A new report released last week by CoinShares suggests that bitcoin mining may be far more environmentally friendly than we previously expected. That’s because prior attempts to put a carbon footprint estimate on the bitcoin mining network merely relied on data that made many assumptions on the power sources feeding most mining operations. But according to the CoinShares report, the vast majority of bitcoin mining done today is powered by renewable energy sources.
The Debate That Never Ends
One persistent argument that has followed bitcoin from its early days through to now is the infamous energy debate. Proponents of Bitcoin say that since Bitcoin is not a company, it hires no employees, builds no office buildings, and does not pay for international business trips, bitcoin provides financial services for the entire world without the wasteful expenditures of a bank that offers fewer services than bitcoin. Bitcoin detractors, on the other hand, are quick to point out the proof-of-work mining mechanism that bitcoin uses, which inevitably leads to a hash rate war that incentivizes large-scale miners to burn up as much electricity as possible as they chase the next block reward.
This new report does not bring into question the amount of electricity used by large-scale bitcoin miners. Instead, it presents a reasonable calculation based on where most of the world’s massive mines are and where those regions get their power from.
Sichuan province is home to the vast majority of all China-based bitcoin mining activity. The province is still considered to be reasonably underdeveloped in comparison to the high-tech coastal cities of China like Beijing, Shanghai, and Shenzhen. However, the province that is often famed for its spicy cuisine is also the home of a growing renewable energy movement.
According to Wikipedia, Sichuan province has over 50 planned or currently in construction hydroelectric power sources in addition to the dozens or so that are already operational. Admittedly the region does have a handful of coal-fired power plants, but their numbers pale in comparison to the sheer amount of hydroelectric projects that are either already in operation or will come online in the next few years.
While it can be difficult to get accurate data about power systems in China, it’s pretty difficult to hide something as large as a hydroelectric power plant. Conversely, it would be tough to claim that such a power plant exists when it doesn’t, as it would be clearly visible from satellite. This suggests that the hydroelectric power plant count in Sichuan province is at least highly accurate, if not wholly accurate.
So what does all of this mean? In simple terms, it means that most bitcoin mining that occurs in China is happening in areas that are powered by renewable energy.
Not all of the renewable growth is happening in China. On the contrary, the report suggests that most mining operations based in China are either packing up and moving to other countries, or are no longer investing in their Chinese infrastructure. The reason for this is because far more favorable conditions, both financially and from a regulatory perspective, exist in other Western countries.
One popular destination for new mining operations is in central and eastern Washington state. One of the biggest bitcoin miners from China, Bitmain, has reportedly set up facilities there that will take advantage of the low electricity cost. That electricity is again sourced mainly from hydroelectric sources which are abundant in the state.
Aside from directly powering mining machines, another issue to contend with is waste heat. Mining devices spit out tons of hot air which needs to be piped out of large facilities similar to how a data center for Google operates. For this reason, miners are further incentivized to set up shop in naturally cold areas so that there is much less need to produce cold air to keep the machines running properly. Using this type of natural air conditioning dramatically reduces energy consumption.
It’s unlikely that this energy debate will end anytime soon. Even if cryptocurrencies managed to replace the entire global economy completely, it would always have its detractors. Those detractors will come up with any reason to say why bitcoin and other cryptocurrencies are bad. With reports like this, cryptocurrency proponents have more ammunition with which they can defend their preferred means of transmitting and storing wealth.
And while renewable energy sources are not consequence-free, the fact that bitcoin mines can be set up nearly anywhere means that miners have the flexibility to choose not only the most cost-effective but the greenest energy sources near which to set up. This is in comparison to major banks that want to set up on Wall Street and other financial hubs. This consequently limits their ability to be selective about using renewable energy to power their data centers, office towers, international business trips, and so on.
Perhaps in some ways bitcoin really is a greener currency than even the greenback itself.
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