This week, the House Energy and Commerce Committee will hold a hearing on the environmental impact of Bitcoin mining. Congress has of late become very concerned about the Bitcoin mining industry, which, since the Chinese ban on the practice, is increasingly domiciled in the U.S. Why worry about an industry that consumes approximately 0.55 percent of global electricity production? After all, energy associated with Bitcoin mining is roughly equivalent to the energy consumption of zinc mining and refinery, and less than the energy associated with the extraction of either copper or gold. It consumes the rough equivalent of the energy associated with running domestic tumble driers in the U.S. alone, and one fifth the energy used for domestic refrigeration.
It's well understood that Bitcoin miners can operate practically anywhere: One can mine with a meager amount of data, so 4G or satellite internet work just fine. Electricity that no one else will pay for is useful, here. This is why many Bitcoin miners have historically located themselves in southwest China, where hydro power had been massively overbuilt and often went unused. It explains the presence of miners in former aluminum smelting plants in hydro-rich Upstate New York. Miners have also identified fallow energy resources in British Columbia, built for the now-departed paper and pulp industries. And there is today a huge influx of miners into West Texas, where a wind and solar boom has created a massive overabundance of energy that the grid simply cannot consume (due to mismatches between the supply and demand for power, as well as insufficient transmission lines to the rest of Texas). Due to the overbuilding of renewables and lack of local demand, West Texas has the highest frequency of negative- or zero-pricing events for power in the U.S. today. Bitcoin miners are attracted to the cheap power—they are willing to scoop up the stranded power and rescue the economics of wind and solar installations that might otherwise be uneconomical.
And even when miners are drawing conventional grid power, they make for an entirely benevolent presence. Bitcoin mining is fully computational, requiring little physical infrastructure beyond an enclosure and some cooling. This means that miners can migrate practically anywhere, and can locate their operations in rural locations where energy is abundant and underutilized. And since Bitcoin miners can tolerate interruption without significantly impairing their operations, they can provide services to the grid that few other sources of energy demand can.
This is due to the remarkable properties of mining itself. Each individual computation is statistically independent of the last one, meaning that the process of mining can be stopped at any moment without a loss of progress. This allows miners to dial down their usage on short notice, if necessary. Grid operators love this, as they reckon with increasingly unstable grids due to an influx of wind and solar. Normally, grid operators have to keep fast-reacting natural gas power plants in reserve in order to backstop unreliable wind and solar. But with flexible load in the form of Bitcoin mining, these operators have a new tool: They can simply ask miners to reduce their consumption to offset a loss of supply—and miners gladly do, within seconds. Today, the vast majority of Bitcoin miners in North America participate in these "demand response" programs.
Compare the flexibility of Bitcoin miners to the rigidity of traditional data centers. Normal data centers must maintain uptime and redundancy precisely because they offer specific uptime guarantees to their clients. They certainly cannot accommodate frequent interruption or downtime. Not all loads are equivalent.
That Bitcoin miners qualify as a flexible load is a big deal. The International Energy Agency has asked for 500GW (roughly one Thailand's worth) of new demand response resources worldwide by 2030 in order to meet renewable goals. This added demand-side flexibility is a crucial enabler of grid modernization.
Unlike conventional data centers, households, hospitals, most industrial consumers or office buildings, Bitcoin miners happily participate in these "demand response" programs wherever available.
While other industrial sources, like electric vehicle charging or hydrogen electrolysis, will also chip in as flexible loads, Bitcoin miners will be a crucial part of the broader story. These miners are building out high-voltage energy infrastructures at locations on the grid where electricity is abundant and demand is low. This can be repurposed in the future for all kinds of high-energy use cases, from generic computation to hydrogen production.
Even the Bitcoin mining operations that are frequently demonized by anti-Bitcoin activists aren't remotely as bad as they may first appear. You may have heard about the Greenidge Bitcoin mining plant in the Finger Lakes region in New York. Politicians and the press like to describe it as a coal plant, brought back online solely to mine Bitcoin. But this isn't true: It was converted from coal to much cleaner natural gas and, in addition to mining Bitcoin, it provides energy to households in the area. A refurbished natural gas plant is hardly something to be upset about. More natural gas usage is responsible for driving down the carbon intensity of the U.S. grid over the last decade. Wind energy enthusiasts might be interested to know that fast-reacting natural gas plants are what are used to backstop the intermittent nature of wind power. In other words, without natural gas, grids cannot accommodate wind.
Regrettably, critics of Bitcoin mining tend not to be experts on energy policy. They are fond of asserting that Bitcoin miners deprive households of power, apparently unaware that electricity only has a finite useful radius. Critics often think of a single grid spanning the nation, imagining that a Bitcoin miner in Texas might drive up electricity bills for a household in Maine.
But the reality is that electricity infrastructure is geographically constrained, and pockets of free negatively priced energy routinely emerge on the grid. Over the last decade, negative prices—a signal of energy overabundance—have become much more common, particularly in the windy vertical corridor stretching from Texas to the Dakotas. It's these stranded islands of energy—growing in size every year, as solar and wind account for more generation, while transmission lags—that are particularly ripe for Bitcoin miners. And far from driving up prices, if a miner is buying energy that no one else wants, he is actually fortifying the grid, making energy available if other industrial consumers move in—or if transmission lines are built to transport it elsewhere.
Lastly, as Congress and the White House turn their eyes to Bitcoin mining, it's worth noting that mining is a global industry, beyond the reach of any one government regulator. For the sake of Bitcoin's emissions impact, we should be thankful that China banned the practice and Kazakhstan is pushing it away, rewarding cleaner miners based in North America. However, policymakers in the U.S. could squander their advantage by making it more difficult to mine domestically. If they do, miners will flow back overseas to more carbon-intense locales where mining occurs, such as Iran, Venezuela, Russia or Kazakhstan.
Ultimately, policymakers do not get to decide whether Bitcoin mining occurs or does not occur. It will happen regardless, as long as the market continues to value Bitcoin. But policymakers can help determine whether Bitcoin miners locate themselves in the U.S., where they can help build a more abundant and renewable energy grid, or whether miners migrate to other geographies with dirtier energy. The choice is still theirs.
Link: https://www.newsweek.com/bitcoin-mining-americas-most-misunderstood-industry-opinion-1669892
Nic Carter is the general partner of Castle Island Ventures, an early-stage venture capital firm in the blockchain industry. ->The views expressed in this article are the writer's own.
If Stalking is your thing: https://www.castleisland.vc/
