Last year saw some remarkable milestones in the world of crypto-currencies and more specifically Bitcoin. It’s market capitalization crossed $1 Trillion, aBitcoin ETF (Exchange Traded Fund) debuted on the New York Stock Exchange, and El Salvador adopted Bitcoin as legal tender, just to name a few.
Naturally, this meteoric rise and widespread adoption has come with intense scrutiny. Congress has taken an interest in Bitcoin and the blockchain validation process commonly referred to as Bitcoin mining. Unfortunately, some members of Congress hostile to crypto-currency have trotted out the strawman argument that Bitcoin mining is bad for the environment due to the amount of energy consumed for the mining process.
This week, the U.S. House Committee on Energy and Commerce is hosting ahearing aimed at “cleaning up crypto-currency.” The title of hearing implies that crypto-currency and its mining activities are somehow dirty, which as we explain below is just untrue.
First, let’s acknowledge that every industrial activity uses a large amount of energy. Bitcoin mining is no different, however, the network is by far more efficient and arguably has more social utility when compared to gaming for example. Globally, Bitcoin mining uses 188 terawatts of energy annually. While this number may sound extreme on first blush, it’s statistically insignificant accounting for only 0.122 percent of global energy consumption. For even better context, Christmas lights (201 terawatts) and computer games (214 terawatts) use more energy than the entire bitcoin network.
When compared to other extraction activities, such as gold mining, we see that Bitcoin mining uses only a third of the energy. Furthermore, the Bitcoin industry is consistently looking for ways to reduce energy consumption and integrate newer energy sources, including renewables. According to the Bitcoin Mining Council, 57 percent of its energy usage comes from renewable sources, which is the largest percentage of any other comparable industrial sector.
Second, Bitcoin mining can be used as an effective tool towards a lower-emissions energy future. This is already being demonstrated in the oil and gas industry around the country where operators are rapidly adopting methods to use flared gas to mine Bitcoin rather than burn it off into the atmosphere.
Renewable energy development can also greatly benefit. Projects paired with Bitcoin mining can generate revenue from day one of initial operations which allows private industry to undertake renewable grid expansion projects without risks of being unable to generate profits while they wait for residential and commercial development. While an obvious benefit to renewable energy infrastructure development, it is rarely if ever acknowledged by opponents of Bitcoin and Bitcoin mining.
Additionally, Bitcoin mining can serve as a stabilizing force to the inherent mismatch between renewable energy supply and consumer demand that has undercut grid reliability. Since Bitcoin miners can easily turn on and off their operations, they maintain a higher load on the grid by pulling excess energy from the grid thereby reducing waste and providing a non-taxpayer funded revenue stream necessary to maintain operations for renewable energy projects. More importantly, when energy is in high demand miners can shutter operations that are helping to maintain a higher and consistent baseload on the grid. This ability to keep the grid baseload high and then ramp down at a moment’s notice allows utilities to send life-sustaining energy back to the grid. As we witnessed during Winter Storm Uri, grid stability can be a life and death matter and the evaluation of the benefits of Bitcoin mining should be taken seriously.
A major barrier to environmental improvements has always been cost. Traditionally, solving environmental issues has been contingent on taxpayer subsidies, but Bitcoin mining changes this. As Bitcoin mining expands it has the potential to not only reduce the network’s environmental footprint as necessary, but all industrial activities tied to the electrical grid.
Congress should continue to seek out a better understanding of the opportunities related to Bitcoin, other cryptocurrencies and blockchain applications without prejudice. The environmental criticisms surrounding bitcoin and other cryptocurrencies are nothing more than a red-herring.
Bitcoin mining is in fact developing some of the most creative solutions to longstanding environmental issues and has a very minimal impact on the environment. More importantly, Bitcoin mining can support low emissions energy technologies while strengthening our energy security.