Bitcoin Mining for a Sustainable Future
The discourse around Bitcoin’s environmental impact has only intensified in recent years. The mainstream narrative prefers to simplify this discussion into a binary issue, equating Bitcoin’s energy usage to environmental harm. Nevertheless, a growing body of real-world evidence and scientific papers suggest a more nuanced reality: Bitcoin can be a positive environmental force.
In an era where addressing our environmental challenges runs paramount, the unique nature of Bitcoin mining is fostering innovative solutions aligned with a sustainable future. From incentivizing renewables, mitigating methane emissions, and promoting the growth of a more sustainable economic system, Bitcoin is emerging as a key tool in our fight against climate change.
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Four Key Characteristics of Bitcoin Mining
Before delving into specific cases, it's crucial to grasp that Bitcoin stands out as a unique energy user — there is nothing quite like Bitcoin mining. Here are four distinguishing characteristics that set Bitcoin mining apart from other energy consumers:
Bitcoin Mining is an Entirely Electric Process
There are no direct emissions associated with Bitcoin mining. Similar to using lights in your home or driving an electric car, the emissions intensity of these activities depends entirely on the source of electricity used.
Bitcoin Mining is Location Agnostic
Bitcoin miners have the flexibility to set up operations anywhere. With no geographical constraints, miners only need access to an energy source and an internet connection.
Bitcoin Miners are Non-Rivalrous Consumers of Energy
Bitcoin miners do not compete with the electricity needs of homes or the general population, it’s simply too expensive. Due to their need for low-cost energy, Bitcoin miners actively seek out wasted, stranded, or surplus energy to power their operations.
Bitcoin Mining is an Entirely Synthetic Production Process
Because Bitcoin is a digital commodity, Bitcoin miners can power up or down their operations at a moment's notice, with unprecedented flexibility. This attribute makes Bitcoin mining an incredible load balancer and an active participant in demand response for electrical grids.
Now that we have outlined these fundamental principles, let’s delve into specific cases while keeping these key characteristics in mind.
Bitcoin’s Energy Use
According to the Cambridge Bitcoin Electricity Consumption Index, the Bitcoin Network currently consumes roughly 0.25% of the world's total electricity production, on par with the amount of electricity consumed by tumble dryers in the United States. This statistic makes it trivial why so much attention is focused on Bitcoin's environmental impact when in reality the network could disappear tomorrow and we would be no closer to solving our environmental problems.
Why Bitcoin Seeks Out Sustainable Low-Cost Energy
Of Bitcoin’s total energy consumption, sustainable energy sources make up over 55% of the network's energy mix, establishing it as one of the most sustainably powered industries in the world. The reason behind Bitcoin’s high proliferation of sustainable energy comes down the to economic incentives of the network.
The extremely cost-competitive nature of Bitcoin mining means Bitcoin miners necessitate access to low-cost energy which most often comes in the form of surplus renewables or wasted energy sources such as flared gas or vented methane. In most cases, fossil fuels are simply too expensive to utilize economically. Additionally, by making use of otherwise wasted energy sources like flared gas, Bitcoin can even have a carbon-negative impact and reduce emissions from entering the atmosphere.
This point is further exemplified by the fact that the emissions intensity of Bitcoin is falling while the network itself is scaling and growing in adoption. Over the past three years, the emissions intensity of the entire Bitcoin network has fallen by over 50% due to an increasing proliferation of sustainable energy sources in its total energy mix. This highlights the free market incentive Bitcoin miners have to use sustainable energy.
Bitcoin Mining For Demand Response
Due to Bitcoin’s digital nature and miners' ability to shut down or power on operations with the flip of a switch, Bitcoin mining is emerging as an unparalleled load balancer to an electrical grid and Bitcoin miners are increasingly participating in demand response programs.
As renewable energy gains prominence in our energy matrix and is increasingly incorporated into our electrical grids, the need for demand response increases significantly. The intermittent nature of renewable energy sources, such as the sporadic availability of sunlight or wind, creates a situation where the supply of energy does not always match the demand for energy at any given time. For example, wind often blows more at night creating an abundance of energy supply, but people are asleep and are not demanding for this electricity. This creates a situation where renewables are often wasted leading to more volatile energy prices for consumers.
Enter Bitcoin — because miners can promptly power operations on and off, miners function as effective load balancers to an electrical grid. At any given time, Bitcoin miners stand ready to provide demand when supply is abundant and reduce their demand when supply dwindles and electricity is needed elsewhere. This unique capability positions Bitcoin miners as an invaluable asset for aligning the mismatched dynamics of energy production and consumption for a given electrical grid.
Imagine a scenario where a town heavily relies on intermittent renewable sources, such as wind and solar, for its electrical grid. During a windy night, the electrical grid experiences an abundance of wind energy, surpassing the current demand since citizens are asleep. In this situation, Bitcoin miners, equipped with the ability to swiftly power up, seize the opportunity. They activate their mining operations, providing an outlet for the surplus energy and acting as a demand response mechanism, ensuring no energy is wasted. As dawn approaches, the wind's intensity diminishes and citizens wake up, creating a potential energy deficit where demand may now exceed available supply. In this situation, Bitcoin miners can promptly power down, aligning with the decreased renewable energy supply and increase in demand from citizens.
By acting as a load balancer and participating in demand response programs as shown in the example above, Bitcoin mining can stabilize electrical grids and lead to lower electricity prices for consumers. In this way, it is easy to see how Bitcoin can be complementary to any electrical grid.
Incentivizing the Growth of Renewables
Bitcoin mining and renewable energy are a match made in heaven. The intermittent nature and remote locations of renewable energy often pose economic challenges, limiting our expansion of this critical energy infrastructure. Bitcoin mining necessitates access to low-cost energy and lots of it, potentially allowing it to serve as an economic catalyst for renewable energy projects.
Renewable energy sources such as solar, wind, and hydro often generate surplus energy that remains unused and is challenging to store effectively. Bitcoin miners can capitalize on this surplus energy, effectively acting as a renewable energy subsidy. Doing so improves the economics of renewables; by providing demand during periods of surplus supply, renewable energy operators earn more profit than otherwise would be the case.
This increased profit sends a price signal to other renewable energy developers; build more renewable energy! In essence, Bitcoin is creating a market for surplus energy, which in turn can incentivize the growth and utilization of renewables, making them more economically viable in the long run and promoting a carbon-neutral future.
Renewable energy also suffers from location mismatch. Often, renewable energy sources are not located where they’re needed most. Instead of near urban centers like cities, renewable energy sources often tend to be in remote areas. This means transmission and distribution lines need to be built from renewable energy sources to the urban centers, a process that can take years. In the meantime, you have perfectly good energy going to waste. Enter Bitcoin miners — thanks to their high mobility, they can co-locate next to renewable energy projects in their infancy stage, providing much-needed revenue at a time when transmission and distribution are yet to be built.
Together, these unique uses of Bitcoin mining work to improve the economic viability of renewable energy and can help promote the development of more renewable energy projects since developers can recoup their capital costs much faster. If you want to explore the role of Bitcoin in expanding renewable energy further, check out this recent report from accounting giant KPMG.
Electrifying Rural Areas
Gridless is a Bitcoin mining company that co-locates next to stranded energy sources in rural Africa to help electrify villages absent any power. They highlight a remarkable example of how Bitcoin improves the economics of renewables, leading to the electrification of rural areas and subsequently the growth of renewable energy sources.
In regions of Africa where access to electricity is notably constrained, endeavours such as those by companies like Gridless aim to alleviate this issue through the strategic deployment of small Bitcoin mining operations. Envision this: You’re situated in a rural African village absent electricity, where the lack of access to power is a prevalent challenge. A nearby stream presents an opportunity with its constant water flow, yet the feasibility of harnessing this potential energy for the village's power needs remains economically impractical.
Enter Bitcoin mining. Gridless will co-locate next to the stream and establish a small Bitcoin mining operation. Because Bitcoin pays you for electricity, a newfound economic viability arises, prompting the initiation of a miniature grid infrastructure supplemented by Bitcoin miners. This innovative approach makes harnessing this previously unutilized power source economical and Bitcoin mining facilitates a more rapid cost recovery of the project. In doing so, this mini-grid can now supply electricity to the rural village, where previously no electricity was available, representing a significant improvement in the quality of life experienced by anyone living there.
What I just described above is not merely a theoretical scenario but a tangible reality actively unfolding through the initiatives spearheaded by companies like Gridless. An article from MSN eloquently described this scenario in an article titled The surprising, simple answer to Africa’s rural energy problems — Bitcoin mining.
“Small Bitcoin mines can be immediately profitable, and can therefore fund a renewable minigrid and supply power to the community at no cost. And, if this seems too good to be true, it gets even better.”
If you’re interested in learning more about these initiatives, check out ‘Stranded’ a recent article from Alex Gladstein, Chief Strategy Officer at the Human Rights Foundation that explores “how Bitcoin is monetizing stranded energy, financing electrical infrastructure, and empowering millions.’
Methane Mitigation through Bitcoin mining
Bitcoin mining also has the potential to address environmental issues associated with methane — one of the most potent greenhouse gasses. Methane, which has a global warming potential 80 times that of carbon dioxide, is responsible for 30% of global warming to date. Mitigating its current emissions is widely recognized as a crucial lever to slow climate change.
Methane is frequently released during the decomposition of waste in landfills and through the flaring of gas. Unfortunately, this energy is uneconomical to use, so the methane instead leaks into the atmosphere as a byproduct and contributes to our stock of greenhouse gas emissions. Instead, by harnessing the wasted energy from these processes for Bitcoin mining, we can mitigate methane emissions associated with these harmful processes. Vespene Energy offers a stunning illustration of methane mitigation via Bitcoin mining.
In this way, Bitcoin mining is also creating a market for wasted energy, once again thanks to its prerequisite of low-cost energy. This dual-purpose utilization transforms environmental liabilities, like landfills and gas flares, into assets, by creating economic value from otherwise stranded energy sources. The synergy between Bitcoin mining and methane mitigation further demonstrates how this novel technology can be leveraged to address our environmental challenges.
The Future Of Bitcoin Mining
This exploration of Bitcoin’s environmental impact unveils a nuanced reality that diverges from the mainstream narrative of environmental harm. In this article, we highlighted Bitcoin’s potential to act as a catalyst for positive environmental change. From incentivizing the growth of renewable energy by transforming surplus energy into a subsidy to mitigating methane through utilizing wasted energy in Bitcoin mining, Bitcoin is emerging as an unexpected ally in the fight against climate change.
However, it doesn't stop there — in this article, we explored two practical applications of Bitcoin mining, but further environmental benefits may arise through systemic changes. Deflationary money, which is widely adopted, could incentivize saving over consumption, helping end rampant consumerism and pursuits of “infinite growth” that run paramount in society today.
Ultimately, this highlights how many of our environmental problems are systemically ingrained. If we cannot address the environmental challenges posed by our current economic system, could an alternative monetary system offer the solutions we seek? Only time will tell, but as the discourse continues to evolve, it’s becoming increasingly evident that Bitcoin, often criticized for its environmental footprint, could, in fact, play a pivotal role in shaping a more sustainable future.