Is Bitcoin a threat to the environment, or its saviour?
As summer approaches and we head inexorably to a nuclear apocalypse, extinction-by-generative-AI or climate crisis obliteration, it’s nice to know that somebody, somewhere will blame Bitcoin for the end of the world.
While the volatility of the currency is well-known, the one constant is that Bitcoin is using too much of the world’s resources, ‘equivalent to a small country’ and that its proof-of-work protocol is an unnecessary impediment to Net-Zero commitments; Bitcoin mining should be banned.
As we know, these calls happen regularly and from country to country. As we also know, Bitcoin banning is as impossible as anything can be. Bitcoin miners are not blessed with innate goodness, but they know about economics. The cheaper the power the better, wherever it comes from and that’s where they will go.
One month it’s China, so mining moves to North Korea. Another month it’s Sweden, so miners up sticks to Finland. Then there are threats from the US that there will be a 30% tax and miners will go to Europe… but probably not Sweden.
The aforesaid Swedish are probably doing most to put off Bitcoin mining and not by swingeing words of banning, but just making it too expensive to do so.
Starting next month, the Swedish government will attempt to price Bitcoin miners out of the market by increasing the electricity tax by 6,000% from 0.006 Swedish Krona ($0.0006) to a whopping 0.36 Krona ($0.035) per kilowatt-hour (kWh).
The message is stark. You can’t make money here, so go somewhere else. But capitalism doesn’t care, somebody else will make it cheaper and miners will hoist their kit elsewhere. Probably Finland.
However, as mean as capitalism is, there are other more benign factors at work. Human ingenuity is at its best in a crisis, iterated by the current climate crisis/climate change depending on one’s fatalism.
And there are many in the crypto industry who are leading the way for Bitcoin to be mined sustainably and by ‘greening the grid’, be that by using solar, wind and hydroelectric power instead of fossil fuels… even using spare power from the grid that would otherwise be wasted.
Many Bitcoin mining facilities are now using these sustainable options or using ‘stranded’ energy such as flared gas that would otherwise be wasted. If the renewable energy lobby’s claim that green power is the cheapest form of electricity, then miners will inevitably use more of it… for no other reason than economics.
Contrary to public opinion, Bitcoin mining is already using a majority of sustainable energy. According to the latest quarterly report from the Bitcoin Mining Council, ‘a strong adherent for managing miners’ energy and employing sustainable alternatives’, miners are using 58.9% of sustainable energy and this percentage is rising on a monthly basis.
The stampede towards renewable energy is not just dust on the horizon; it’s real and others are jumping on the wagon (excuse the mixed metaphors). Not least Tether.
Earlier this week it announced that it would set up a Bitcoin mining operation in, er, Uruguay to become more sustainable – the first in its plans to to invest its resources into renewable energy production, marking its opening foray into the energy sector.
Tether certainly knows its GreenSpeak, epitomised by its CTO Paolo Ardoino:
“By harnessing the power of Bitcoin and Uruguay’s renewable energy capabilities, Tether is leading the way in sustainable and responsible Bitcoin mining. Our unwavering commitment to renewable energy ensures that every Bitcoin we mine leaves a minimal ecological footprint while upholding the security and integrity of the Bitcoin network.”
Well done, Paolo, you will now likely go to Green heaven, not hell.
Seriously, it will be places such as Uruguay where Bitcoin mining’s future inevitably lies. Fossil fuel is expensive, and uncool, look at other countries such as land-locked Bhutan, high in the Himalayas and replete with natural power.
Earlier this month, Forbes reported that it had followed the example of Central American company El Salvador by becoming only the second country to run a state-owned mining operation.
Already hydroelectricity provides power for all of its 800,000 citizens and also provides a huge 30% of Bhutan’s GDP.
So, the end of the world is not Bitcoin’s fault at all; it could even be the opposite. If anything these miners can be an example of how the rest of the world should use energy.
You heard it here first. Bitcoin is going to save the world. Phew, just in time.