis is literally insane, Yvonne Taylor, vice president of Seneca Lake Guardians, said in a statement.
Anne Hedges of the Montana Environmental Information Center said that before Marathon Digital arrived, environmental groups expected the coal-fired power plant in Hardin, Montana to shut down.
It was a death watch, Hedges said.
We received their quarterly reports. We were looking at how well they worked. We saw it continue to decline year after year and last year that totally changed. It would have disappeared without bitcoin.
The cryptocurrency industry needs to find a way to reduce its energy demand and needs to be regulated, Hedges said. That’s all we can say about it. It is unbearable.
Some say the solution is to switch from proof-of-work verification to proof-of-stake verification, which is already used by some cryptocurrencies. With proof-of-stake, the verification of digital currency transfers is left to computers, rather than having them compete.
Individuals or groups who stake more on their cryptocurrency are more likely to get the job and the reward.
Although the method uses much less electricity, some critics claim that proof-of-stake blockchains are less secure.
Some companies in the sector recognize that there is a problem and commit to achieving net zero emissions by adding no greenhouse gases to the atmosphere from the electricity they use by 2030 by signing a crypto climate accord, modeled after the Paris climate accord.
All crypto communities should work together, as a matter of urgency, to ensure that crypto does not further aggravate global warming, but instead becomes a net positive contributor to the vital transition to a low-carbon global economy, says the agreement.
Marathon Digital is one of many companies pinning their hopes on harnessing excess renewable energy from solar and wind farms in Texas.
Earlier this month, Blockstream Mining and Block, formerly Square, announced they were opening a small off-grid mining facility in Texas using solar panels and Tesla batteries.
This is a step to prove our thesis that bitcoin mining can fund zero-emission electricity infrastructure,” said Adam Back, CEO and co-founder of Blockstream.
Companies say cryptocurrency mining can provide an economic incentive to build more renewable energy projects and help stabilize power grids.
Miners give renewable energy producers a guaranteed customer, making it easier to get financing for projects and produce electricity at full capacity.
Mining companies are able to contract for cheaper power because all the power they use can be cut and returned to the grid at any time, Thiel said.
In Pennsylvania, Stronghold Digital is cleaning up hundreds of years of coal waste by burning it to create what the state classifies as renewable energy that can be sent to the grid or used in bitcoin mining, depending on demand. of electricity.
The Pennsylvania Department of Environmental Protection is a partner in the work, which is using relatively new technology to burn coal waste more efficiently and with fewer emissions.
Left alone, piles of coal waste can ignite and burn for years, releasing greenhouse gases. When wet, coal waste releases acid into local waterways.
After using the coal waste to generate electricity, what is left is toxicity-free fly ash, which is state-registered as clean fertilizer, said Stronghold Digital spokeswoman Naomi Harrington.
As Marathon Digital gradually moves its 30,000 miners out of Montana, it leaves behind tens of millions of dollars in mining infrastructure.
Just because Marathon no longer wants to use coal power doesn’t mean there won’t be another bitcoin miner to take its place. Thiel said he assumed power plant owners would find a company to do just that.
No reason not to, he said.
(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)