Ultimate Resource On The Bitcoin Miner And The Mining Industry (Page#2) #GotBitcoin
Crypto Miners Exempt From IRS Reporting Rules, US Treasury Affirms. Ultimate Resource On The Bitcoin Miner And The Mining Industry (Page#2) #GotBitcoin
The U.S. Treasury affirmed that crypto miners and wallet operators are exempt from the IRS reporting rules, preparing appropriate regulations.
The cryptocurrency industry in the United States is about to score a major legal win as the United States Treasury Department plans to spare crypto miners and other “ancillary parties” from tax reporting rules.
In a letter to a group of senators on Friday, the U.S. Treasury indicated that it plans to exempt crypto miners, stakers and other market participants from rules that would require crypto brokers to share data on their clients’ transactions with the Internal Revenue Service.
“Appreciate the Treasury Department affirming that crypto miners, stakers and those who sell hardware and software for wallets are not subject to tax reporting obligations,” Senator Rob Portman said, announcing the news on Twitter.
In the letter, Treasury Assistant Secretary for Legislative Affairs Jonathan Davidson said that the department’s position is that “ancillary parties who cannot get access to information that is useful to the IRS are not intended to be captured by the reporting requirements for brokers.”
Davidson also emphasized crypto validators are “not likely to know whether a transaction is part of a sale,” while entities involved in offering services related to hardware or software crypto wallets “are not carrying out broker activities.”
The Treasury will also consider “the extent to which other parties in the digital asset market, such as centralized exchanges and those often described as decentralized exchanges and peer-to-peer exchanges, should be treated as brokers,” the letter notes.
Bloomberg reported that the Treasury is planning to issue proposed regulations to include its stance on the broker definition.
As previously reported, U.S. President Joe Biden signed the $1-trillion infrastructure bill in mid-November 2021, requiring crypto market participants to report all digital asset transactions worth more than $10,000 to the IRS.
Several senators, including Pat Toomey, Ron Wyden and Cynthia Lummis, subsequently urged the Treasury to clarify the definition of broker in the infrastructure law in December, planning to offer related legislation. A group of House Democrats also backed a similar initiative in November.
Billionaire Investor Charlie Munger Thinks China Was Right To Ban Bitcoin; Crypto Twitter Responds
Charlie Munger, the vice chairman of Warren Buffett-owned investment conglomerate Berkshire Hathaway, believes China made the correct decision in banning bitcoin.
The billionaire investor, who has has never been a fan of bitcoin, has now prompted a disparaging response on social media with his latest criticism of crypto.
“The Chinese made the correct decision, which is just simply to ban them,” Munger said in an interview for the Sohn Hearts & Minds Investment Conference, the Australian Financial Review reported Friday.
The Chinese state has introduced much tougher measures against crypto in recent months, outlawing trading and banning financial institutions from offering any crypto-related services, while also tightening its crackdown on the mining industry.
Munger praised China for coming down hard on investment booms and not letting them go too far. “They’re acting in a more adult fashion,” he said. “They were right to step down so hard on corruption.”
He added that he wished crypto had never been invented, saying that people in the crypto business “are not thinking about the customer; they’re thinking about themselves.”
Inevitably, numerous commentators from the crypto community ridiculed Munger’s position on Twitter, both for his praise of China and his ongoing disapproval for bitcoin and other cryptocurrencies.
Charlie Munger praising China for Banning Crypto saying he wishes “they’d never be invented” reaffirms how much older generations can’t stand the fact that ppl can work so much smarter now, than harder.
Can you imagine feeling so threatened you have to condemn innovation?
I am reminded of the Buffet quote:
“It takes 20 years to build a reputation and five minutes to ruin it”
— Dan McArdle (@robustus) December 3, 2021
ConocoPhillips Selling Excess Gas To A Bitcoin Miner In North Dakota
The oil major is aiming to reach zero routine flaring by 2025.
ConocoPhillips (COP), the giant oil and gas exploration and production company, is routing excess natural gas from one of its Bakken region projects in North Dakota to supply necessary power to a bitcoin (BTC) mining operation.
* “ConocoPhillips has one bitcoin pilot project currently operating in the Bakken, where gas that would otherwise have been flared is routed to a bitcoin processor owned and managed by a third party,” a ConocoPhillips spokesperson told CoinDesk in an emailed statement.
* So-called flaring, where excess natural gas is burned off into the atmosphere as part of oil drilling operations, has become standard industry practice because of the lack of transportation infrastructure. Aiming for the win-win of running their rigs while slashing carbon emissions from flaring, bitcoin miners, including Crusoe Energy and JAI Energy, are setting up shop next to drillers to capture that power. However, it’s not known if either of these companies are involved with this ConocoPhillips project.
* “Every oil and gas company in five to 10 years will have some exposure to mining bitcoin,” Ryan Leachman, a founding partner of JAI, told CoinDesk in November.
* ConocoPhillips management said on a recent conference call that the company is committed to further reducing its methane emissions and has a “zero routine flaring ambition” by 2025.
* In 2019, ConocoPhillips was among the founding members of the OOC Oil & Gas Blockchain Consortium, a group of energy companies looking to establish “key blockchain standards, frameworks and capabilities” within the industry.
Crypto-Mining Host BitRiver Rus Had Net Zero Carbon Footprint In H2 2021
The carbon emissions of crypto mining are central to regulatory debates globally.
BitRiver’s Russian subsidiary had net zero carbon emissions in the second half of last year, the first firm in Russia to receive that accreditation, the company said in a Wednesday press release shared with CoinDesk.
The report was verified by U.K.-based standards testing firm BSI.
“A positive opinion on zero greenhouse gas emissions from an international auditor may be considered, without exaggeration, a watershed event for the industry,” BitRiver Rus CEO Igor Runets said in the press release.
The environmental impact of crypto mining has been at the center of regulatory debates in the U.S. and Europe, with some estimates putting the Bitcoin network’s energy consumption on a par with countries like Argentina.
The testing firm verified that BitRiver’s direct and indirect emissions of carbon dioxide (CO2) were equal to zero, in accordance with the standard ISO 14064-1:2006. Greenhouse-gas emissions are calculated using international renewable energy certificates (I-RECs) that certify the renewable origin of electricity.
BSI did not respond to CoinDesk’s request to confirm the report at the time of publication.
Verifying BitRiver’s greenhouse gas emissions report was an “unusual project,” David Fardel, BSI’s CEO for CIS and France, said in the statement.
BitRiver Rus, based in Irkutsk, Siberia, is one of the largest mining firms in Russia, offering hosting services for large-scale mining. Its data centers are 300 megawatts, and the company plans to increase their size over sixfold by the end of 2022. The company manages five proprietary data centers it has built from scratch, and is implementing a further 15 projects in Russia and abroad, according to the statement.
Cash-Strapped Bitcoin Miners Sell Stock AND Bitcoin Just To Stay Afloat
Miners are starting to get strapped for cash and need a boost since BTC has dropped in price since November, and revenue has fallen even further due to increased competition.
Bitcoin (BTC) miners are selling off coins from their stockpiles and shares in their companies after the profitability of mining took a dive since November.
With Bitcoin currently holding around $43,500, about 33% below the all-time high (ATH) of about $69,000, miners are selling at a less-than-opportune time. However, electricity and equipment bills must be paid.
Data from on-chain analytics firm Glassnode shows that Bitcoin miners have become net sellers after being net hodlers for months.
Since Nov. 9, the return from mining 1 BTC has decreased by an average of 50.5% for the two most popular mining devices, the Antminer S9 and the S19, according to data by blockchain research firm Arcane Research. This means the return on investment has decreased at a greater rate than the price of BTC.
A big increase in hash rate has contributed to the lower profitability of mining. Competition among miners increases proportionally with the hash rate because it means more devices have been turned on to compete to find the next block.
Cointelegraph reported on Sunday that Bitcoin had reached a new ATH in hash rate. That milestone was achieved by jumping from 188.4 exahashes per second (EH/s) to 284.11 EH/s in a single day. The hash rate is currently at about 232.19 EH/s as of the time of writing according to YCharts.
Some large mining operations have opted to increase their cash piles or pay their bills by selling stocks rather than crypto. On Friday, a spokesperson for the Marathon Digital Holdings (MARA) mining operation told Bloomberg, “We started hodling in October 2020, and since then, we have not sold a single satoshi.”
Instead, Marathon filed with the United States Securities and Exchange Commission to sell $750 million in stocks and securities. Seeking Alpha reported that Marathon intends on using a “substantial portion” to purchase hardware and general purposes.
MARA is currently down 0.56% and priced at $28.24 in after hours trading.
An analyst for wealth management firm D.A. Davidson told Bloomberg on Monday that miners have ideological and business reasons for being reluctant to sell Bitcoin:
“Big miners would rather sell equity, because their shareholders want them to hold their Bitcoin and not even think about selling it.”
Crypto Miner BIT Mining Ditches Data Center Build In Kazakhstan Due To Unstable Power Supply
The company’s bitcoin mining rigs hosted by third-party data centers in the country remain operational.
Hong Kong-based cryptocurrency miner BIT Mining (BTCM) pulled the plug on its near-$10M mining data center construction project in Kazakhstan, citing unstable local power supply.
* BIT Mining announced in May a plan to invest $9.33 million to construct and operate a data center in Kazahkstan with a total power capacity of 100 megawatts (MW). However, during its quarterly earnings report this morning, the company said that deal had been terminated.
* The move won’t affect BIT Mining’s bitcoin mining machines deployed in third-party data centers in the country, said the firm.
* It’s another data point showing the continued difficulty miners are facing in Kazakhstan as the national grid operator moved first to ration electricity to crypto miners, and then to cut them off completely. On Dec. 2, CoinDesk reported that Bitmain-backed miner BitFuFu – following weeks of power rationing in Kazakhstan – abandoned its mining rigs there and purchased new ones to set up in the U.S.
* BIT Mining, meanwhile, continues to ramp up data center investment in the U.S., saying development of its Ohio mining site is expected to be completed in the first half of this year. The location will have a total planned power capacity of up to 150 megawatts.
* Turning to Q4 operating results, the company reported revenue of $495.8 million, up 26% from $393.1 million in the previous three months. Helping to boost revenue were deployments of mining machines in Hong Kong and the U.S., and stronger mining pool business thanks to rising cryptocurrency prices.
* The company’s Q3 revenues were revised lower by $33 million because of a reclassification of commissions charged to mining pool customers, Vice President Danni Zheng told CoinDesk via WeChat on Thursday.
* Shares are down 2.6% in late-morning U.S. trading, with miner peers also sliding alongside a 4% decline in the price of bitcoin (BTC).
Flower Powered: Bitcoin Miner Heats Greenhouses In The Netherlands
A greenhouse in the Netherlands warmed with Bitcoin miner waste heat brings new meaning to the word “Dutch oven.”
Bitcoin (BTC) mining generates a lot of “waste” heat. As energy prices spiral out of control in Europe, miners have come up with creative ways of recycling the heat generated by solving valid Bitcoin blocks.
Whereas a miner is drying wood from a local timber mill in Norway, across the North Sea in the Netherlands, a miner is heating greenhouses to grow produce and bloom “Bitcoin flowers.”
In a win-win partnership between a Dutch farmer and a Bitcoin miner, Bitcoin Bloem mines Bitcoin and cultivates flowers in greenhouses in the province of North Brabant, southeast of Rotterdam.
It works like this: Bitcoin Bloem mines BTC in the farmer’s greenhouses and pays the electricity bill; the farmer gets free heat to grow their crops. Consider the “Bitcoin flowers” that Bitcoin Bloem sells the cream in the coffee to the climate-friendly operation.
Bert de Groot, founder of Bitcoin Bloem, told Cointelegraph that the operation “reduces the use of natural gas” in the greenhouse growing process, as Bitcoin miner heat replaces polluting gas heaters.
Plus, using BTC miners for heating saves both the farmer and Bitcoin Bloem a pretty penny. For the farmer, miner heat makes sense because natural gas prices have “skyrocketed.” For Bitcoin Bloem, it gets access to cheaper electricity.
When asked whether the Netherlands could welcome more BTC miners in the future, de Groot said the country could “be an optimal location for Bitcoin mining.”
“Most large scale data centers of tech giants are located in the Netherlands — for example, Google and Facebook — because there is an abundance of cooling water and cheap electricity for large-scale operations.”
He added that the “Texas solution would be interesting to roll out in the Netherlands.” The Texas solution revolves around “load balancing” and working in tandem with local authorities to regulate power demand.
Currently, the Netherlands remains a relatively strict European country about cryptocurrency activities. However, grassroots movements such as Domino’s franchises offering salary top-ups in BTC and Dutch football clubs supporting Satoshi’s invention are building momentum.
The flowers that Bitcoin Bloem sells are appropriately named “White Rabbit” and “Blue Pill.” In a jibe at the energy fear, uncertainty and doubt that is often slung at Bitcoin, the website jokes, “We offer you flowers for your Bitcoin because your bitcoin is a waste of energy too.”
America’s Power Grid Is Increasingly Unreliable
Behind a rising number of outages are new stresses on the system caused by aging power lines, a changing climate and a power-plant fleet rapidly going green.
The U.S. electrical system is becoming less dependable. The problem is likely to get worse before it gets better.
Large, sustained outages have occurred with increasing frequency in the U.S. over the past two decades, according to a Wall Street Journal review of federal data. In 2000, there were fewer than two dozen major disruptions, the data shows. In 2020, the number surpassed 180.
Utility customers on average experienced just over eight hours of power interruptions in 2020, more than double the amount in 2013, when the government began tracking outage lengths.
The data doesn’t include 2021, but those numbers are certain to follow the trend after a freak freeze in Texas, a major hurricane in New Orleans, wildfires in California and a heat wave in the Pacific Northwest left millions in the dark for days.
The U.S. power system is faltering just as millions of Americans are becoming more dependent on it—not just to light their homes, but increasingly to work remotely, charge their phones and cars, and cook their food—as more modern conveniences become electrified.
At the same time, the grid is undergoing the largest transformation in its history. In many parts of the U.S., utilities are no longer the dominant producers of electricity following the creation of a patchwork of regional wholesale markets in which suppliers compete to build power plants and sell their output at the lowest price.
Within the past decade, natural gas-fired plants began displacing pricier coal-fired and nuclear generators as fracking unlocked cheap gas supplies. Since then, wind and solar technologies have become increasingly cost-competitive and now rival coal, nuclear and, in some places, gas-fired plants.
Regulators in many parts of the country are attempting to further speed the build-out of renewable energy in response to concerns about climate change. A number of states have enacted mandates to eliminate carbon emissions from the grid in the coming decades, and the Biden administration has set a goal to do so by 2035.
The pace of change, hastened by market forces and long-term efforts to reduce carbon emissions, has raised concerns that power plants will retire more quickly than they can be replaced, creating new strain on the grid at a time when other factors are converging to weaken it.
One big factor is age. Much of the transmission system, which carries high-voltage electricity over long distances, was constructed just after World War II, with some lines built well before that. The distribution system, the network of smaller wires that takes electricity to homes and businesses, is also decades old, and accounts for the majority of outages.
A report last year by the American Society of Civil Engineers found that 70% of transmission and distribution lines are well into the second half of their expected 50-year lifespans. Utilities across the country are ramping up spending on line maintenance and upgrades. Still, the ASCE report anticipates that by 2029, the U.S. will face a gap of about $200 billion in funding to strengthen the grid and meet renewable energy goals.
Another factor is the changing climate. Historically unusual weather patterns are placing great stress on the electric system in many parts of the U.S., leading to outages.
Weather-related problems have driven much of the increase in large outages shown in federal data, topping 100 in 2020 for the first time since 2011. Scientists have tied some of the weather patterns, such as California’s prolonged drought and wildfires and the severity of floods and storms throughout the country, to climate change.
They project that such events will likely increase in years to come. Unlike electric systems in Europe, distribution and transmission lines in the U.S. were typically built overhead instead of buried underground, which makes them more vulnerable to high winds and other weather.
Those weather extremes are raising the costs of power network upgrades for utilities all over the country. That in turn is set to raise power bills for homeowners and businesses.
Public Service Enterprise Group Inc., which serves 2.3 million electric customers in New Jersey, plans to invest as much as $16 billion in transmission and distribution improvements over the next five years to replace aging equipment and make the grid more resilient to extreme weather events, such as a highly unusual spate of tornadoes that swept the state last year.
Ralph Izzo, PSEG’s chief executive, said the plan is critical to ensuring reliability, especially as customers become more dependent on the grid to charge electric vehicles and replace traditional furnaces and gas appliances with electric alternatives.
The movement toward electrification is in part driven by consumers, amid mounting concerns about climate change, as well as initiatives among cities and towns to enact mandates aimed at phasing out natural gas for cooking and heating.
“That resiliency needs to be further enhanced, because the solutions to climate change are going to put more challenges on the grid,” Mr. Izzo said. “Those are the kinds of things that really keep you awake at night.”
The historic shift to new sources of energy has created another challenge. A decade ago, coal, nuclear and gas-fired power plants—which can produce power around the clock or fire up when needed—supplied the bulk of the nation’s electricity.
Since then, renewable energy sources, including wind and solar farms whose output depends on weather and time of day, have become some of the most substantial sources of power in the U.S., second only to natural gas.
Grid operators around the country have recently raised concerns that the intermittence of some electricity sources is making it harder for them to balance supply and demand, and could result in more shortages. When demand threatens to exceed supply, as it has during severe hot and cold spells in Texas and California in recent years, grid operators may call on utilities to initiate rolling blackouts, or brief intentional outages over a region to spread the pain among everyone and prevent the wider grid from a total failure.
Companies around the country are rapidly adding large-scale batteries to store more intermittent power so it can be discharged during peak periods after the sun falls and wind dies.
But because such storage technology is somewhat new, and was, until recently, relatively expensive, it remains a small fraction of the electricity market, and grid operators agree much more will be needed to keep the system stable as more conventional power plants retire.
The problem could soon threaten New York City. The New York Independent System Operator, or NYISO, which oversees the state’s power grid, last month warned of possible supply shortages in the coming years as several gas-fired power plants close or operate less frequently in light of stricter state air quality rules.
New York, which has set a goal to eliminate emissions from its electricity supplies by 2040 and no longer has any coal-fired power plants, also recently shut down a nuclear plant some 30 miles north of Manhattan after critics for years called it a safety hazard.
NYISO said its reserve margins—how much electricity it has available beyond expected demand—are shrinking, increasing the risk of outages. A 98-degree, sustained heat wave could result in shortfalls within New York City as soon as next year, a circumstance that would likely force NYISO to call for rolling blackouts for the first time ever.
“We already foresee razor-thin margins,” said Zach Smith, NYISO’s vice president of system and resource planning. “The risk is compounded when we take into consideration unforeseen events.”
New York is adding substantial amounts of new wind and solar generation, as well as battery storage, and NYISO has said that it is critical that the projects remain on track to improve the stability of the system in the coming years. Already, wind and solar developers across the country are facing headwinds related to supply-chain issues, inflation and the amount of time it often takes to get approval to connect to the grid.
The North American Electric Reliability Corp., a nonprofit overseen by the Federal Energy Regulatory Commission that develops standards for utilities and power producers, warned in a report last month that the Midwest and West also face risks of supply shortages in the coming years as more conventional power plants retire.
Within the footprint of the Midcontinent Independent System Operator, or MISO, which oversees a large regional grid spanning from Louisiana to Manitoba, Canada, coal- and gas-fired power plants supplying more than 13 gigawatts of power are expected to close by 2024 as a result of economic pressures, as well as efforts by some utilities to shift more quickly to renewables to address climate change.
Meanwhile, only 8 gigawatts of replacement supplies are under development in the area. Unless more is done to close the gap, MISO could see a capacity shortfall, NERC said. MISO said it is aware of this potential discrepancy but declined to comment on the reasons for it.
Curt Morgan, CEO of Vistra Corp. , which operates the nation’s largest fleet of competitive power plants selling wholesale electricity, said he is worried about reliability risks in New York, New England and other markets as state and federal policy makers pursue ambitious goals to quickly phase out fossil fuel-fired power plants.
His concern is that the plants will retire before replacements such as wind, solar and battery storage come online, he said, given the cost and challenge of quickly building enough batteries to have meaningful supply reserves.
“Everything is tied to having electricity, and yet we’re not focusing on the reliability of the grid. That’s absurd, and that’s frightening,” he said. “There’s such an emotional drive to get where we want to get on climate change, which I understand, but we can’t throw out the idea of having a reliable grid.”
Serious electricity supply constraints have historically been rare. Most recently, the Texas grid operator called for sweeping outages during an unusually strong winter storm last February that caused power plants and natural gas facilities of all kinds to fail in subfreezing temperatures. Millions of people were in the dark for days, and more than 200 died.
California, which experienced outages during a West-wide heat wave in the summer of 2020, also called on residents to conserve power several times last summer amid a historic drought that constrained hydroelectric power generation across the region.
The state is now racing to secure large amounts of renewable energy and batteries in the coming years to account for the closure of several conventional power plants, as well as potential constraints on power imported from other states when temperatures rise.
California state Sen. Bill Dodd, Democrat from Napa, recently introduced legislation that would require the state’s electricity providers to offer programs that compensate large industrial power users for quickly reducing electricity use when supplies are tight, helping to ease strain on the grid.
“We just can’t go down the road of having rolling blackouts again,” Mr. Dodd said. “People expect their government to keep the lights on, and our reliability situation in California still isn’t where it needs to be.”
Similar challenges have emerged elsewhere in the West. PNM Resources Inc., a utility that provides electricity for more than 525,000 customers in New Mexico, has warned that it would likely have to resort to rolling blackouts this coming summer, following the June retirement of a large coal-fired power plant.
It has recently proposed keeping one of the generating units online for an extra three months to help meet demand during the hottest months of the year.
Tom Fallgren, PNM’s vice president of generation, said the company faced significant delays in getting regulatory approval for several solar projects to replace the coal plant’s output, as well as construction delays tied to supply-chain issues.
A spokeswoman for the New Mexico Public Regulation Commission said the agency does its best to address all utility proposals in a fair and timely manner.
Mr. Fallgren said he anticipates even steeper challenges in the coming years as the company works to replace output from a nuclear plant with a combination of renewable energy and battery storage.
“We used to do resource planning on a spreadsheet. It used to be very simple,” he said. “The math is just astronomically more complicated today.”
One of the biggest challenges facing grid operators and utility companies is the need for better technology that can store large amounts of electricity and discharge it over days, to account for longer weather events that affect wind and solar output. Most large-scale batteries currently use lithium-ion technology, and can discharge for about four hours at most.
Form Energy Inc., a company that is working to develop iron-air batteries as a multiday alternative to lithium-ion, recently announced plans to work with Georgia Power, a utility owned by Southern Co., to develop a battery capable of supplying as many as 15 megawatts of electricity for 100 hours.
It would be a significant demonstration of the technology, which the company is aiming to broadly commercialize by 2025.
Form Energy CEO Mateo Jaramillo said the U.S. has ample capability to produce power, but increasingly finds itself short on electricity during periods of high demand and low production as the generation mix changes.
“That’s sort of a feature of this new grid that we find ourselves with today,” he said.
Other outage risks are mounting as extreme weather events test the strength of the grid itself. A spate of strong storms in Michigan last summer left hundreds of thousands of residents in the dark for days as utility companies rushed to make repairs.
DTE Energy Co. , a utility with 2.2 million electricity customers in southeastern Michigan, had more than 100,000 customers lose power.
CEO Jerry Norcia called the storm barrage unprecedented, and said the company needed to invest more heavily in reliability.
DTE now plans to spend an additional $90 million to keep trees away from power lines and is working to hire more people to help maintain its system. But it may take time for such utility improvements to fully materialize, and meanwhile, consumers may suffer further inconveniences.
Michael Fuhlhage, a professor at Wayne State University who lives just outside of Detroit, hadn’t thought much about the power grid until a few years ago, when he began noticing an uptick in the number of times severe weather caused his lights to go out. He has since started measuring outage length by the number of trash bags it takes to clean out his fridge.
In August, a storm caused a dayslong outage while he was visiting family, and he returned home to find a mess of spoiled food.
“That was probably a three-garbage bag storm,” he said. “We worry every time there’s some kind of weather coming in now, and that’s not an anxiety we had to deal with before.”
State Lawmakers In Illinois, Georgia Propose Tax Incentives For Bitcoin Miners
Lawmakers in Illinois and Georgia are hoping to give tax breaks to crypto mining companies.
The U.S. states of Georgia and Illinois are both looking to introduce tax incentives for cryptocurrency mining, according to legislation filed this year.
According to a bill introduced on Thursday, House representatives in Georgia are proposing tax exemptions for the sale or use of electricity in crypto mining activities. An Illinois Senate bill introduced in late January is also looking to extend an existing tax incentive for data centers to crypto mining.
Mining describes the computing process through which popular cryptocurrencies like bitcoin and ether are minted. The energy-intensive process has come under fire by regulators around the world, but the U.S. has embraced it and is now the market leader in crypto mining.
Georgia and Illinois are just the latest to consider tax incentives for miners. Both Texas and Kentucky offer similar tax breaks to attract miners to their states. Meanwhile, at the national level, Senators Ron Wyden (D-Ore.), Cynthia Lummis (R-Wyo.) and Pat Toomey (R-Pa.) are looking to make sure a crypto tax reporting provision in the U.S. infrastructure bill does not apply to miners.
After China – previously the world leader in bitcoin mining – outlawed all crypto mining activities in the country in May 2021, the U.S. quickly picked up on demand. According to data from the Cambridge University’s Centre for Alternative Finance, within three months of China’s ban the U.S. became the hottest bitcoin mining spot in the world, racking up 35% of the bitcoin hashrate, or the computing power used per second in the bitcoin mining process.
Like Kentucky House Bill 230, the Georgia House Bill 1342 is looking to entice bitcoin miners by offering tax breaks for energy use. The four Republican lawmakers in Georgia who introduced the bill are seeking to amend the state’s official tax code to include “exemptions from sales and use tax, so as to exempt the sale or use of electricity” used in the commercial mining of digital assets.
Meanwhile, the bipartisan Illinois Senate Bill 3643, introduced by State Sen. Sue Rezin (R) looks to amend the Civil Administrative Code of Illinois to include crypto mining centers as “qualifying Illinois Data center” over a 60-month period, effective immediately if the bill is passed and then signed into law by the governor. State Sen. Julie A. Morrison (D) added her name to the bill on Wednesday.
But to qualify for the Illinois tax incentive, existing and new enterprises looking to make use of the incentive must first make an investment of no less than $250 million in the state and create at least 20 full-time jobs. Within two years of qualifying, enterprises must also certify they are carbon neutral, according to the proposed bill.
Meanwhile, some federal lawmakers led by Sen. Elizabeth Warren (D-Mass.), are scrutinizing crypto mining companies on their climate impact. In 2019, the global bitcoin mining industry used more energy than Poland, a country with roughly 38 million people, according to the Cambridge Centre.
Georgia Lawmakers Consider Giving Crypto Miners Tax Exemptions In New Bill
The U.S. state is expected to have 56,000 Bitmain miners operating by October as part of an agreement with Bitmain, ISW Holdings, and Bit5iv.
Five members of the Georgia House of Representatives have introduced a bill that would exempt local crypto miners from paying sales and use tax.
On Monday, Georgia representatives Don Parsons, Todd Jones, Katie Dempsey, Heath Clark, and Kasey Carpenter introduced HB 1342, a bill that has yet to be titled. The legislation proposes amending the state tax code “to exempt the sale or use of electricity used in the commercial mining of digital assets” and would likely only apply to commercial miners operating in a facility of at least 75,000 square feet — roughly 6,968 square meters.
This proposed bill is the latest in a series of state-level measures aiming to encourage crypto miners to set up shop. In January, Illinois lawmakers introduced a bill to extend tax incentives for data centers engaged in crypto mining. Kentucky proposed similar legislation in March 2021.
Electricity costs remain a major factor for crypto firms looking to expand their operations in the United States and beyond. Canadian Bitcoin (BTC) mining company Bitfarms announced in November it was planning to build its first data center in Washington, citing the state’s “cost-effective electricity” and production rates.
Texas has also received a number of firms following China’s crackdown on mining, possibly due to the state’s deregulated power grid and renewable energy sources.
Georgia is expected to have 56,000 Bitmain miners operating in the state by October as part of an agreement with the mining firm, ISW Holdings, and Bit5iv. In addition, the state’s legislature passed a bill in March 2021 calling for education officials to implement a high school study program based on financial literacy that includes cryptocurrency.
A Healthy US Bitcoin Mining Industry Could Generate Significant Tax Revenue
Tax revenue inflows from bitcoin mining companies could represent a meaningful windfall for the United States government.
Crypto supporters were taken aback this past July when the infrastructure bill brought to the U.S. Congress claimed it could raise $28 billion from crypto investors by applying new information-reporting requirements to exchanges and other parties.
This projection ended up getting beat down on the internet as the dollar amount seemed to be plucked out of thin air. In reality, figuring out how much taxes crypto investors owe based on their capital gains is incredibly difficult to estimate.
Theoretically, the Internal Revenue Service (IRS) could look through every transaction on every blockchain to see profits and losses in each wallet or account. From there, the IRS could figure out the amount of on-chain gains it could tax.
However, that raises the issue of whether those assets were sent from one wallet to another with the same owner, something that may not make it a taxable event. On top of that, there’s the difficulty of getting good information from exchanges to figure out the amount of off-chain gains the IRS could tax. In practice, this collection and estimation process is a mess.
If the U.S. government wants to raise money through taxation on crypto, it could consider encouraging bitcoin miners to set up shop. Doing so could bring in tax revenue inflows from the companies that set up mining operations.
For Tax Week, we wanted to estimate the amount of revenue the U.S. government could stand to gain from bitcoin mining companies. While the result of this exercise is subject to the assumptions underpinning the model, they are worth the look. The fact that this exercise is even possible is a testament to bitcoin mining’s transparency and simplicity.
We built a relatively simple estimate of bitcoin mining profitability using an open-sourced model developed by Galaxy Digital to approximate the cost of mining a bitcoin (the report the model came from is available here), applying simplifying assumptions to represent the entire bitcoin market.
A few caveats before we dive into a brief overview of the methodology are worth mentioning: Right now, there are several publicly traded bitcoin mining companies (which is sometimes referred to as CHARM for Core Scientific, Hut 8, Argo Blockchain, Riot Blockchain and Marathon Digital). Public companies are required to share financial information and those reports show that bitcoin mining companies are, by and large, not paying very many taxes.
In fact, some of the companies book income statement losses and are paying no taxes at all. Start-ups – which bitcoin miners are – are generally unprofitable as they look to spend money building up operations. Our model strips out the business decisions that young companies must make when they are growing, meaning that it only works in a world with a more mature bitcoin mining industry.
We also wanted to normalize for accounting methods allowing companies to minimize tax burdens, mostly through non-cash charges like share-based compensation and some types of depreciation. Doing so makes a company look less profitable on paper than it is in reality.
The last simplifying assumption we make is a big one, in that bitcoin mining profitability will not trend to zero. There is a solid theoretical argument that bitcoin mining economic profit margins will approach zero as new entrants join the relatively low barrier-to-entry market.
(The CoinDesk report “Does Bitcoin Have an Energy Problem?” suggests that “bitcoin mining [profit] margins are relatively capped.”) In reality, businesses need to make money over the long term in order to stay open, so we assume that bitcoin miners won’t lose all profitability for at least the near- to medium-term.
Our work relied on the model done by Galaxy Digital for a simple reason. We know roughly how much revenue miners will collect annually in bitcoin terms. The Bitcoin protocol is designed in a way so that a block is mined roughly every 10 minutes, so we can say with confidence that the amount of revenue miners will make annually is 328,500 bitcoin plus transaction fees, which nominally make up about 3% of the current block reward.
As such, the main focus for determining profitability should be on estimating costs. The three main expenses we looked to estimate were cost of revenue (mainly electricity costs for mining); selling, general and administrative expenses (general costs like marketing and rent); and depreciation (a non-cash but real expense that represents the wear and tear on machines used for mining).
In plain English, we looked to estimate the cost of the electricity it takes to power mining rigs and the cost of “keeping the lights on.”
The main cost driver for bitcoin mining is a function of electricity use and price. Galaxy’s model calculates the cost of bitcoin production based on the specifications and performance of 18 different models of ASIC mining machines. These machines draw different amounts of power at varying levels of efficiency.
Each type of mining machine operates at a different level of profitability based on the cost of electricity per kilowatt hour. Our base case assumed $0.06 per kwh of electricity cost.
Next, in this machinery-heavy business, the mining companies that buy ASICs have a meaningful amount of depreciation to deal with. Our model assumes 22.5% of revenue as the base case based on the assumption that mining companies will depreciate their ASICs over five years.
These companies then have other costs associated with SG&A which, through public company comparisons and informed by Galaxy’s work, is estimated to be around 12.5%.
Lastly, we included a catch-all for “other expenses” that made up 3.5% of revenues, as a way to curtail the potential overstatement of profitability. We could have easily made the same adjustment in the other direction and recognize this is largely a design choice by our team.
Below we present our results in two-way charts using various scenarios adjusting for bitcoin price, Bitcoin’s total hashrate, the cost of electricity and U.S. share of global hashrate. The numbers in the chart represent the annual federal tax revenue to the government from mining companies, assuming a 21% federal corporate tax rate.
In The Event The Input Is Not Sensitized Against In The Chart, The Base Case Is:
* Global Bitcoin Hashrate Of 200 EH/s
* Electricity Cost Of $0.06 Kwh
* U.S. Has A 30% Share Of Global Hashrate
* 21% Federal Corporate Tax Rate
In the base case scenario, bitcoin miner pre-tax profitability was estimated at $1.4 billion and a tax bill of $299 million. That scenario shows up in the middle of each table below. All other numbers in the tables are representative of estimated taxes if those inputs were changed.
For example, if bitcoin price were $60,000 and hashrate were 250 EH/s, taxes to the U.S. government would be $335 million.
Conclusion And Disclaimer
Of course, this exercise was for informational purposes and the results provided are for illustrative purposes only.
We recognize the shortcomings of our model and this exercise. But at the very least, bitcoin mining represents a potentially profitable industry that, when domiciled in the U.S., could provide the government with increased tax revenue.
While the specifics of “how much” revenue this could bring the government vary greatly (showcased by the wide range of dollar amounts shown in the two-way tables, in some scenarios even hitting $0), profitable businesses represent tax revenue opportunities for the U.S. government.
Intel’s Second-Gen Miner’s Efficiency Second Only to That of Bitmain’s S19 XP: Griid
The new miners boast power efficiency of 26 J/TH, better than most Bitmain and MicroBT models, according to miner and client Griid Infrastructure.
Intel’s second-generation miner, dubbed the Bonanza Miner 2, is the second most efficient on the market, according to an investor presentation filed in November by Griid Infrastructure, one of three firms known to have secured supply agreements with the chip giant.
* The new miner will reach 135 terahash/second (TH/s), a measure of computing power, at an electricity efficiency of 26 joules/terahash (J/TH). This makes it more efficient than Bitmain’s latest model, the Antminer S19 Pro+ Hyd., which delivers hashrate of 198 TH/s with an efficiency of 27.5 J/TH. The miner is also more efficient than MicroBT’s Whatsminer M30S++, which brings 112 TH/s at an efficiency of 31 J/TH.
* The second-gen Intel miner doesn’t beat out Bitmain’s Antminer S19j XP, however, which can be as efficient as 21.5 J/TH, reaching 140 TH/s of hashrate. Power efficiency is crucial for bitcoin miners, as energy is one of their biggest operational expenses.
* It is unclear whether Intel will be selling exactly the same mining rigs to all of its customers. Its supply agreement with Griid includes design materials, which indicates that the miners’ rigs could be tailor-made for or by the clients using Intel’s mining chips. Jack Dorsey, whose company Block, formerly known as Square, is also buying Intel chips, has said they are designing an open source mining system based on “custom” silicon.
* The new miner is half the price of an Antminer S19 Pro, while being 15% more efficient, improving gross profits by 130%, Griid’s presentation said.
* The presentation doesn’t specifically identify the miner as Intel’s, but Griid is known to be working with Intel based on a previously published supply agreement and Intel’s own statements.
* Intel revealed the details of the first generation of its mining chip at a semiconductor conference earlier in February. But it is the second generation that will be shipped to Griid, Argo Blockchain and Block later this year.
* The chip giant’s entrance into the mining rig game is expected to break a supply side dominated by a few companies.
Hive To Buy Intel Mining Chip That Can Raise Hashrate by 95%
The crypto miner also signed a new 100MW power deal with Compute North in Texas.
Hive Blockchain (HIVE) agreed to buy Intel’s new mining chips in a deal the crypto miner said could increase its aggregate bitcoin mining hashrate by as much as 95% from 1.9 exahash per second (EH/s).
* Hive said an original design manufacturer (ODM) will incorporate the Intel (INTC) chips into an air-cooled bitcoin mining system. The system is expected to be delivered over a period of 12 months starting in the second half of 2022.
* “Intel’s energy-efficient and high performance blockchain accelerator is expected to reduce our power consumption over current ASIC (application-specific integrated circuit) miners on the market,” Hive President and Chief Operating Officer Aydin Kilic said in a statement.
* Intel revealed the details of the first generation of its mining chip, which failed to match current rivals, at a semiconductor conference in February.
* However, it is the second generation that will be shipped to Hive as well as to peers Griid, Argo Blockchain and Block (formerly Square) later this year.
* Last month, Griid said Intel’s second-generation mining machine, Bonanza Miner 2, will be the second most efficient on the market with a hashrate of 135 terahash/second (TH/s) at an electricity efficiency of 26 joules/terahash (J/TH).
* Vancouver, British Columbia-based Hive also signed a deal with Compute North to deploy 100 megawatts of miners at a Texas facility that is run by renewable energy.
Riot Blockchain Sees 2022 As Year Of Consolidation In Bitcoin Mining Sector
The Colorado-based miner beat analysts’ estimates for 2021 sales due to a higher company hashrate and bitcoin price.
One of the largest publicly traded bitcoin (BTC) miners, Riot Blockchain (RIOT) sees this year as the “year of consolidation in the bitcoin mining industry” and expects the company to potentially benefit from such a trend.
* The miner said it is “continuously evaluating strategic opportunities,” which it may decide to undertake as part of its strategic growth initiatives, company said in a Securities and Exchange Commission (SEC) filing on Tuesday.
* The miner reported 2021 revenue of $213.2 million, which is up 1,665% from 2020 and beat average analyst estimates of $211.06 million, according to FactSet data.
* A rise in the company’s hashrate and bitcoin price helped the company’s revenue in 2021, the miner said.
* The company reported a net loss of $7.9 million in 2021, versus a net loss of $12.7 million in 2020. The net loss for the fiscal year 2021 was significantly impacted by non-cash, stock-based compensation expense of $68.5 million and a non-cash, unrealized loss of $36.5 million on impairment of cryptocurrencies, according to a statement.
* Riot also increased the bitcoin held on the balance sheet by 353% in 2021, compared to 1,078 in 2020. On March 3, the miner said it held about 5,783 self-mined bitcoins as of end of February.
* Furthermore, the miner reiterated its expectations of reaching a 2022 hashrate of 12.8 exahash per second (EH/s). By comparison, its peer Marathon Digital said it expects to reach a hashrate of 23.3 EH/s by early 2023.
* Riot shares rose slightly in post-market trading, while bitcoin hovered above $40,000, according to TradingView data.
Crypto Miner Hut 8 Posts Record Revenue As BTC Holdings Surge 100%
The financial results weren’t all positive, however, as the Bitcoin miner posted a surprise loss in the fourth quarter.
Canadian cryptocurrency miner Hut 8 posted mixed financial results on Thursday, as revenue and mining profitability soared while overall net income declined — underscoring a volatile end to the year for Bitcoin (BTC) and the broader digital asset market.
The Toronto-based company, which trades publicly on the Nasdaq and TSX, saw its revenues surge to $45.69 million ($57.901 million CAD) in the fourth quarter of 2021, up from $10.25 million ($12.986 million CAD) the year before. Full-year revenues were $137.1 million, up 326% compared with 2020.
Despite generating a large profit from mining activities, the company posted an overall loss of $0.53 ($0.67 CAD) per share in the fourth quarter. Losses amounted to $0.43 ($0.54 CAD) per share in all of 2021.
Shares of Hut 8, which trade under the ticker symbol HUT, fluctuated within a narrow range on Thursday. The stock was last seen trading at $5.23, according to TradingView data.
Over the past 12 months, HUT has behaved very much like a crypto proxy stock as its movements have been strongly correlated with Bitcoin and the broader digital asset market. HUT peaked near $16 in early November just as Bitcoin printed a new all-time high north of $69,000.
In its quarterly earnings report, Hut 8 disclosed that it had mined 2,786 BTC in 2021, bringing its total holdings to more than 6,200 BTC. Its Bitcoin reserves are now worth over $254 million at current prices.
Only five other publicly traded companies hold more BTC than the Canadian miner: MicroStrategy, Tesla, Marathon Digital Holdings and Block (formerly Square).
Russian Crypto Miners Brace For Sanctions Fallout Amid Ukraine Conflict
The ruble’s fall has made mining more profitable in Russia for now, but parts and shipping costs are set to rise.
Crypto miners in Russia have been unscathed so far by the war in Ukraine, but sanctions could soon indirectly squeeze their businesses.
Last August, Russia was the world’s third-biggest bitcoin (BTC) mining country after the U.S. and Kazakhstan, according to the Cambridge Center for Alternative Finance’s Bitcoin Electricity Consumption Index.
Mines are mostly located in remote parts of Siberia, some around 3,700 miles away from Kyiv, and so they haven’t seen any serious interruptions to their operations. By contrast, earlier this year in Kazakhstan, another former Soviet state, civil unrest led to internet shutdowns that disrupted the operations of crypto mines for a few days.
Mining remains a “sustainable business” in Russia despite the conflict, said Sergey Arestov, co-founder of Russian mining hosting firm BitCluster. He pointed to the supply of relatively inexpensive energy and construction materials as well as to the weak ruble. As a result of the local currency’s fall, bitcoin is worth more in rubles, and so “mining has become even more profitable,” Arestov said.
Further, the ruble’s decline has made local energy cheaper by global standards, said Denis Rusinovich, co-founder of Berlin-based Cryptocurrency Mining Group (CMG) and Switzerland-based miner Maveric Group. Electricity tariffs in Russia dropped 25%-30% in U.S. dollar-denominated terms, he said, a few days into the conflict.
The global bitcoin hashrate, a measure of computing power on the network, has been unchanged three weeks into the war, which Russian President Vladimir Putin calls a “special military operation.”
On top of the conflict itself, however, Russia has become the world’s most sanctioned country, with banking restrictions, export and import bans and the freezing of assets owned by some of Russia’s richest and most powerful people.
“We definitely will not see any investments in new sites or hosting for bitcoin mining in the region from anyone outside Russia,” Rusinovich said. That once again raises concern over the centralization of the network and the ever-diminishing range of options for geographic diversification of computing power, he said.
Driven Away By Sanctions
At least two Europe-based miners interviewed by CoinDesk have abandoned plans to expand operations in Russia. Rusinovich said he has given up on projects in Russia in light of the current situation.
“We don’t plan to look for new sites in Russia, but we are developing more than 300 megawatts in the next six to eight months,” Roman Zabuga, a spokesman for BWC UG, a Germany-based mining hosting firm, told CoinDesk. BWC UG will likely host Chinese miners from Kazakhstan once the firm’s mines are complete, he said.
BitCluster, which also hosts mining rigs for other firms, will reorient itself from Western Europe and North America to the east when looking for investors and clients, Arestov said. The Middle East, Central Asia, India and Africa are huge markets, he said.
The decisions of some European and U.S. miners to pivot away from Russia won’t severely disrupt the crypto mining industry, said David Carlisle, director of policy and regulatory affairs at blockchain analytics firm Elliptic.
Switzerland-based BitRiver, which is one of the largest mining players in Russia, declined to comment for this story.
Those who stay in Russia “might face a shortage of spare parts and difficulties with logistics” because of the sanctions, Arestov said.
But specialized chips for crypto mining, known as application-specific integrated circuits (ASICs), can still be purchased from China, Carlisle said. The major manufacturers of ASICs remain in China, which hasn’t placed any sanctions on Russia.
Rusinovich predicted a rise in tariffs for air shipments of hardware, now that Russian airline carriers have banned European airlines from flying into Russia.
The restrictions and logistics difficulties regarding equipment procurement will lead to a slight uptick in mining hardware demand inside Russia, as it could also be seen as an investment protected by soaring inflation, Rusinovich said.
Prior to the conflict, Russia was brewing what was likely to be its biggest regulatory step in crypto trading and mining yet.
About a week before the war started, the Russian Ministry of Finance submitted a bill that would regulate crypto trading and mining to the parliament. The press release announcing the bill gave few details about how mining would be regulated, only mentioning that dedicated government agencies would be responsible for the industry.
There is uncertainty about how the new legislation will treat mining, as well as how Russia’s capital controls will be implemented on crypto.
The central bank ordered exporters to convert 80% of their foreign currency deposited to their bank accounts under cross-border traded contracts into rubles. A similar logic could be applied to bitcoin as it is a convertible digital hard currency, Rusinovich said.
One Russian miner said that he expects regulation to be introduced quickly to deal with the federal budget deficit and capital flight.
The regulation might turn out to be a ban on cryptocurrency activities, with higher electricity tariffs for miners (similar to what China has done), instead of a tax rebate, as previously hoped, this miner said.
By contrast, Elliptic’s Carslile thinks the Kremlin may suddenly see mining as a much-needed source of cash flow: “A key question is whether the Russian government may look to mining as a way to generate revenue in the face of sanctions – either by directly getting involved in mining, or by seeking to license and tax it,” he said.
Considering that sanctions are now specifically targeting Russia’s oil and gas industries, it is “increasingly likely that Russia could turn to mining.” State-owned Russian natural gas giant Gazpromneft is among the firms that has been engaged in mining itself.
Stranded No More? Bitcoin Miners Could Help Solve Big Oil’s Gas Problem
Can Bitcoin mining be part of the solution for greenhouse emissions rather than part of the problem?
The energy usage and environmental impact of Bitcoin (BTC) mining have been frowned upon and been under the scanner by various international financial institutions. The International Monetary Fund (IMF) mentions how Bitcoin mining consumes “vast amounts of computing power and electricity.”
Bitcoin mining is an energy-consuming process, as it is a proof-of-work (PoW) blockchain network that involves providing cryptographic proof to the network that a quantified amount of a specific computational effort has been used. The information used to verify this is stored in a block to be accepted into the network by other participants.
Elon Musk, one of the richest men in the world and the co-founder and CEO of Tesla, in February 2021 announced that the car manufacturing company will accept Bitcoin as payment for its products and services.
But, in May of that same year, Tesla discontinued its support for the acceptance of Bitcoin payments, citing the company’s concerns about the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal.” This also led Musk to hail Dogecoin (DOGE) as a better means of payment than Bitcoin due to the high environmental cost of BTC transactions.
— Elon Musk (@elonmusk) May 13, 2021
However, a new solution seems to be emerging that has the potential to address the narrative that has permeated the mainstream conscience.
Associated natural gas is a byproduct of oil drilling, the volume of which is often outweighed by the costs of getting it to a refiner, leaving it “stranded” at the well. Thus, it is often just burned off at the oil derrick, earning it the moniker “flare gas.”
On Feb. 17, CNBC reported that the oil giant ConocoPhillips is running a pilot program in Baken, North Dakota. Instead of burning associated gas, the company is selling it as fuel to third-party Bitcoin miners.
The idea of using associated gas to mine Bitcoin is not new. Back in 2019, Brent Whitehead and Matt Lohstroh started the company Giga Energy Solutions, which mines Bitcoin with electricity generated from such gas. The firm delivers a shipping container that is full of Bitcoin mining equipment to an oil well and then diverts the stranded natural gas into generators that convert the gas to electricity, using it to mine Bitcoin.
Crusoe Energy is another company that uses the energy from flare gas to mine Bitcoin. The firm has grown to become one of the biggest players in the space and has also received investment from one of the oldest cryptocurrency exchanges in the world, Coinbase and Winklevoss Capital, a company founded by the Winklevoss twins, the founders of crypto exchange Gemini.
A report from Crusoe Energy Systems claimed that using this gas to mine Bitcoin reduces CO2-equivalent emissions by about 63% compared to the continued flaring of the gas.
Cointelegraph spoke with Ethan Vera, chief financial officer and chief operations officer at Viridi Funds, a company that offers crypto investments to Bitcoin miners, about the impact of ConocoPhilips involvement in the innovation.
Ver said, “While ConocoPhillips is one of the major energy companies that have publicly announced their entry into Bitcoin mining, there are many other energy companies that have already started the process of setting up mini-test sites. If the economics of Bitcoin mining increase and total mining revenue on a USD basis grows, many of the large energy producers will look to enter the space in a bigger way.”
Energy Impact Of Bitcoin Mining Could Be Overrated
As per the University of Cambridge’s Cambridge Bitcoin Electricity Consumption Index metrics, the estimated power demand for the Bitcoin network is 15.57 GW (GigaWatts) which annualizes at 136.48 TerraWatt hours (TWh). The look at historical data of power demand for the network reveals that this demand is continuously increasing through the years as the network grows.
Despite this increase in demand for power, the environmental impact could be overrated. A report from CoinShares released in January this year attempted to gauge the carbon emissions caused by Bitcoin mining. Contrary to popular belief, the report’s findings suggest that Bitcoin mining only accounts for 0.08% of the world’s carbon dioxide, or CO2, production.
The report found that the network emitted 42 megatons (Mt) (1Mt = 1 million tons) of CO2 in 2021 out of the world’s total emissions of 49,360 Mts of CO2.
Sam Tabar, Chief Security Officer Of Bit Digital, A Publicly-Traded Bitcoin Mining Company, Told Cointelegraph:
“The environmental impact of Bitcoin mining is massively exaggerated by traditional financial authorities (IMF, etc.) because they know they can divide a new counterculture movement by using fake environmental arguments. They are trying to gaslight us against each other. They gaslight the world with fake green arguments, and I understand why: They don’t want to lose influence over the levers of power of a system that only works for the elite.”
In this regard, Vera mentioned that gauging the environmental impact of Bitcoin is a highly nuanced topic and is one that can’t simply be explained by the energy consumed metric.
He said that “In many cases, Bitcoin mining incentivizes the development of renewable energy which will have profound impacts on long-term energy infrastructure and environmental impact.”
Oil Giants Could Lead The Change To Make Bitcoin Green
Considering that using stranded natural gas to mine Bitcoin could reduce the net carbon emissions of mining, as well as reduce emissions from flare gas, other major oil companies could soon jump on the opportunity, especially as governments and regulators have been cracking down on gas flaring.
In November 2020, Colorado regulators gave the initial okay to ban gas flaring in order to curb methane pollution.
Regulators in the state of New Mexico imposed a rule in March 2021 that requires oil operators to gradually eliminate gas flaring. The rule dictates that 98% of the nature-stranded gas should be captured by April 2022 instead of flaring.
However, such decisions are highly difficult to pass in a country where both sides of the government are heavily dependent on lobbying from big oil companies. In October 2021, Bloomberg reported that President Biden’s crackdown on methane emitters is set to stop short of imposing a ban on flaring.
An outright ban on gas flaring would be good news for the Bitcoin mining industry as that oil producers would have either of two options. First, to reduce the production output of oil which wouldn’t be economically viable.
Or, second, utilize excess stranded natural gas on-site, which is where Bitcoin miners could step in to create synergies with big oil companies like ExxonMobil, British Petroleum (BP), Chevron or Valero Energy.
Vera stated that “With high oil prices, the majority of these producers are turning to utilize the stranded gas on-site such as Bitcoin mining, instead of burning it up. We expect the trend to continue in the future as more governments regulate the ability for oil companies to flare excess gas.”
The World Bank also has its own initiative to help reduce gas flaring around the world. The Global Gas Flaring Reduction Partnership (GGFR) is a multi-donor trust fund that comprises governments, oil companies and multinational companies that are committed to reducing gas flaring. Bitcoin mining pools and companies could enter collaborations with this trust fund to further this initiative.
However, oil companies could have a two-faced approach to the issue at hand, thus, raising questions on their intentions. For example, in 2020, BP urged regulators in Texas to ban the routine flaring of natural gas. But, in January 2021, the Texas Railroad Commission passed 121 of the company’s requests for flaring.
With regulators and governments around the world cracking down on gas flaring, the Bitcoin mining industry has an opportunity to reduce the CO2 emissions and methane pollution in the atmosphere.
Vera concluded on this synergy, stating that “Bitcoin miners are a natural partner to all energy producers including renewable and oil and gas. Bitcoin mining improves the ability for these companies to manage and utilize their resources in the most profitable way.”
Margins Of Up To 90% Give Energy Firms That Mine Bitcoin An Edge
Energy companies see opportunities from helping Bitcoin miners.
When Beowulf Mining Plc built a data center in Montana for a major Bitcoin miner in 2020, the three-decade old energy company saw a big opportunity.
Whereas its client Marathon Digital Holdings Inc. was reliant on third parties for electricity, Beowulf had direct access to power in what could be a profitable play if it was to start mining Bitcoin itself.
The bet paid off and in filings to take its crypto offshoot TeraWulf public in 2021, the business projected having 800 megawatts of mining capacity and 10% of the Bitcoin network’s current computing power by 2025.
The company is just one of a handful of energy groups to discover Bitcoin mining from clients before building out their own facilities, including CleanSpark Inc., Stronghold Digital Mining Inc. and Iris Energy Ltd. And with lower operational risks and wider profit margins, energy firms are becoming a major force in crypto.
“Energy companies tend to be very conservative by nature and they are often regulated,” said Paul Prager, chief executive officer of TeraWulf. “We are early adopters because we had a front-row seat in our partnership with Marathon.”
While miners can have a decent margin on 5 cents per kilowatt, those with a direct energy source and power assets tend to enjoy a much lower price, said Gregory Beard, chief executive of Stronghold.
“If you are buying power from a producer and paying a third-party operator to manage the data center, you are going to have lower margins than those that do it themselves,” Beard said.
That extra profit could give energy companies an edge over competitors as the Bitcoin mining industry’s lucrative margins have been compressing. With the price of Bitcoin still down 40% from a high in November — it was trading at about $41,250 as of 7:45 p.m. in New York on Sunday — and the war in Ukraine propelling energy prices higher, margins have contracted to about 70% from 90%, according to analysts.
With Bitcoin block rewards also programmed to be cut in half in less than three years, further pressure is also expected.
“It is not only the efficiency from the commercial perspective but it is from a risk perspective where we are better built to handle the downside,” Prager said. “When a transformer goes out on site, you are not calling a third party service firm to come in to repair it, putting in a change order, paying them overtime and hoping that in two to three weeks that transformer is repaired.”
Typically, Bitcoin miners will pay hosting sites to not only build their data centers but host, run and maintain their machines. Fees for such services have also been on the rise since Beijing’s ban on crypto mining gave U.S. miners a multibillion dollar windfall, with many able to get much more Bitcoin from the network with the same input.
The Bitcoin network is programmed to give a fixed number of rewards in the token when miners successfully processes a block. The more computing power a miner or a group of aggregated miners has, the more likely the miner will receive the rewards.
Earlier adopters of Bitcoin mining in the U.S. such as Marathon and Riot Blockchain Inc. are still dominant in terms of computing power. But another advantage energy-turned Bitcoin miners might enjoy over peers is their willingness to sell the Bitcoin they mine, unlike some crypto enthusiasts promoting the hodl, or “hold on for dear life” mantra.
With the recent slide in Bitcoin prices, companies like Marathon have been shoring up balance sheets and turning to debt and equity capital markets to raise money. Meanwhile, CleanSpark has not sold a single share of equity since last November, said Matthew Schultz, executive chairman.
“Instead of selling part of the company, what we sell is a small portion of the Bitcoin that we mine,” he said. “It costs us about $4,500 at our company’s own facilities to mine a Bitcoin at today’s price; that is a 90% margin. I can sell Bitcoin and use that to pay for my facilities, operations, personnel and growth, and not dilute my shareholders.”
Don’t Call It A Comeback: The Unlikely Rise of Home Bitcoin Mining
Even with the surge in popularity, home bitcoin mining only accounts for a small slice of the industry’s overall pie.
Lili used to work at JP Morgan. She once ran a portfolio for ultrahigh net worth clients. She has a good grasp of traditional finance. In 2018, while working at wealth management firm UBS, she pitched the idea of using bitcoin as a hedge against equity markets. “They all laughed at me,” she said.
Meanwhile, she began to buy her own bitcoins. She did more research. And the more she studied the ethos of cryptocurrency, the more she became troubled by owning bitcoin that was KYC, or “know-your-customer,” meaning that onramps like Coinbase would know her identity and personal data.
How to get bitcoin that was truly private, or “non-KYC”? Lili tried using bitcoin ATMs, but those charged a 6% premium and were 20 minutes from her home on the East Coast. Then she had a wild idea. Why can’t I just mine my own? She discovered an online tutorial from a guy named Diverter called “Mining for the Streets,” which gave a practical, step-by-step guide on how to set up a rig and also a manifesto on why it makes sense.
“Don’t fall victim to the narrative pushers that would have you believe mining is ‘too hard,’ ’too expensive,’ or ’better left to the big players,’” Diverter writes. “Sounds an awful lot like the same thing bankers and governments tell the masses about fiat money and economics now, doesn’t it?”
Suddenly Lili had a plan. “I just need a machine. It’s not that bad.” She found home mining groups on Telegram. Initially she didn’t know whom or what to trust, since most miners on the board were “Nyms” (as in anonymous, like her), but soon she found an ad for a popular (if older) bitcoin miner, called the S9, for only $300. Why not? If she was scammed, in the worst-case scenario she was only out a few hundred bucks.
It took some headaches and a few trips to Home Depot, but soon Lili had a steady stream of non-KYC bitcoin flowing into her wallet. This wasn’t making her rich. But each day she pocketed around $2 to $3, which soon paid back the cost of the miner.
(She paid for electricity out of her normal wages.) “As soon as those rewards started coming in, and after I learned how to troubleshoot, I was hooked,” said Lili, who would later evangelize home mining in a Twitter thread. “This is the best way to stack.”
Lili, now the head of Biz Dev at FOUNDATIONdvcs (a provider of privacy-focused crypto storage products), is part of a home mining renaissance. “Home mining is more popular than it’s ever been,” said Zack Voell, a longtime researcher of mining (and one-time CoinDesk reporter), and now an editor at Braiins (firmware used by mining machines).
According to Google Trends, the terms “bitcoin mining,” “how to mine bitcoin” and “home bitcoin mining” roared back to life in 2021. Subreddits like r/BitcoinMining are thriving.
On Twitter, mining enthusiasts proudly post images of their DIY setups, such as this thread from Braiins showcasing homemade rigs in coolers, rigs plugged into HVAC units and rigs that use 3D-printing to cleverly reduce heat.
“We’re seeing a huge resurgence and interest in home mining, particularly from US residents,” said Colin Harper, a researcher for the Luxor mining pool (and yet another former CoinDesk reporter).
In some ways this is jarring. The conventional wisdom has long been that mining is only for the institutions, and you don’t have a chance. Quick primer: Back in 2009, at the dawn of bitcoin’s inception, only Satoshi Nakamoto and a few other cypherpunks “mined” bitcoin on normal central processing unit (CPU) computers, and every 10 minutes someone won 50 bitcoins.
It was easy. Then the network grew. Competition stiffened. People quickly realized that the faster your computer, the fatter your payout. Savvy miners upgraded to GPUs, or graphics processing units, the chips used to power video games.
Then came the rise of ASICs (application-specific integrated circuits), muscular chips built for the sole purpose of mining bitcoin. GPUs would no longer cut it.
Larger mining shops, such as Riot Blockchain (RIOT) and Marathon Digital (MARA), had the capital to purchase entire warehouses of these ASICs. The bigger miners could broker deals for cheaper power, leaving the little guy without a prayer. Game over.
Then a few things altered the state of play. When China banned crypto mining in the summer of 2021, the “difficulty” of mining was roughly cut in half, since miners had less competition. “It became a lot easier for the smaller guys,” said Harper. There are now more ways for home miners to get the right equipment.
“Before, you can’t just go to Bitmain [the largest manufacturer of miners] and say, ‘I want one.’ … They’re just going to tell you to pound sand.” This changed when companies, such as Luxor and Compass, began selling miners to individuals, lowering the barrier to entry.
And now it’s easier to figure out how to do it. “There are more and more tutorials and YouTube channels focused on home mining,” said Magdalena Gronowska, aka @Crypto_Mags, who has a background in enterprise mining and is now the vice president of business development at Coinkite, a bitcoin wallet startup.
Gronowska bought a Bitmain Antminer S9 in 2021, and then, to her delight, realized that she could use the heat emitted by the miner to dry out mushrooms. (Celebrated on Twitter here.) This is another change in the past year: Home miners are harnessing the power of heat.
“As soon as I stopped seeing an ASIC as something that makes bitcoin, and I saw it as a profitable heater, it just completely changed my outlook,” said a miner who goes by the alias of Coin Heated, who has a day job in IT. “I was like, ‘I have to do this. I’ve got to be a part of this.’” He first bought an S9 for $160, and figured that even if it didn’t yield much bitcoin, at least it would help heat his home.
It’s a space heater with financial upside. The S9 paid for itself within four months, so he bought more miners, made more custom modifications (like sticking them in fish tanks) and eventually built a clever system that heats his 17,000-gallon swimming pool.
The New Bitcoin Mining Math
Heating swimming pools with bitcoin is a nifty trick, but it still doesn’t answer this fundamental question: How are tiny players now able to compete with the big boys?
To understand the economics, let’s focus on the miner that Lili, Gronowska and Coin Heated all purchased, the S9. It was released in 2016. It looks a bit like a computer from the Gerald Ford administration, the size of a microwave with cords sprouting from its back.
These were once the “darling of the mining industry,” said Harper, but now you can get one for around $300. The S9 pumps roughly 14 terahashes per second (TH/s) of power, which was blazing fast in 2016 but a turtle by today’s standards, meaning it has almost no chance of winning the coveted block. The daily odds of the S9 winning a block are around 1 in 100,000; it’s just a lottery ticket.
So how can home miners like Lili make any money from crypto mining? Enter the mining pools. It’s true that she only has a 1 in 100,000 chance of winning a block per day. But that’s not nothing.
And when you add this itty-bitty amount of horsepower to a mining pool, such as Slush Pool or Luxor, the group’s total odds increase. All of these add up. “No matter how sh**ty it is, it’s still increasing the pool’s chance of winning the block,” said Harper.
So when all of the home miners join forces, that combined power is enough to compete with the industrial players. The pools win rewards. The Slush Pool (made up of both home miners and larger players), for example, now accounts for about 5% of all the Bitcoin network’s power, and it wins roughly 5% of the blocks.
Lili’s humble S9 is adding a dollop of power to Slush Pool, so she gets a proportional share of the revenue. This is why she’ll earn $2 to $3 worth of bitcoin every day, even though – absent a miracle – she will never win a block herself.
The daily revenue becomes predictable. “Pool setups are dominant for a reason,” said Will Foxley, content director at Compass mining, and co-host of CoinDesk TV’s “The Hash.” “Almost nobody is mining solo.”
The exact payout structure varies by pool, but generally speaking, while you don’t know precisely how many blocks your pool will win each day (if any), you can get a solid estimate of your income. Your exact profits will fluctuate with the price of bitcoin, the overall “difficulty” of the network (the stiffer the competition, the less your pool wins) and the cost of energy.
While “almost nobody” is mining solo, incredibly, there are at least 2,000 miners who choose to do just that. They’re not part of a shared payout system. They let their machines rip, they pay their energy bill, they know that they will almost never win the reward, and they are totally OK with doing this as a hobby to help secure the network.
“You’re getting nothing out of it,” said Con Kolivasas, an Australia-based software engineer who administers a pool of solo miners called Solo CK. “That’s the reality of solo mining. There’s the dream and there’s the reality. I make it clear to people at the outset. Your chance of solving the block is miniscule.”
Kolivasas said there are about 2,700 solo miners using the Solo.ck pool, which at first sounds like a paradox. If they’re solo mining, why are they in a pool?
The solo pool is a different beast. If your tiny S9 bucks the odds and wins a block (which actually happened recently), you don’t split it with the other miners – you keep nearly all of it yourself.
Kolivasas said that solo miners use the pool to take advantage of his faster and “lower latency” network connection, ensuring that if you hit the jackpot and win the block, you can claim the reward in time. (This can be tougher to do when truly going solo.)
And who’s doing this exactly? Kolivasas doesn’t know the solo miners in person (anonymity is king), but from years of chatter on the message boards, he gathers that most are middle-aged men, “generally guys that live alone.”
“Econoalchemist” is not a solo miner, and he’s not a middle-aged man who lives alone. He has a wife and two little kids, and he recently lived in suburban Denver. He wanted to buy $300 of bitcoin each month, but, like Lili, said, “I couldn’t bring myself to spend that at KYC exchanges anymore.” He treasured his privacy and anonymity.
Like Lili, he found Bitcoin ATMs impractical. He also came across Diverter’s “Mining for the Streets” manifesto. He realized that if he bought an ASIC miner, instead of spending $300 at Coinbase each month, he’d use that $300 for his electricity bill.
That would magically convert fiat to bitcoin. Soon he was thrilled to be getting “bitcoin for way cheaper than spot price,” and not just any bitcoin, but that sweet and coveted non-KYC bitcoin.
Econoalchemist has a long beard. He wears sunglasses and a baseball cap, and he looks like he could be the lead singer of an indie-folk band in Bushwick. When he bought his first miner, it worked so well that he decided to scale up, purchase another 13 machines, and set up an intricate cooling system that he chronicled on Twitter (fetching 734 Likes).
Once his system was ready to go, he called the utility company to ensure his home was wired to handle 200 amps, as most are only configured for 100. (This is a common headache for many home miners.)
“Are you sure my house is rated for 200 amps?” he asked the power company.
They assured him that yes, absolutely, indeed it was.
“Cool, I’m going to pull like 150 amps worth of electricity.”
He started eight of the crypto miners. That was too hot, so he switched off two and let six of them rip. That seemed to do the trick. So he left the rig humming and headed to work at his day job (for a company that makes railroad equipment). Then his wife called with a status update: The power lines had caught on fire. It turns out the electric company had been mistaken; the home was only wired for 100 amps.
“Screw it, we’re leaving,” said Econoalchemist. By then he was so smitten with mining that he decided to move to the “Intermountain West” (his preferred anonymous term) where he had more space for rigs. The decision was aided by politics.
At the time, he was fed up with his kids’ mask mandates at the Denver-area school, and his own stance on vaccine mandates (not a fan) got him fired from the railway job.
“My wife and I were like, and excuse my language here, but f**k this dystopia,” said Econoalchemist. After moving to his new home with more space, he bought a shipping container to house the rigs. Now he’s focused on it constantly, and he recently published his own jaw-droppingly thorough guide on setting up home mining. “There has been this explosion in home mining innovation,” he said. “This is all I do, every day, and I can’t keep up with it anymore.”
The Bitcoin Mining Rig Arms Race
Another aspect of recent innovation: Now you don’t even need to mine at home to be a home miner, or at least to be a “retail miner.” Scott Melker, aka “The Wolf of All Streets,” is a prominent crypto trader. He had long been curious about mining, but he was reluctant to personally deal with the maintenance or the noise. “It’s a bit daunting for anyone who’s not heavy into the tech,” said Melker.
So he outsourced all of that to Compass, which Foxley describes as the “Airbnb of bitcoin mining,” and now Compass handles the day-to-day operations of his miners located in far-flung warehouses. Some are in Canada, some are in Russia. Melker has never touched these rigs. But he pays the electrical fees, he earns revenue from the pool, and mining has become another chunk of his portfolio.
“For me, it’s a way of passively dollar-cost averaging,” said Melker, referring to the practice of investing a fixed amount of money in set increments, regardless of the price. (The philosophy is mainstream and hardly crypto-specific; in 401(k) plans, when a set percentage of your paycheck is used to buy stocks or a mutual fund, that’s dollar-cost averaging.)
Here’s how he sees the math: Say his S19 miner (the more powerful and energy-efficient successor to the S9) costs $10,000. He pays that upfront. Then every day, thanks to the sharing mechanism of the pool, that S19 spits out between $20 to $40 worth of bitcoin, minus the cost of electricity.
So effectively, that $10,000 of fiat is then converted to a steady stream of bitcoin that’s acquired at different prices. “And as an added bonus,” said Melker, “this is equipment that you can depreciate on your taxes.”
Then there’s the intangible appeal. “I always wanted to feel like I’m part of securing the network,” said Melker. He’s been in the crypto space for years, but in some ways he felt removed from the guts of it. “I’m a firm believer that you have to experience it to talk about it. Now I’m qualified to do so. Now I can say I’m a miner.”
Econoalchemist likes that home mining makes the bitcoin network more decentralized, and he loves that he now has a voice in the bitcoin mining ecosystem. “I’m doing something even more to participate in the bitcoin network than running a node,” he said.
“I enabled myself to be able to vote with my hash rate. If one pool was doing something I didn’t like,” he said, such as censoring transactions (he points to MARA as an example), “then I could take my hash rate elsewhere.”
And for many, home mining is also just plain fun, like an arts-and-crafts hobby. When the S9 blew her circuit-board and became too noisy, Gronowska ended up moving it to her parents’ basement. (Nice parents.) Now she geeks out with her dad about bitcoin. “It created this thing we can bond over,” she said.
Her dad used to be an electrician in Poland, and while he was never particularly interested in bitcoin as a speculative investment, now he enjoys tinkering with the S9’s optimum wattage and finding ways to cool the system.
The money isn’t much, maybe a couple of bucks per day. But just as some families use sports, memes, or even fantasy football as a way to stay in touch, Gronowska and her dad excitedly chat about the day’s block rewards.
Almost on cue, on our Zoom call, she checks her phone and reads from the screen: “Slush Pool says, ‘You’ve earned 0.000092 bitcoin, which is about $3.48.’ That’s a little higher than what I’ve been seeing.”
That said, it’s also true that Gronowska had to move the miner out of her own home. It was loud. It was so damn loud that she couldn’t run it while doing podcasts or conference calls, which is why she looped in Dad. Every miner I spoke with complained about the noise.
“When you plug it in, it’s effectively like running a shop-vac,” said Coin Heated. “It’s unbelievably noisy for a home.” (He also notes that there are now creative ways to reduce the noise, such as using Braains firmware to tweak the fan speed.)
Kolivasas said they sound “like a chainsaw going all day long.” He no longer mines at home because electricity in Australia is too expensive, but when he did, his garage was so loud that the local council came and complained, accusing him of noise pollution.
And there are some less obvious concerns. Econoalchemist, Lili, Gronowska, Coin Heated and the growing army of DIY-ers are finding mining to be profitable … for now. But that all hinges on a few key variables.
Econoalchemist is confident that his system would still turn a profit even if the network’s hashrate doubled (meaning the “difficulty” increased) while the price of bitcoin remained constant. But if bitcoin crashes far below $20,000?
The math changes. It might even break. This is why virtually all miners are bullish on the long-term price of bitcoin. “All miners are hedging their bets that the price of bitcoin goes up,” Kolivasas said.
It’s also true that just as those old CPUs and GPUs became obsolete, the same will happen with the current crop of cryptocurrency miners. “The reason the S19 is relatively profitable at the moment is because China off-lined mining,” said Kolivasas. “Otherwise the current hash rate would be double.”
He said we’re now in a sweet spot on the “curve” of mining equipment, meaning that the S19 is relatively new and efficient and profitable, but that won’t last forever. New rigs will inevitably make the S19 obsolete, argues Kolivasas, as “it’s an arms race. It has always been an arms race.”
Power To The Generalists
Even with the surge in popularity, home mining only accounts for a skinny slice of the industry’s overall pie. “Home mining has definitely popped off,” said Foxley, “but I’d be surprised if it made up over 2% of bitcoin mining.”
Voell said the exact number is hard to pinpoint because there’s no agreed-upon definition of “home mining.” Does it only count if someone has one miner? Five? 20? Everyone interviewed agreed that home mining made up less than 10% of the network (most guessed less than 5%). “It’s still pretty niche,” said Gronowska.
There’s less consensus on what will happen in the future. Gronowska notes that the giant mining operations, such as Marathon, continue to pour money into the space. “Yes, home mining will grow,” she said, “but hash rate is growing everywhere at industrial scale.”
She noted that while home miners are collectively buying thousands of new machines, the industrial players are buying millions. So while she expects the number of home miners to increase, she guesses their share of the network will shrink.
Voell agrees that industrial mining is growing, but suspects that if the space encounters a true bear market, the plucky home miners will be more likely to ride it out. “It’s much more difficult to squeeze a retail miner out of the market,” said Voell.
The big shops are only mining bitcoin to make money, he said, whereas the home miners – who also care about profit, sure – enjoy getting KYC-free bitcoin, they’re in it partly for the ideology, and sometimes they’re heating 17,000 gallon swimming pools. “Even if they’re running at a small loss,” said Voell, “they’ll run an ASIC or two just to participate in the network.”
That is almost certainly true of Econoalchemist and Lili. She now feels invested in the network, both literally and figuratively. She paid her dues. When she first installed the S9 in her basement, it was “so freaking loud” that she couldn’t work or watch TV.
So she used Diverter’s guide and figured out how to nestle the S9 in a cooler and snake the exhaust out a window. This required a botched experiment of sawing wood, but she eventually got the job done.
That was satisfying. Even fun. She likes that she didn’t need to be a mechanic or an engineer (her background is in finance); she just followed the DIY tools of the community and figured it out. She didn’t need millions of dollars of capital; she just needed a few hundred bucks and a willingness to learn.
“There was a lot of FUD going around saying that it’s not profitable for you to mine, and it’s very hard, and that you have to build this big thing,” said Lili.
Striking a more philosophical note, she wonders why all of us are forced into being specialists, and staying in the lanes of our professions, as opposed to trying out new skills. Why can’t we be generalists? Why can’t we do more than one thing? “I think everyone should try it out,” said Lili. “I think anyone can mine.”
Bitcoin Mining Could Be Good For US Energy Independence: Research
Texas representative Pete Sessions made a simple yet powerful statement that the proliferation of the Bitcoin mining industry could promote energy independence in the country.
United States Congressman Pete Sessions of Texas has come out with a bold statement about the impact that Bitcoin (BTC) mining will have not just on his state but on the United States as a whole.
The Texan representative, a proponent of Bitcoin mining, tweeted on Tuesday that “Bitcoin Mining will play a critical role in rebuilding energy independence in the USA.” His statement drew a mixed bag of reactions from both supporters and critics. Wyoming Senator Cynthia Lummis was among the supporters who responded to his tweet with a succinct “Indeed.”
#Bitcoin Mining will play a critical role in rebuilding energy independence in the USA
— Pete Sessions (@PeteSessions) March 21, 2022
Both lawmakers have been vocal advocates for policies that support innovation in the crypto industry, and not only for miners.
As U.S. consumers suffer from a spike in gas prices due to global tensions, the debate has ramped up about how the country can reduce its dependence on external energy sources.
Sessions’ view highlights a growing compilation of research that suggests the innovations from the BTC mining industry could have global applications in industrial energy consumption and production.
As Texas has come to contribute over 14% of the country‘s total Bitcoin hash rate, the stability of the state’s electrical grid and the environmental impact of miners have come to the forefront of growing criticism, as it has in other mining hubs around the world.
Despite those concerns, various researchers have suggested that the growing mining market in Texas could reduce its net environmental impact and energy demands on the public energy grid.
A March 2021 research paper detailed how flexible data centers could promote renewable energy resources. A flexible data center generates its own energy either from a small dedicated renewable power plant or draws power from the grid, depending on the grid‘s current state.
According to the U.S. Energy Information Administration (EIA), Texas is already the country’s leading wind power generator. Therefore, miners may already have access to renewable energy when needed. Promoting miners to utilize a flexible data center model could stimulate greater growth in renewable energy accessibility and reliability. The paper stated:
“Hence, the (integrated energy system) may contribute to grid stability by locally using generated electricity instead of feeding it into the grid.”
Software solutions firm Lancium published similar research last October. It concluded that as the mining industry grows and more operations implement a flexible data center model, it will likely prevent energy grid shortages while promoting the growth of renewable energy resources. Researcher Joshua D. Rhodes said in the paper:
“As grids move towards incorporating higher levels of intermittent resources, such as wind and solar, flexible demand will play an ever more important role in keeping the electrical grid system stable.”
Texas is a significant hub of Bitcoin mining in the United States, as Hive Blockchain, Riot Blockchain, Argo Blockchain and others have operations in the Lone Star State.
Why Do Old-Line Businesses Enter Crypto Mining? Simple: Fat Profits
Even though mining margins have shrunk since crypto prices corrected, for now they’re big enough to keep luring entrants from sectors like prepackaged food and anti-aging formulas.
Margins as high as 90%? It doesn’t take a Harvard MBA to know that’s an unusually profitable business model.
Such was the allure of cryptocurrency mining, back when bitcoin and the broader digital asset market hit all-time highs last year, leading many traditional businesses to venture into the mining world in search of juicier returns.
Fast forward to 2022, when miners’ margins have shrunk to 60%-70%, yet old-line businesses continue to enter the sector, as net margins of other industries are still reeling from many macroeconomic factors, including the COVID-19-related downturn. Of course, the margins are based on where the prices of the crypto currencies are going. But for now, they remain lucrative.
To take advantage of such currently profitable opportunities, some long-established companies have completely transformed themselves into digital currency miners, while others diversified their legacy business for an extra revenue stream by mining and providing mining-related services.
However, the question is whether these new entrants survive and thrive in this sector. The incumbents think it might be a stretch.
But first, let’s examine how these new entrants have done so far with their new ventures.
A Total Transformation
One of the best examples of complete transition is Nate’s Food, which rebranded itself to NHMD Holdings by transitioning from its original product – premixed pancake and waffle batter in pressurized cans – to bitcoin mining, last year.
Prior to the announcement, the company reported no sales in the fiscal quarter that ended Aug. 31, 2021. In the quarter ending Nov. 30, 2021, the company reported $21,204 in revenues from mining, perhaps a glimmer of hope. However, the company was still in the red, as its net loss for the period was $74,565.
Shares of the small company, which is traded on the over-the-counter markets, more than tripled in price last year as bitcoin rallied toward all-time highs around October and November.
The shares now have pared almost all of their gains since then, along with those of other crypto miners, and NHMD now trades slightly above the levels of its pre-mining days, according to TradingView data. The company didn’t immediately reply to requests for comments.
Another example of a company completely transforming itself is the Chinese sports lottery firm 500.com, which announced early last year that it would start buying bitcoin miners and subsequently rebranded itself as BIT Mining (BTCM). The company now has 4,800 gigahash per second (GH/s) ether and 825.4 petahash per second (PH/s) bitcoin mining capacity, according to its recent earnings report. However, the stock has fallen about 88% in the last 12 months, according to TradingView data.
And even though the examples are plenty, it would be a missed opportunity not to include Fort Lauderdale, Florida-based anti-inflammatory and antiaging formula manufacturer, Graystone Company (GYST) in this feature.
The company announced last year that it would move into bitcoin mining to improve its own financial health and use mining as a “hedge” against its legacy business. The company now plans to bring in 1 EH/s of mining power by 2024 and currently has 2.1 PH/s of mining power, according to its website. Shares of Graystone have also fallen about 27% in the past year.
A Sixfold Rally
So, a total transformation didn’t really help the above companies, at least based on their share price performance. But what about the companies that kept their core businesses, but added mining as an extra source of income?
The strategy likely helped a Thai information technology company boost its share price more than 500% after it announced plans to diversify into bitcoin mining.
Jasmine Technology Solution, which changed its name from Jasmine Telecom System Public Company, announced its foray into crypto mining on Aug. 10, 2021. At the time, the company cited the economic uncertainty brought by a new wave of COVID-19 cases as the reason to look for new business ventures that could provide a fresh source of income for the company.
It seemed to have worked in Jasmine’s favor, as the shares are now up almost fivefold since the announcement, according to TradingView data. However, the company didn’t generate a large amount of revenue from mining, as its recent presentation shows telecom service accounted for most of its top line in the fourth quarter of 2021.
“We did not transform, but we extended our potential of competency, investment and other aspects such as space, electricity and partners relating to bitcoin mining operation,” a company spokesperson told CoinDesk.
The company saw an opportunity to grow its business into an ever-expanding digital assets market and, given it was already involved in the IT sector, delving into crypto mining came naturally, the spokesperson said. Jasmine already “had a continuous growth with high recurring income and margin” before it entered mining, the representative said.
Jasmine Technology expects that its revenue from bitcoin mining will rise gradually as it gets more mining computers. The company plans to have 500 machines by the first quarter and another 3,000 within this year, while negotiations for more mining rigs are underway.
“We perceive that bitcoin mining has a shorter payback period compared to investment in technology and telecommunications infrastructure, and it is a huge market giving us an opportunity to grow further,” Jasmine’s spokesperson said.
Surviving A Crypto Bear Market
Bitcoin mining itself is not an overly complicated industry for new entrants to break into. In fact, anyone can start mining, given lots of different options are now available in the market. However, given mining is a very volatile and cyclical business, staying profitable is the main challenge for any newcomers into the industry.
“I think there are a lot of people who are very good at identifying high-margin businesses,” said Sue Ennis, vice president of corporate development of Hut 8 (HUT), one of the oldest and largest publicly traded crypto mining companies in North America. However, neophytes don’t understand the amount of complexities, including procuring power contracts and managing supply chain constraints, that come with building and operating a crypto mining business successfully, she added.
Lot of these businesses ordered their mining equipment at high prices when bitcoin was trading around $65,000, but now that it’s barely catching a bid past $45,000, “how do you protect your balance sheet?” Ennis said.
These are some of the questions the new entrants have never wrestled with before, but incumbents like Hut 8 have. Having weathered bear markets is what differentiates the established miners from the new ones, Ennis concluded.
This was echoed by bitcoin miner CleanSpark (CLSK). “There are a lot more barriers to entry than people realize when mining at an industrial scale (as opposed to home mining where barriers are coming down),” said CEO Zach Bradford, adding that it’s not as simple as just “plugging in a machine.”
“The capital requirements are substantial, and operating requirements are considerable —both in terms of new machines, infrastructure and power,” he said. The need for technical expertise also shouldn’t be overlooked, including the need to know and understand global supply chains, electrical and mechanical systems, regulatory frameworks and many other considerations, Bradford added.
Jasmine Technology said it’s coming in with eyes wide open. “There will be more companies diversifying into mining,” said the IT company’s spokesperson, adding that in the past there had been a similar trend of firms diversifying into the clean energy businesses.
However, companies that can gain an understanding of the bitcoin mining business and access to the capital markets as well as source mining machines at cheaper prices through partnerships with manufacturers like Bitmain will be able to stick around, the Jasmine rep added.
Crypto Mining Service Providers
There are of course other ways of entering the industry than mining the digital assets directly. For example, Vancouver, British Columbia-based Top Speed Energy provides data centers powered by flared natural gas that would have otherwise burned into the atmosphere to power bitcoin mining operations for customers. The company also uses the heat generated by the mining operations to supply nearby communities.
Top Speed also expects demand for computing power to multiply as metaverse related applications ramp up, which the company plans to service as well, “In the future, the metaverse’s demand for computing power will be 10 times that of the present, so in the future we will not only consider mining is such a simple service, and we are also considering the future development of our company and the ability of metaverse development,” Top Speed CEO Ronan Xu told CoinDesk.
‘The Time Has Come’
Top Speed is not unique; providing flared gas as a source of power was pioneered by Crusoe Energy and has started to become a more widely used energy source for digital asset mining. Most recently, ConocoPhillips (COP), the giant oil and gas exploration and production company, said that it was routing excess natural gas from one of its Bakken region projects in North Dakota to supply power to a bitcoin (BTC) mining operation.
Given the explosive growth in the mining sector, “the time has come” for traditional enterprises to get a piece of the action, Xu said. “The digital currency mining industry chain is exceptionally long, including upstream wafers, software services, hardware services, energy services and follow-up transaction services, as well as new custody generated by future compliance supervision,” the CEO added.
Perhaps it would better suit non-crypto native businesses to service these subsectors of the mining industry, rather than start mining digital assets themselves. Such an approach might hedge them against the industry’s ups and downs and provide indirect exposure to mining at the same time.
After all, it’s often said that during the California gold rush of the mid-19th century, the merchants selling supplies to miners typically prospered more than the miners themselves.
US Bitcoin Mining Firm Turns To Harmful Coal Waste For Cleaner Energy
In a bid to make crypto mining more environmentally friendly, Stronghold Digital Mining is turning harmful waste from coal mining into clean energy to power Bitcoin miners.
Stronghold Digital Mining (SDIG), a crypto mining company in Pennsylvania, is turning waste from old power plants into energy to power hundreds of Bitcoin mining rigs.
The company collects coal refuse, a leftover waste material from the process of coal mining, and burns it in what it says is an emissions-controlled environment at its energy generation facilities.
Coal refuse can cause a raft of environmental problems such as water and air pollution and acid mine drainage, the acidic water which comes from coal mining operations. Collecting this waste and safely disposing of it while generating power for crypto mining is a productive way of tackling the problem.
The state of Pennsylvania is the third-largest producer of coal in the United States, estimates put the amount of coal wastage at 881 pounds per 2,200 pounds mined. Stronghold estimates that Pennsylvania alone has over 220 million tons of harmful wastage.
Bitcoin and other proof-of-work (PoW) cryptocurrencies have caught the attention of regulators recently due to their reliance on energy-intensive processes in order to mine and provide validation for the network.
Earlier this month, a New York state proposal to suspend proof-of-work mining that uses fossil fuels was introduced, citing the negative environmental impact of the process. That proposal today was advanced by the New York State Assembly. If passed, it could see proof-of-work mining suspended for up to three years in New York.
Other schemes have seen ways to make Bitcoin mining environmentally friendly. Earlier this month, oil drilling company ConocoPhillips started a program in North Dakota where it would sell the natural gas byproduct from its operations to Bitcoin miners instead of burning it.
Last August, Argo Blockchain, a United Kingdom-based crypto mining company, announced its operations had become climate positive on its greenhouse gas emissions. Its planned 200 MW mining facility in Texas is also set to run on renewable energy.
Exxon Is Mining Bitcoin With Excess Methane Gas And Will Take Pilot To Four Countries
* The Oil Giant Launched Its Bakken Crypto Pilot In January 2021
* Miners Are Pushing To Use ‘Flared’ Gas To Power Operations
Exxon Mobil Corp. is running a pilot program using excess natural gas that would otherwise be burned off from North Dakota oil wells to power cryptocurrency-mining operations and is considering doing the same at other sites around the globe, according to people familiar with the matter.
The oil giant has an agreement with Crusoe Energy Systems Inc. to take gas from an oil well pad in the Bakken shale basin to power mobile generators used to run Bitcoin mining servers on site, said the people, who asked to not be named because the information isn’t public.
The pilot project, which launched in January 2021 and expanded in July, uses up 18 million cubic feet of gas per month that would have otherwise been burned off — or flared — because there aren’t enough pipelines.
Exxon, the largest U.S. oil producer, is considering similar pilots in Alaska, the Qua Iboe Terminal in Nigeria, Argentina’s Vaca Muerta shale field, Guyana and Germany, one of the people said.
“We continuously evaluate emerging technologies aimed at reducing flaring volumes across our operations,” and Exxon expects to meet the World Bank’s call to end routine flaring by 2030, spokeswoman Sarah Nordin said in an email. She declined to comment on “rumors and speculations regarding the pilot project.”
Crusoe declined to comment.
Oil and gas producers are increasingly under pressure from regulators and investors to reduce their carbon footprint to help combat climate change. That includes reducing the amount of gas they flare. At the same time, there is a rush of miners trying to use cheap gas in oil producing fields to fuel their operations.
The gas is still burned, releasing carbon dioxide into the atmosphere, but the energy is put to use instead of simply being wasted.
Last month, ConocoPhillips said that has been supplying gas from the Bakken shale in North Dakota to a Bitcoin mining firm for the first time.
Shale oil produces so much excess gas that it ends up being vented into the air or burned off. Natural gas is comprised mostly of methane, a global warming agent that is more than 80 times more powerful than carbon dioxide during its first two decades in the atmosphere. North Dakota, Colorado and Wyoming are among the first places to use crypto mining to slash methane emissions.
Crusoe Energy, backed by Bain Capital, the Winklevoss brothers and Tesla Inc.’s first institutional investor Valor Equity Partners, has 20 portable engines permitted in North Dakota, of which 11 have operated, according to the North Dakota Department of Environmental Quality.
The start-up has similar projects in place for Equinor ASA and Devon Energy Corp., according to the state records and a Crusoe statement last spring.
The push by crypto miners into North Dakota’s oil fields may only be beginning, said Craig Thorstenson, manager of the permitting program at the state’s Division of Air Quality. He estimated that about 90% of the gas produced in the state makes its way into pipelines to be used at power plants and elsewhere. The rest goes to waste.
Danielle Fugere, president of As You Sow, an environmental shareholder-activist group, that said it’s a positive step for Exxon to find a use for gas that would otherwise be burned off into the atmosphere. “It is creating use of what would be otherwise wasted,” she said.
But it would be better if the company worked more aggressively to transition away from fossil fuels, Fugere said.
Bitcoin Miner TeraWulf’s Stock Can Rally Almost 160%, Says Analyst
B. Riley initiated the environmentally sustainable miner’s stock with a buy rating and a 12-month price target of $24.
Bitcoin (BTC) miner TeraWulf (WULF) is “leading the pack in sustainable mining” and its stock continues to trade at a large discount versus its peers, Wall Street investment bank B. Riley said in a research note issued Thursday after the market close.
* “While many other miners aim for carbon neutrality, TeraWulf is entering the space using zero-carbon resources from the start,” wrote analyst Lucas Pipes about the company, which went public in December and is backed by celebrities such as actress Gwyneth Paltrow.
* Pipes, who is the only analyst covering the stock, according to FactSet data, initiated coverage of TeraWulf with a buy rating and 12-month price target of $24 per share, implying 159% upside from Thursday’s closing price of $9.28.
* On Thursday, shares of TeraWulf were up 11.7% and they were rising roughly 6% in early trading on Friday. The stock has fallen about 36% this year, underperforming the mining-heavy Viridi Cleaner Energy Crypto-Mining & Semiconductor exchange-traded fund (RIGZ), which was down 17%.
* The miner is using 100% zero-carbon nuclear energy at its Nautilus Cryptomine facility in Pennsylvania and at its Lake Mariner site in upstate New York. The company is using power from the grid through a deal with the New York Power Authority, whose mix is 90% carbon-free primarily using hydropower, Pipes said.
* Pipes also noted TeraWulf has an experienced management team that has worked in energy infrastructure and power management, and cited the miner’s joint venture deal with Talen Energy which enables the company to lock-in longer-term power contracts.
* On March 17, TeraWulf said it sees itself reaching a hashrate range of 4.7 to 5.1 exahash per second (EH/s) by the end of 2022 and 23 EH/s of mining capacity by 2025.
How Northern Italian Hydropower Producers Became Bitcoin Miners
In the pursuit of economic sustainability, northern Italian hydropower producers are turning to bitcoin mining.
TRENTINO, ITALY – Daniele Graziadei, the 37-year-old mayor of Borgo d’Anaunia, a small municipality in the northern Italian region of Trentino-Alto Adige, entered the 100-year-old Alta Novella hydropower plant with familiar ease, with hands in his jean pockets and sporting a baseball cap.
This year, under the leadership of Graziadei, Borgo d’Anaunia, home to around 2,500 people, became Italy’s first municipality to run a crypto data center. Whirring away on a small shelf at the far end of Alta Novella’s historic turbine room are 40 state-of-the-art application-specific integrated circuit (ASIC) machines powering the world’s most popular cryptocurrency, bitcoin.
Under pressure over rising energy costs, and concerned about achieving climate goals, some regulators and parliamentarians in the European Union are looking to outlaw proof-of-work, the energy-intensive computing method that powers the Bitcoin network. But in Italy, this same mechanism has become an economic incentive for hydropower producers to continue or expand their renewable energy production.
The northern Italian regions bordering the snowy Alps are home to dozens of hydroelectric power plants in a range of sizes, thanks to the abundance of water and varying altitudes. Alta Novella had belonged to Borgo d’Anaunia since the 1960s, but then it was abandoned because of the absence of a dam. There was no way of controlling the Novella river, Graziadei said.
In 2008, the municipality decided to open the facility again by changing the turbine, and the Italian government granted the facility some monetary incentives.
But this past winter, there was little rain and snow in Borgo d’Anaunia, Graziadei said. When CoinDesk visited in February, still in the dead of winter, the landscape framing the valley was mostly free of snow, except for a dangerous layer of thin ice on the road that led down to the facility.
When production is low, running and maintaining a hydropower plant becomes an expensive burden.
“If there is no snow that increases water levels in the river, electricity production is low, and during these months in previous years, we would shut down the facility for maintenance,” Graziadei said.
The state incentives, which included purchasing the power produced by the facility at 0.20 euros (around $0.22) instead of at the standard price of around $0.06, had expired a few years ago.
But when CoinDesk visited, despite the relatively dry conditions, the plant was still running: The small amount of energy being produced was used to run a few of the bitcoin mining machines.
“In periods like this winter when there has been little precipitation, and the amount of water the river brings is very low, this new technology is allowing us to maximize production and therefore give higher value to our facility,” Graziadei said in Italian, adding, “Even if the water levels are low, [mining] allows us to keep the facility in production.”
Indeed, Graziadei’s main motivation for setting up a data center at the municipal hydropower plant was economic. The municipality doesn’t actually mine or trade bitcoin.
Alps Blockchain, the Italian tech company that set up the mining farm at Alta Novella and carries out maintenance, simply purchases the computing power produced by the facility’s mining farm for at least 35% more than what the government pays for its energy. Alps Blockchain sells the computing power purchased from the facility to bitcoin mining pools around the world.
Graziadei, who dabbles in crypto trading himself, said it wasn’t that hard to convince the city council and his constituents to set up the data center: In the absence of the government’s incentives, they had to find a way to cover maintenance costs of the facility and turn it into a sustainable revenue source for the municipality.
“Income from [the Alta Novella power plant] is used for the maintenance of the facility, and for the municipality’s public work in service of the community,” Graziadei said.
Alta Novella is one of 18 hydropower plants in northern Italy that now house a mining farm set up by Alps Blockchain. The company aims to double that number by the end of the year.
Alps Blockchain, the Italian startup behind the slew of hydropower plants that are contributing to the Bitcoin network, was founded by two 23-year-olds from Trento, a northern Italian city dubbed “Bitcoin Valley” because of its early interest in cryptocurrencies.
Co-founders Francesca Failoni and Francesco Buffa met while working as event planners a few years ago. They became interested in blockchain thanks in part to its influence around them.
Failoni, in a clean-cut pantsuit, is commanding in a man’s world of energy and tech, while Buffa, in his black turtleneck and glasses, leaves little doubt in your mind about who he aspires to be. When CoinDesk visited in February, the young entrepreneurs were moving their team into an expansive office space in Trento.
Failoni, the chief financial officer at Alps Blockchain, said they wanted to participate and build in the blockchain world, but mining bitcoin themselves proved to be a challenge because of high energy prices.
Mining bitcoin at home in Italy means paying at least $0.22 per kilowatt hour. By comparison, household energy costs around $0.138 per kilowatt hour on average in the U.S.
“The price of the energy you buy from the grid is higher than the rest of the world,” Failoni said. “But we understood that renewable energy producers sell energy at a far lower price than what we buy from the grid.”
The duo began studying the mining sector and discovered that there was a shift toward the use of renewable energy for powering energy-intensive crypto networks like the proof-of-work verification system used for Bitcoin. They also found that some hydropower producers in northern Italy were struggling to keep their plants profitable once government incentives expired.
“We realized that they can self-consume the energy they are producing … That can be an alternative to the state incentives, that is, using some part of the energy produced to create computing power,” Failoni said.
According to Buffa, who is Alps Blockchain’s CEO, it wasn’t easy to educate hydropower producers who were unfamiliar with crypto, about how mining worked.
“But once they understood, the hydro sector is small, so word of mouth helped. The second problem was finding money to buy machines and push forward the business,” Buffa said, adding that talking to banks and convincing investors about the merits of blockchain technology was a challenge.
Although the hydropower plant owners make the investment in setting up a farm, Alps Blockchain handles everything from purchasing mining equipment to setting the machines up and maintaining them. It also helps each facility with tax reporting.
Failoni said his company’s hydropower mining farms are custom-made based on their production capabilities, their size and the owner’s willingness to invest. For instance, Alps Blockchain set up a special payment plan for the small farm at Alta Novella:
To shield the municipality from the volatility in the crypto markets, the company purchases a portion of the computing power produced at the facility at a fixed rate.
During the 2021 crypto bull market, Buffa said the Alps Blockchain hydropower plants made up to 400% more than usual. Alps Blockchain’s own revenue rose 18 times from 2020 to 2021.
“This allowed Alps Blockchain and [the hydropower plants] to develop their business. Having margins and making more money, they bought more computers, they refurbished the plants and they created more computing power centers,” Buffa said.
Alps Blockchain mining farms are small operations compared with larger mining facilities in the U.S. and European countries like Sweden that host thousands of mining rigs. Alps Blockchain’s hydropower plants house between 20 and 600 ASIC (s19 pro or s19j) mining rigs generating between 2,000 and 60,000 terahashes per second.
In February, CoinDesk also visited one of the company’s other facilities in the Veneto region – a larger hydropower plant (also a century old) in the municipality of Valstagna that has 300 machines and that is in the process of adding 150 more.
The Valstagna hydropower plant is one facility belonging to a large local energy company. According to Giacomo Magoni, who manages the mining project at the power plant, the plant has been self-consuming 20-25% of its total production to generate computing power since July 2020. During CoinDesk’s visit, only a 10th of the 10 megawatt facility’s production was being self-consumed.
“We decided to take this road in generating computing power to diversify our business and to become a forward-looking company,” Magoni said in Italian.
The energy company’s main goal is to provide as much clean energy to the national grid as possible, Magoni said, adding that profits from its mining operation are being invested in the company’s expansion into multiple renewable energy sectors including hydro and wind power.
Regulatory Concerns Over Crypto Mining
In November, Swedish financial and environmental regulators published an open letter calling for a ban on crypto mining in the EU over energy concerns.
“Sweden needs the renewable energy targeted by crypto-asset producers for the climate transition of our essential services, and increased use by miners threatens our ability to meet the Paris Agreement,” the letter said.
Since then, a growing number of politicians in the EU have been fiercely campaigning for laws directed at limiting the use of energy-intensive cryptocurrencies in the bloc.
The EU crypto-energy debate reached its most recent climax earlier this month when a committee vote in the European Parliament narrowly defeated a proposed provision looking to outlaw cryptocurrencies that cannot switch from the proof-of-work consensus mechanism into more environmentally friendly methods such as proof-of-stake.
Bitcoin, powered by proof-of-work, would have effectively been banned in the EU under the measure.
“We narrowly lost the vote, but the debate on this continues. Clear ecological criteria will come sooner or later, and then cryptocurrencies that optimize their energy consumption will prevail. Others will disappear,” EU parliamentarian Rasmus Andresen, who supported the provision that would require cryptocurrencies to meet climate standards in the EU, said on Twitter.
It is unclear if Italian hydropower producers that are self-consuming portions of their production to power the bitcoin network would appease the concerns of lawmakers and regulators in the EU.
For instance, Valstagna’s Mangoni said that, to some extent, the volatility of energy prices and the profitability of mining dictate where the energy produced at the plant goes.
“We constantly monitor the fluctuation of these two values, and we decide whether to put the energy in the grid or take advantage of generating computing power,” Mangoni said.
On the other hand, Failoni argues that without the mining farms, Valstagna wouldn’t be able to invest in expanding its renewable energy production, while Alta Novella would have been shut down altogether this winter, unable to cover costs.
Failoni says the renewable energy sector in Italy and the crypto economy both stand to benefit from robust and clear regulations that target efficiency levels of mining machines instead of specific consensus mechanisms.
“One thing that makes this kind of activity very energy-consuming is that … the hardware used is not efficient. If they can make some regulations about using only efficient miners, using only renewable energy sources, this kind of sector would change for sure,” Failoni said.
Graziadei, the mayor, says that he has no plans to expand the computing center at the Alta Novella power plant and that it’s perfectly calibrated to the needs of the plant – just enough to keep it running and well-maintained. He urges regulators to understand the technology.
“I read some proposals, but they were never very well argued,” Graziadei said.“I advise them to understand the functioning of the tech.”
When asked what would happen to the energy that is not consumed by the 300 mining rigs at Valstagna, Mangoni said all of it would go to the national grid.
“[The grid] always buys it because in Italy, we consume more than we produce in all the hours of the day,” Mangoni said.
Greener Bitcoin Mining Could Be China’s ‘Trillion-Dollar Present’ To The US
Can change come fast enough for an ESG-embattled mining industry?
When China banned bitcoin (BTC) mining from May of last year, it handed the U.S. a “trillion-dollar present,” as one mining executive told CoinDesk. But perhaps most importantly, crypto miners, particularly listed firms in the U.S., Canada and parts of Europe, are presiding over a shift towards greener and more innovative ways to use energy for mining coins.
Adding to a higher mix of renewables, crypto miners are becoming more adept at balancing the load of demand at power grids, while energy giants like Exxon are now exploring new paradigms, such as piloting the use of wasted gas from its North Dakota oil wells to power bitcoin mining operations, for example.
While this transformation is moving rapidly, it can’t come fast enough for the now-adolescent Bitcoin mining industry, whose ingrained dirty image continues to attract the attention of lawmakers and the public.
Environmental, social and governance (ESG) pressures on crypto mining’s energy use are mounting, both from within U.S. President Joe Biden’s administration and also from the European Union with its recent deliberation on a possible ban of proof-of-work (PoW) mining.
An adjacent concern comes in the form of proposed rules that would give the U.S. Securities and Exchange Commission (SEC) insight into carbon footprints of listed firms.
The “greener mining” saga goes back a decade, when North America constituted a mere sliver of bitcoin’s global hashrate.
For those cryptocurrency frontiersmen, an obvious step towards improving the sustainable power mix was simply locating mining operations in places where an excess of renewable energy was on offer. That could be parts of Canada where there’s a lot of hydropower and, more recently, places like Texas with its surfeit of wind and solar.
In such places, renewable energy production has to be curtailed at times because there’s too much congestion on power lines transmitting that energy to urban centers. So there’s a need for local load brought by bitcoin miners, who act as a kind of safety valve for stranded power that would otherwise go to waste.
“Proximity matters,” said Peter Wall, CEO at listed mining firm Argo Blockchain (ARBK), which was set up initially in Quebec, tapping into the region’s hydropower, and now also located in West Texas. “When you are close to renewables, you have better access to them. That’s just a reality.”
In addition to providing renewable power, the grid in Texas, run by the Electric Reliability Council of Texas (ERCOT), incentivizes a high capacity power user like Argo to quickly shut down at times when the utility requires a lot of power; for example, to heat people’s homes in the winter or cool them in the summer.
Financially incentivizing bitcoin miners’ flexible load capabilities adds a virtuous competitive element into the Texas grid, Wall explained.
“If you opt in every day to be a flexible load provider, i.e., to be on call to be shut down, the Texas grid will give you a discount on your power and will pay you back to be essentially a virtual power plant,” Wall told CoinDesk. “To have the option to shut you down instead of having to fire up some other type of generation is economically advantageous for the miner. But more importantly, it’s economically advantageous for the grid because it keeps the cost of power lower for everyone.”
Core Scientific (CORZ), another U.S. crypto mining giant, produces monthly reports detailing the amount of energy handed back to the grid in times of need.
“We have arrangements with the communities and utilities wherein; when the grid needs it, we will down power,” said Core Scientific CEO Mike Levitt in an interview. “If we get a call from one of the utility companies in the geographies where we operate who need 30 megawatts available from two to five o’clock today, we put the machines into sleep mode, and it’s literally a keystroke because we have a software program that manages the 160,000-plus mining rigs.”
Last month, for example, Core powered down in two different states, for a total of 4,400 megawatt hours.
“Our industry really can quite legitimately, effectively and uniquely release energy utilization to the grid; it’s almost as if we’re acting as a battery,” Levitt said. What’s often not recognized, he added, is that utility companies would normally have to rely on so-called peaker power plants in times of high demand. “Generally speaking, those peaker facilities are the old ones and the dirty ones and the expensive ones,” Levitt said.
There’s a tacit understanding that when China controlled the lion’s share of bitcoin mining such transparent arrangements simply didn’t exist. It needed publicly accountable companies operating on U.S. regulated soil to make that happen.
“China’s ban that resulted in the down-powering of mining infrastructure was a trillion-dollar present to the U.S.,” said Core Scientific co-founder Darin Feinstein. “I am certain that the people in China will question the wisdom of banning one of the largest innovations in financial, economic and accounting history.”
Nasdaq-listed mining company Marathon (MARA) echoed Core Scientific’s sentiment regarding China, and pointed to the rapid shift in bitcoin mining’s renewable power mix over the past year.
“One of the reasons that so much of the mining industry moved into North America when China banned bitcoin mining is that people woke up to the fact that we have a lot of excess power in the United States,” said Marathon Vice President of Corporate Communications Charlie Schumacher in an interview.
Bitcoin mining went from 37% sustainably powered to 59% sustainably powered as an industry, according to the Bitcoin Mining Council, an industry group including most of the large miners and fronted by big names including MicroStrategy (MSTR) chief and bitcoin enthusiast Michael Saylor. And as Schumacher pointed out, this does not include any carbon offsetting.
“I don’t know of any other industry that’s improving its power mix quite that rapidly,” Schumacher said.
The past year has also seen a rapid U-turn among power utilities that would previously not touch bitcoin mining, but are now banging on the door of firms like Marathon, having woken up to the fact this is a valuable way to use excess power, Schumacher said.
Shape Of Things To Come
Looking ahead, bitcoin can also play a central part in the transition of energy grids to becoming more decentralized, Schumacher said, because community-based renewable energy projects could use bitcoin mining to become more economically viable, with potentially battery storage.
Another interesting trend would be power companies becoming the bitcoin miners of the future, something that’s being talked over right now and which would most likely happen via joint ventures, Schumacher said.
“Power companies own the single biggest input cost, since electricity is 70% of the input cost for a miner,” Schumacher said. “If you sell excess power to a bitcoin miner you charge, say, 3 cents per kilowatt-hour. But if [power companies] owned 100% of the bitcoin, at today’s prices it works out at more like 35-40 cents per kilowatt-hour.”
(A crypto mining source who asked to remain anonymous said a few power companies were among a rush of speculative new entrants back in 2017 when the price of bitcoin spiked, but that most found the infrastructure requirements were too daunting to proceed with. However, joint ventures in the future seem inevitable, the source said.)
The possibility that power companies could become bitcoin miners has an interesting parallel in the world of proof-of-stake blockchains, where large telcos that provide infrastructure for such networks are also taking part in staking and crypto earning rewards, with the likes of Germany’s Deutsche Telekom leading the way.
In addition to plugging into a grid with a greener power mix, another arrow in the quiver for bitcoin miners is the use of renewable energy certificates (REC), the means by which many corporate entities pay a premium to promote more renewable energy use.
An accurate way of verifying the RECs has been created by decentralized data storage protocol Filecoin among its storage providers (the blockchain system’s equivalent to miners). And now an ambitious RECs platform tailored to bitcoin miners has been launched in the form of the Sustainable Bitcoin Standard (SBS).
SBS co-founder Bradford van Voorhees, who has worked on sustainable supply chains and responsible sourcing with brands such as The North Face, Wrangler, Timberland and Vans, understands very well that firms don’t change unless it’s good for business.
“The Sustainable Bitcoin Standard is a protocol that financially incentivizes or rewards bitcoin miners using verified clean energy sources,” he said. “It also allows institutional investors who have ESG mandates to add proof of sustainable mining to their bitcoin holdings. And it does the two of those without disrupting the fungibility of bitcoin in any way.”
The project, which was born out of the first Stacks accelerator cohort (the blockchain system formerly known as Blockstack), is at various stages of cooperation with 10 large miners, said van Voorhees, that are either publicly listed or extremely well-capitalized.
The two that can be named at this stage are Bitdeer, the crypto mining platform spun out of Chinese chip manufacturing giant Bitmain; and sustainable energy-focused miner ClearSpark.
When a miner wins a block reward of Bitcoin, it is issued a matching amount of sustainable Bitcoin certificates (SBCs), which, like Bitcoin, are on-chain tokens divisible by 100 million.
These tokens can be held or uncoupled from the Bitcoin coinbase and sold to institutional investors and ESG-focused investors, who can then match these to their Bitcoin holdings. Next month, the protocol will carry out its first end-to-end transaction from distribution of SBCs to a miner, to those being sold on to an ESG-focused investor, van Voorhees said.
The system is modeled on the renewable energy certificate (RECs) market in the U.S., in that it distributes a reward to miners, whose green credentials have first been verified by the Center for Resource Solutions, a third-party non-profit which works with the likes of Apple and Proctor and Gamble.
However, quantifying or auditing carbon offsetting and accounting for a possible variation in or duplication of renewable energy certification opens a whole new can of worms, such that the Bitcoin Mining Council (BMC), has removed RECs from its attempts to calculate how green the industry is.
When you are close to renewables, you have better access to them. That’s just a reality.
The problem with not counting RECs is that some Bitcoin miners want to get credit for relocating to another, greener power grid, according to Doug Miller the co-founder of clean energy platform Zero Labs.
“I think part of this happened as a result of miners relocating from China to North America and they’re trying to get credit for sourcing clean energy from the ‘greener grids’ they’ve relocated to without having done anything beyond moving,” said Miller via email. “They want credit without having the standard evidence/documentation (RECs), so it seems like they want credit for essentially doing nothing other than relocating.”
Speaking on behalf of the BMC, Core Scientific’s Feinstein said RECs were removed in the last quarter’s numbers because it was judged not to be feasible to compare different REC credits across a wide range of companies based all over the world.
“The purpose of the Bitcoin Mining Council is to educate globally on what’s going on in terms of Bitcoin mining and its energy footprint. The simpler the message is, the better,” Feinstein said in an interview.
With his long-time experience working with RECs, van Voorhees acknowledges the problem of creating a standard that will fly, pointing to the SBS’s use of Green-e RECs, which are “pretty much the pinnacle.”
He also adds his role is not to become an arbiter of what constitutes green or sustainable energy use; for instance, if methane miners, which burn flare gas at drill heads to power electricity generators, are actually helping to mitigate CO2 equivalents, then perhaps they should be included in the protocol as being sustainable, van Voorhees said.
“We are starting for now with North America and just organizations that are using renewable energy that is verified by using RECs that meet the Green-e standard,” said van Voorhees. “This is extremely stringent.”
Bitfarms Reports Q4 Revenue Growth of 33% to $60M, Along With Margin Expansion
The miner booked full-year revenue of $169 million, up 383% versus 2021.
Canadian crypto miner Bitfarms (BITF) on Monday morning reported revenue of $60 million for the fourth quarter of 2021, up 33% from $45 million in the third quarter and up 426% from the fourth quarter of 2020.
* The company reported full-year revenue of $169 million for 2021, up 383% versus 2020.
* Operating income in Q4 was $15 million, and net income was $10 million, or $0.05 per share. Adjusted EBITDA for Q4 was $44 million, or 74% of revenue, up from $32 million, or 71% of revenue in Q3. The company mined 1,045 bitcoin (BTC) in Q4 at an average price of $8,000 per coin versus an average of $7,500 a year earlier.
* For comparison, Marathon Digital – one of the larger miners in the world – had blended mining costs of $5,087 per coin, according to an investor presentation.
* Turning to the balance sheet, Bitfarms as of year-end held $126 million in cash and 3,301 bitcoin valued at about $153 million (based on price of $46,300). The company raised $113.9 million in Q4 via the sale of 17.6 million shares through its at-the-market (ATM) program with H.C. Wainwright. Since the start of 2022, the Canadian miner raised another $25.6 million through ATM share sales.
* On January 6, the Canadian miner purchased another 1,000 bitcoin for $43 million to add to its BTC treasury holdings.
* As of March 25, the company had boosted its hashrate to 2.7 exahash per second (EH/s) versus 2.2 EH/s at the end of the year. Management believes existing miner orders and contracted infrastructure expansion should allow hashrate of about 7.2 EH/s by the end of 2022. The company target is 8.0 EH/s by year-end, and Bitfarms is looking at further development opportunities in order to be able to achieve this.
* Shares are up 13% in Monday morning trading, rising along with mining peers like Marathon Digital (MARA) and Core Scientific (CORZ), thanks to a big rally to above $47,000 for bitcoin (BTC) over the weekend.
Russian Government Official Calls To Legalize Mining ‘As Soon As Possible’
The quotas and allocations of mining operators should be set by the regional authorities, not federal, the deputy minister says.
Russian Deputy Minister of Energy Evgeny Grabchak proposed eliminating the legal vacuum around crypto mining in the country and introducing clear regulations. This statement continues the recent streak of support for the crypto industry among the country’s officials.
Speaking at the first national conference of legal crypto miners in Irkutsk on Saturday, Grabchak called for introducing a regulatory framework for the sector as soon as possible:
“The legal vacuum makes it difficult to regulate this area and set clear rules of the game. This legal vacuum needs to be [eliminated] as soon as possible. If we want somehow to get along with this activity, and we have no other options in the current reality, we must introduce legal regulation, adding the concept of mining to the regulatory framework”.
The deputy minister also suggested that it would be more prudent to let the regional authorities — not their federal counterparts — set the sites for mining and the possible energy quotas. “Perhaps, it should be synchronized with the regions’ development strategies and other industry sectors’ plans,” he added.
Grabchak speech puts mining in Russia in the state’s strategic perspective. He also shared his disbelief in the market’s ability to regulate the quantity and allocation of mining operators. Earlier, on March 21, Vice-Premier Aleksandr Novak had stated that “it would be reasonable” to legalize mining.
These statements continue the series of voiced support for the crypto industry after the sudden attack by the Central Bank of Russia (CBR), which hcalled for an outright ban on mining and trading back in January.
In March, a working group within the Duma, or lower chamber of parliament, called for the “clear regulation of the digital assets industry” as the most effective approach to lower the risks associated with crypto’s adoption in the country.
Can Crypto Miners Make The World Greener?
As it decarbonizes, the mining industry might help push energy producers to build more renewable power sources.
Around 15,000 cryptocurrency mining rigs are humming away at HIVE Blockchain’s (HIVE) 30 megawatt (MW) data center in Boden, Sweden. But not all the time. Sometimes, the facility powers down to help the local grid.
The data center, drawing cheap energy from local hydropower producers, acts as one of the largest, if not the largest, active energy reserves the Swedish grid can call upon whenever there are major disturbances to the local power supply. The facility can shut down its machines almost instantaneously so that energy can quickly be diverted to public use.
“In five seconds, we have to power down half of what we have allowed into the system,” said Johanna Thornblad, HIVE Blockchain’s Sweden country president. “And within 30 seconds, the entire power supply that is being requested has to be participating in the FCR-D system” – the Frequency Containment Reserve for Disturbances that keeps the lights on in the region.
When managed like that, the energy demand of HIVE’s mine is an asset to the local electricity grid; the miners are a stable source of cash flow when public energy consumption is low, but can power off during peak hours.
The mutually beneficial relationship between the HIVE facility and the local grid shows another side to the well-worn story of crypto mining’s environmental consequences.
A popular narrative among politicians, media and the industry’s most vocal critics is that mining is cooking the Earth. Miners have indeed been known to bring fossil fuel plants back from the twilight zone – thanks to their insatiable and indiscriminate thirst for cheap power. Bitcoin (BTC) is therefore said to be gobbling up the world’s precious energy and consequently responsible for a large amount of carbon emissions.
“You cannot waste energy sustainably,” Pete Howson, a senior lecturer in the geography and environmental sciences department at the U.K.’s Northumbria University, told CoinDesk, aptly summarizing the critics’ view.
Globally, bitcoin mining alone consumes 136 terawatt-hours (TWh) per year, estimates the Cambridge University Center for Alternative Finance. That’s about the same amount of electricity as Argentina, the United Arab Emirates or Sweden. But that’s only about half of what data centers run for other purposes consume, which the International Energy Agency (IEA) puts at 200-250 TWh.
U.S. and European lawmakers have been making arguments such as the ones mentioned above when scrutinizing the environmental impact of bitcoin mining. Last week, proof-of-work mining, used by the Bitcoin network, narrowly escaped its demise in the European Union:
Lawmakers voted down a proposal that would have banned proof-of-work mining but made allowances for protocols such as Ethereum that were transitioning to other verification methods that consume less electricity, like proof-of-stake.
Concurrently with these criticisms, the bitcoin mining industry has shifted dramatically toward renewables.
Estimates of how much bitcoin mining is powered by renewables range from 40% to 75%, The New York Times reported in September 2021. A report by crypto asset management firm CoinShares found that as of December 2021, renewables contributed under 30% of the total energy consumed by the bitcoin network, with nuclear power responsible for 11% of the total and natural gas contributing another 24%.
Although carbon emissions from mining have been growing overall along with the industry, they have decreased relative to megawatt hours of electricity used and terahashes of computing power produced, CoinShares found.
More than cleaning up its own act in the process of decarbonization, the crypto industry might help energy producers build more renewable energy that the rest of society can use.
The Benefits Of Renewables For Crypto Miners
For many miners, using renewable sourced electricity makes a lot of economic sense. Overall, renewable energy is cheaper than fossil fuels, so it can preserve miners’ profit margins.
“Generally speaking, electricity from renewables is as competitive if not cheaper than fossil fuel-based electricity,” said Jesse Morris, CEO of Energy Web, a U.S. company that is helping a consortium of miners build transparency around their energy sources, known as the Crypto Climate Accord.
Not only are fossil fuels more expensive, but they are vulnerable to external price shocks such as the war in Ukraine.
An interesting dynamic emerging from the conflict is that, with fossil fuel prices through the roof, renewable energy is even more attractive, said Mellerud. “We will likely see more miners moving towards renewables due to this shock.”
Howson, who studies the social and environmental impact of bitcoin mining, is skeptical of such arguments. The fact that renewable energy is not produced 24/7, 365 days a year, makes it less attractive to miners, he said. “Every minute the sun’s not shining or wind’s not blowing, or it’s dry season so no hydro, they’re losing money,” he told CoinDesk.
Miners have another incentive to move toward cleaner energy sources: They can “lower their cost of capital since they have a better chance of attracting institutional investors that operate under ESG-mandates,” said Jaran Mellerud, researcher at Oslo-based Arcane Research. “Environmental, social and governance” is a set of criteria for making investments that looks at social goals in addition to financial returns.
Companies, especially those traded on public markets, are under pressure to decarbonize, said John Belizaire, CEO of Soluna. As miners went public, their energy consumption became public information, and “and as you might imagine, no company, especially in the public markets, is immune to ESG pressures. We’re all in the role at this point in the back of a Tesla moving in the right direction,” Belizaire said.
“Still, some miners will resort to buying carbon offsets as an easy solution, as some of them already do today,” Mellerud said. These are transferable credits for reducing emissions, which companies can sell on the market.
If a miner intending to be green joins the industry, fossil fuel-powered miners, such as players using coal in Kazakhstan, or gas-powered ones in Texas, are incentivized to increase their energy consumption to keep up, Howson said.
A growing way of using renewable energy to power mining is through what can be called behind-the-meter solutions. That’s when an electricity producer connects a couple, or a couple thousand, mining rigs close to the energy asset, so the power goes directly to the miners, instead of going through the grid (and its meters).
No Man’s Energy
A fair amount of the world’s renewable energy is stranded or curtailed, meaning it is located far from demand and there is no good way to transmit it to regions with high usage. As a result, producers might turn off or limit their energy production. California clocked 1.5 TWh of curtailed energy from wind and solar in 2021, according to the state’s grid operator.
In addition, a lot of energy dissipates when it is transmitted over long distances, so it makes economic sense to consume it where it is produced, said PoW Energy co-founder Alejandro de la Torre, whose company crypto builds mines around Europe.
For example, in northern Norway, electricity prices are about 10 times less than the southern part of the country because there is abundant hydroelectric power but barely any industry or population to consume it.
“The energy production [in the north] and the potential for more production is so much higher than the local demand for that energy and the capacity to export it to other areas,” Kjetil Pettersen, CEO of Oslo-based miner Kryptovault, told CoinDesk.
However, countries around the world are working to develop better transmission lines such that energy can be consumed or exported. Germany will spend $55 billion on such projects by the end of 2030, estimates the Federal Ministry of Economic Affairs and Climate Action.
Thanks to the abundant hydroelectric energy, northern Norway, which is not directly connected to the rest of Europe, has been impervious to a sharp uptick in energy prices in the south of the country, and doesn’t expect any increases soon, said Oleg Blinkov, head of data center development and operations at Bitfury, one of Europe’s e largest miners.
Kryptovault is considering establishing facilities there to soak up the excess energy. The same is true for northern Sweden, where cheap, abundant energy has attracted everything from Facebook data centers to crypto mining operations to the region.
Bitcoin mining can act as a demand-side response to the problem of curtailed or stranded energy. “The grid is having a real challenge integrating large amounts of power,” Belizaire said. Three things are needed to fix this problem; transmission capacity, flexible loads, and energy storage, he said.
The IEA estimates that another 500 gigawatts (GW) of demand responses need to be brought online by 2030 to achieve net zero carbon emissions globally by 2050. That’s a tenfold increase compared to the capacity of demand-side responses brought online in 2020. Demand responses try to balance the grid by increasing or reducing energy consumption to match the supply.
The next decade will be messy, Morris said. Power grids will become increasingly complicated as they integrate a growing array of energy sources. “It’s gonna get worse before it gets better,” he said, adding that crypto mining should be a necessary part of the solutions available to energy suppliers.
Howson countered that, overall, mining is encouraging fossil fuel energy production more than it is promoting renewable energy. “For every farmer plugging a few ASICs into their biodigester, there’s an entire fossil fuel power plant reopening to satisfy bitcoin’s energy demands,” he said.
Trade groups who tout the former type of miner are simply engaging in ”a massive greenwashing drive,” he said.
Ultimately, the industry “is delaying grid transitions to renewables,” by making oil and gas industries more profitable, Howson said.
Increasing the proportion of wind and solar energy in the grid will increase the need for energy reserves that can be tapped on demand, like HIVE’s Boden mine that can power on and off, Mellerud said.
“These energy sources are variable and not controllable, as they only generate power when the weather allows it,” he said. In other words, the supply of energy becomes less flexible the more wind and solar is integrated in the grid, such that the demand side has to make up for the difference.
Another interesting model is that manufacturing facilities, such as clothing factories, can use any excess energy that they didn’t spend during the manufacturing process to power in-house bitcoin mines, de la Torre said. This is happening, for example, in Spain, he said.
The Energy Flexibility Of Crypto Miners
For Eric Thedéen, the Swedish financial regulator who called for a ban on proof-of-work mining in the European Union, miners are using electricity that would otherwise be available for other industries.
“This energy is urgently required for the development of fossil-free steel, large-scale battery manufacturing and the electrification of our transport sector,” he wrote in November.
Indra Overland, head of the energy program at the Norwegian Institute of International Affairs, agrees with Thedéen’s standpoint, adding that even if miners used energy in places where there is an abundance of it, they would still be competing against other industries also looking to take advantage of cheap renewables.
“The energy transition requires a reorganization of many sectors,” Overland said in an email to CoinDesk in February. This process is already ongoing and will accelerate in the coming years. Many energy-intensive industries will move to locations where there is abundant clean energy. Clogging up those locations with cryptocurrency mining will slow down this process.”
The “unique nature of the miners’ energy consumption profile” is so good for soaking up curtailed energy, that it is hard for other industries to compete, said SAI Tech CEO Arthur Lee, whose firm develops technology to make mines more efficient and green.
“Clean energy stations are mostly built in remote places, which attract energy consumers who have mobility and huge power demand – miners fit into this profile perfectly.”
These unique characteristics are advantages for energy producers looking to balance their grid loads, said Andrew Webber, founder and CEO of Digital Power Optimization, which helps energy producers balance their loads and maximize profits using a host of solutions.
It doesn’t require high latency internet connections, which might not be available at remote edges of the world where renewable power plants are, and also doesn’t need to be running at all times, unlike other types of consumer data centers, he said.
“If Amazon or Google plop down and build a data center, and buy power from a power producer, first of all, they want that power 24/7,” he said. “They never want to shut off because Instagram photos, web applications, and the CIA’s data is there on their servers, and they need that data to be up 24/7. They can’t have glitches; they can’t have downtime.”
Automating the process through which mines turn on and off is key to balancing the grid because it allows adjustments without delays caused by human error, maximizing the benefit to consumers, said Gregg Dixon, CEO of Voltus, a firm that digitally aggregates power suppliers and consumers into one virtual system to more efficiently balance loads.
According to Henrik Juhlin, head of power management at Vattenfall, one of Sweden’s largest state-owned power companies and a major energy supplier to the HIVE facility in Boden, flexible electricity use is an effective way to support stable frequency in the power grid. Juhlin added that HIVE’s Bikupa data center is one of Sweden’s largest contributors to FCR.
The Swedish national grid operator can call on the HIVE data center in Boden to power down a portion of its mining operations at least once a month to balance the local grid. In the facility, energy use is divided into thousands of small units or machines that can be powered off one by one, or all at once, according to Marin Baksa, site manager at the HIVE Blockchain data center in Boden.
By comparison, a steel factory, which has to maintain certain temperatures and an assembly line, might have a harder time powering off quickly, Baksa added. Quick responses, like the ones automated crypto mines can bring, are valued higher than slower ones, Dixon said.
Bitcoin miners are willing to curtail their activity for about 100 hours/year, which is when the value of curtailing exceeds the value of mining, i.e., when it’s more profitable to give power to the grid than use it for mining, Dixon said. These can be days when there is really high demand; for example, due to a heatwave.
The miners “can use excess renewable energy locally, to speed up the rate of return on investment, and attract more (clean power) investors,” Lee wrote in an email.
The Problem With Batteries
Storing electricity instead of using it for mining comes with several caveats, not least of which is that battery technology has been infamously static for the past few years.
In south Spain, energy producers are “not getting very much out of selling electricity to the grid,” said Vincent Burke, CEO of Solar in Spain, which develops small-scale photovoltaic installations.
Burke said that for every three units of electricity he sends the grid, he receives one credit. “So the value of that kilowatt becomes a third of what it is if you use it,” he said, adding that storing extra electricity in a battery is usually expensive because lithium, which is a key material in batteries, is pricey.
“If you don’t use the energy that is produced, then you need to store it somewhere,” HIVE’s Baksa told CoinDesk. But “when you create batteries, after the period of expiration of the battery you create a lot of waste. So, not sure that anyone is going in that direction,” Baksa said.
The pros and cons for crypto mining and batteries are different, Webber said.
For energy producers, batteries capture the difference in value between the low and high price. “You charge them up when the price of power is low, and then you discharge your batteries when the price of power is high, so what you capture is the spread between those two prices,” he explained.
By contrast, with crypto mining, “what you want is more or less consistent low power. Ideally, you have really low power all day long and all night long,” Webber said. So where someone places a battery might be the same place for a crypto mine, but maybe not, he said.
Belizaire said mines are, in a sense, better than batteries because they add load instantaneously that can be directly converted into a different asset. “A battery absorbs the electrons and then has to re-output the electrons to the same point where it’s connected. It can only do that during certain periods, and sometimes those periods for its business model don’t conflict with what the grid needs,” he said.
Howson scoffs at such comparisons. The idea that bitcoin will function like a battery in that miners can act as a buyer of last resort, converting and storing the electricity as “financial energy” is “absolute bollocks,” he said.
The Great Crypto Mining Merger
The incentives between energy producers and miners are so aligned that soon it might be difficult to draw a line between the two.
More energy firms are entering mining, while miners are accumulating their own energy supply. Voltus has created models to determine exactly how much flexibility is worth to crypto miners: in Texas, $37.53 per megawatt hour, whereas in New England, it’s $6.69. per MWh.
Energy companies that stay out of bitcoin mining will leave money on the table, “because mining most of the time is much more profitable than selling the energy to the grid,” Mellerud said.
Based on his research, during mining’s super-profitable 2021, energy producers could have earned more than 10 times the cash flow by mining bitcoin than selling their energy to the grid, he said.
Daro Ruiz, who installs photovoltaics with Solar in Spain, said that although energy prices have increased to $0.14 per kWh for consumers due to the conflict in Ukraine, producers are still paying around $0.05-$0.06 per kWh.
DPO’s Webber said that in five to 10 years, all big crypto miners will have to generate their own power generation capacity to maintain cost competitive operations. “If they don’t, the people that own the power gen can do this,” he said.
Belizaire agreed broadly, but stopped short of saying that miners that don’t supply their own power would eventually be priced out. “As the industry scales, and this approach and model starts to take off, it’s likely that vertical integration of renewables and this industry will be an important strategic advantage,” Belizaire said.
Working On It
The materials used to build mines are also contributing to the industry’s carbon footprint.
Several miners, which are auditing their carbon footprint, are looking comprehensively at their operations, even as they focus on energy consumption, Morris said. And some are finding ways to save energy in their data center designs, software systems and contracting and financial structuring.
Morris added that most of the criticism of bitcoin’s carbon footprint is a veiled way of saying, “I don’t believe in bitcoin.” Decarbonizing the network might not actually satisfy these critics, he said.
Asked whether a fully renewable energy-powered bitcoin mining network would be acceptable in terms of its carbon footprint, Northumbria University’s Howson, a critic of the industry, said that “proof-of-work is proof of waste,” and that “if all the world’s Bitcoiners got together and agreed to cooperate to make bitcoin ‘green,’ it would negate the point of proof-of-work.”
Sweden’s Theéden started his letter calling for a ban on proof-of-work mining saying; “The social benefit of crypto assets is questionable.” For the regulator, the energy going to mining could be better used elsewhere.
Theéden cited research by Digiconomist, a project by Dutch researcher Alex de Vries, who has been a strong advocate against bitcoin mining.
Among other topics, de Vries has quantified the carbon footprint of bitcoin transactions by comparing the energy intensity and carbon emissions of a bitcoin and a Visa transaction. He found that bitcoin’s carbon footprint per transaction is equivalent to 2,700,562 Visa transactions.
The bitcoin community has objected to the comparison and questioned de Vries’s background. Researchers at Cambridge University’s Center for Alternative Finance say that the energy cost per transaction metric is “a purely theoretical measure that has little practical relevance without additional context.”
Critics also point out that the researcher works for the Netherlands central bank, which they consider a conflict of interest.
Bitcoin supporters like many of the miners quoted in this article disagree. Mellerud thinks that the debate overall focuses too much on the costs of bitcoin, and that the network has other benefits.
“Yes, bitcoin consumes a lot of energy,” but “this is the price we pay for having a global, permissionless, and censorship-resistant monetary system,” he said.
Is Miner Concentration Once Again Jeopardizing Bitcoin? Not Exactly
The high percentage of hashrate now located in North America may look like China 2.0, but the reality is more complicated.
One of the main pillars of bitcoin’s (BTC) value proposition is decentralization. Why then does the computer processing power behind the largest cryptocurrency seem to be concentrating again in one place, this time North America? The answer is multifaceted but some of the main reasons come down to where it’s the safest in this geopolitical environment and most profitable for the miners to operate.
Following China’s sweeping crackdown on the country’s crypto industry last year, miners packed up their businesses and fled to other parts of the world, where the geopolitical situation is more stable and cheap power is plentiful. They moved largely to North America, particularly to the U.S.
According to a report released by Cambridge Center for Alternative Finance (CCAF) in October, the U.S. accounted for 35.4% of bitcoin’s global computing power, or hashrate, at the end of August, more than doubling the 16.8% share at the end of April.
Kazakhstan and Russia followed the U.S. with hashrate shares of 18.1% and 11%, respectively, at that time. Meanwhile, mining operations in mainland China had effectively dropped to zero, down from a high of 75.53% in September 2019.
Most recently, the digital-asset investment firm CoinShares said in a research report that the largest global mining country is the U.S., with an estimated 49% of total global hashrate located in the region as of Dec. 31, 2021.
This concentration counters bitcoin’s promise of a decentralized network, where in an ideal world hashrate would be evenly distributed globally. But the reality is far from ideal and given geopolitical instability in some key regions, the trend of miners moving to the U.S. is likely to continue.
“Ideally, miners would distribute bitcoin’s hashrate across the globe and multiple jurisdictions, but they will migrate to the most favorable business, energy, and political climates they can find – that’s why they are coming to the United States,” said Colin Harper, head of content and research at crypto software and services company Luxor Technology.
It’s not hard to see why a miner would rather be in North America than anywhere else as lawmakers worldwide are starting to clamp down on crypto miners. Kazakhstan, which was a popular destination for miners leaving China, called for higher taxes, cut off power and cracked down on illegal mining operations. In February, Hong Kong-based cryptocurrency miner BIT Mining (BTCM) halted its near-$10 million mining data center construction project in Kazakhstan, citing unstable local power supply.
Furthermore, recently a proof-of-work (PoW) ban narrowly failed to pass in a European Union Parliament committee vote. Russia has its own geopolitical problems at the moment.
Rule Of Law And Cheap Power
Having the assurance that a whole industry will not be just uprooted or disrupted overnight by the government is one of the main considerations for anyone planning to start any business, particularly in such a young sector as crypto mining.
This arguably makes the U.S., with its constitutional protections and federal system, the safest place for miners to set up. “The United States is one of the better countries to experience hashrate concentration because the United States’ federal structure ensures strong rule of law and robust states’ rights,” Luxor’s Harper said.
Particularly after miners got burned by China’s ban, a repeat of such total disruption to business would be costly, especially given the sector has become brutally competitive, while margins sunk from their peak of 90% to between 60% and 70%.
“If it had to be that a single country hosts a large percentage of the network hashrate, then I am glad that this is in the United States, given its federated system in which individual states have large autonomy over lawmaking within their borders,” said Jurica Bulovic, head of mining at Foundry (a subsidiary of Digital Currency Group, which also owns CoinDesk).
“That diminishes the risk of an abrupt, country-wide ban on bitcoin mining, like we have seen in China,” Bulovic said.
Or, as Bryan Bullett, CEO of mining firm Bit Digital put it in October: “nobody wants to operate in a region where they face existential risks.”
Dave Perrill, CEO of data centers operator Compute North, said the U.S. also has better access to infrastructure and a lower cost of power.
However, such a large concentration of miners relocating in the U.S. has started to draw the ire of lawmakers and regulators alike, given these firms’ massive demand for energy.
In March, the Environmental Conservation Committee of the New York State Assembly voted to move along a proposed law that would ban proof-of-work (PoW) cryptocurrency mining for two years. Meanwhile, some federal lawmakers led by Sen. Elizabeth Warren (D-Mass.), have scrutinized crypto mining companies on their climate impact.
Most recently, the U.S. Securities and Exchange Commission (SEC) proposed a new regulation that would require publicly traded companies to report information on greenhouse-gas emissions and risks related to climate change, which would affect miners due to their energy consumption. However, the mining community, for the most part, welcomed this proposed rule.
However, it’s doubtful the U.S. government will try to ban digital asset mining altogether as many states have already embraced the industry.
“It’s unlikely that the federal government would move to ban or disrupt mining, and if they did, the decision would have to go through federal courts, not to mention the fact that states would fight tooth-and-nail against a PoW prohibition,” Harper said.
To complicate matters for policymakers, the mining industry has already turned into a multibillion-dollar industry. In Feb. 28 research note, Wall Street bank B. Riley’s analyst Lucas Pipes wrote that the industry has already grown to almost $100 billion in gross value of bitcoin to be mined..
“Most simply, to derive total industry value, we multiply coins to be mined times current BTC price plus transaction fees.
Today, this value is approximately $92 [billion],” he said, using a bitcoin price of $38,000. As of this writing, the price of bitcoin was back up to $44,000.
Such a large industry will likely be hard to strike down completely in a short period of time.
Bitcoin Mining Pool Concentration
Another threat to bitcoin’s decentralization is a handful of mining pools controlling too much hashrate.
“Mining pools are, by definition, a centralizing force in the bitcoin mining ecosystem,” Foundry’s Bulovic said. “They provide a service of aggregating hashrate from individual miners in order to minimize the inherent revenue volatility, and provide stable payouts.”
Foundry USA is the largest bitcoin pool in the world, with almost 20% of the total network’s hashrate, according to BTC.com data as of March 25.
This concentration may seem like another threat to the decentralization thesis. However, mining pools don’t control the network and don’t have a lot of clout, because any miner can quickly change pools if there is any hint of foul play, such as censoring bitcoin transactions, Bulovic said.
“Furthermore, there are developments such as Stratum [version]2 that would, among other things, empower individual miners to construct block templates, taking that power away from mining pools,” he added.
Stratum V2 is a new bitcoin mining protocol that is being developed, improving on many aspects of the previous version, Stratum V1, which miners use to communicate with the mining pools. The improvements include more efficient data transfer and protections against network centralization.
“The full feature set of Stratum V2, offers the miner the choice to select their own transaction set and construct their own block templates [that determines which transactions go inside them], allowing miners to easily revolt against pools that misbehave on censorship to the detriment of the broader Bitcoin network,” according to a recent research report by Rachel Rybarczyk, a vice president at Galaxy Digital Mining. “Even if miners don’t utilize this power, the mere threat that they could, will deter pools from misbehaving.”
Self-Interest And Bitcoin Mining
The numbers showing regional concentration and the mining pools’ outsized market share of the total hashrate look like a threat to decentralization. However, as long as their motivation is profit, it would be counterproductive for the miners to attack the network by banding together.
“To hit on the point about a threat to decentralization, miners ultimately act in their own interests,” Harper said, noting that they compete against each other, and wouldn’t stand to benefit by cooperating to attack the network that generates their income.
And a purely malicious actor with no profit motive (say, a hostile state) would find an attack difficult and expensive to carry out, given the heft of the competition to mine blocks.
However, such concentration does increase regulatory scrutiny for the miners from the country they are setting up their business in, Harper said.
Luckily, “I think the United States’ federal structure provides unique insulation against a state-sponsored attack [against the miners],” he said.
The Bitcoin Shitcoin Machine: Mining BTC With Biogas (Human Waste)
A Bitcoin mining facility in Slovakia converts human and animal waste into Bitcoin hash rate, securing the network while mining Bitcoin.
Next time someone tries to poo-poo the renewable credentials of Bitcoin mining, remember AmityAge Mining Farm. Founded by Gabriel Kozak and Dušan Matuska, the Bitcoin (BTC) mining facility uses human and animal waste to generate electricity for mining.
Matuska, the man “who met Satoshi Nakomoto,” told Cointelegraph that “Methane from biodegradation processes runs our machines.” As human and animal waste isn’t running out any time soon, the facility’s BTC mining process is both environmentally friendly and renewable.
According to Matuska, using renewable energies such as biogas “shows that we can really accelerate the adoption of these renewables and make their return on investment higher in the end,” while it’s also a cheap energy source.
An ecologically sound and low-cost way of generating electricity, biogas electricity plants convert waste into methane gas due to a fermentation process. The gas is then burned as fuel.
Matt Lohstroh, co-founder of Giga Energy — a natural gas Bitcoin miner in Texas — told Cointelegraph that “finding cheap energy [for Bitcoin mining] quickly is the largest issue. All the low-hanging fruit is being plucked away.”
Matuska added that “The situation with energy in Europe changed dramatically in November with a huge price increasing together with a conflict around the corner.” As Lohstroh alludes, turning a profit with Bitcoin mining can be tricky, which keeps Matuska both “busy and worried.”
However, An Eternal Optimist, Matuska Also Told Cointelegraph:
“The most exciting part [about Bitcoin mining] is knowing that we are like ‘Bitcoin security guys,’ helping just a little with our hash rate. We are still helping to protect the network.”
Matuska added that the overall environmental “footprint is pretty low” for the plant and that one of the excesses is “mostly excessive heat.”
If he is looking for ideas for the excessive heat, he need look no further than the creative Bitcoin mining community, which uses the heat to warm campervans, grow flowers in the Netherlands and dry out timber from logging in Norway.
Matuska “Definitely” Recommends That More And More Curious Bitcoiners Get Into Bitcoin Mining:
“You can gain a lot of useful knowledge while setting up your first miner. No need to earn a lot, but the experience is worth a fortune.”
For those interested in getting into Bitcoin mining at home, the process used to be complicated and costly, but solo mining is making a comeback. Compass Mining, the pioneers of Bitcoin mining at home, launched direct-to-consumer hardware sales in late 2021.
Whit Gibbs, CEO of Compass, told Cointelegraph that BTC miners are some of the biggest Bitcoin bulls. He illustrated the point: “You could buy $10,000 worth of Bitcoin, or you can buy an ASIC (Bitcoin mining machine),” knowing full well that it should return the initial investment over a “12- to 14-month” period. He concluded:
“You have to be bullish on Bitcoin to believe that you’re going to see that return in a timely manner as opposed to just buying that amount of Bitcoin outright.”
China Returns As 2Nd Top Bitcoin Mining Hub Despite The Crypto Ban
China still hosts 21% of the total global Bitcoin hash rate after the local government banned all crypto operations in the country last year.
The Chinese government has not managed to take down cryptocurrency operations as part of its crypto ban last year as China has re-emerged as one of the world’s largest Bitcoin (BTC) mining hubs, according to a new report.
China became the second-largest Bitcoin hash rate provider as of January 2022, months after the local government banned all crypto operations in the country, according to the latest update from the Cambridge Bitcoin Electricity Consumption Index (CBECI) shared with Cointelegraph on Tuesday.
Bitcoin miners in China accounted for 21.1% of the total global BTC mining hash rate distribution as of early 2022, following only the United States, which produced 37.8% of the total hash rate as of January, according to the data.
China was once the world’s largest Bitcoin mining country, with the local BTC hash rate power accounting for more than 75% in 2019. The hash rate then plummeted to 0% in July and August 2021, following a series of crypto mining farm shutdowns in the country.
Despite the crypto ban in September 2021, the hash rate share surged to 22.3% that month and did not drop below 18% over the analyzed period.
CBECI Project Lead Alexander Neumueller Told Cointelegraph That The New Data Is Enough To Conclude That Bitcoin Mining Is Still Live In China, Stating:
“Our data empirically confirms the claims of industry insiders that Bitcoin mining is still ongoing within the country. Although mining in China is far from its former heights, the country still seems to host about one-fifth of the total hash rate.”
Russia Drops Out Of The Top Three Largest Miners
The latest CBECI update also signals a slight drop in the hash rate share in Kazakhstan, the world’s third-largest BTC mining hub. Kazakhstan’s BTC hash rate share dropped from 18% in August to 13.2% in January.
The CBECI data also shows that miners now mine as much as 9% of the global BTC hash rate in undefined locations. Canada and Russia are the following major mining hubs, accounting for 6.5% and 4.7%, respectively.
In addition to dropping out from the three biggest countries by BTC hash rate power, Russia also saw its actual hash rate declining from 13.6 EH/s in August to 8.6 EH/s in January.
Georgia, Texas And Kentucky Lead BTC Hash Rate Production In The US
The new CBECI update provides more specific insights about the largest Bitcoin mining market’s hashrate distribution at the state level.
The data shows that Georgia, Texas and Kentucky make up the three largest states in terms of hash rate, accounting for 32%, 11.2% and 10.9%, respectively. All three states combined account for more than half of the overall hash rate in the United States.
Notable mining activity can also be found in the states like New York, California, North Carolina and Washington, the data suggests.
Methodology: CBECI Uses Data From Four Mining Pools
The CBECI is released under the umbrella of the Cambridge Digital Assets Programme, a research initiative host Cambridge Centre for Alternative Finance.
The report is based on data obtained in collaboration with four major mining pools, BTC.com, Poolin, ViaBTC and Foundry.
According to the CBECI website, the sample size for the analyzed mining pool data has varied between 32% and 38% of Bitcoin’s total hash rate since the release of the mining map in 2019.
“We are continually seeking ways in which to improve our data in order to increase the reliability of our estimates. The best way for us to do this is to welcome additional contributing mining pools, so we would encourage other mining pools to reach out and get involved,” the CBECI project lead said.
Bitcoin Mining Appears To Have Survived Ban In China
From September 2021 to January of this year, China’s contribution to the bitcoin mining network was second only to that of the U.S.
China is once again contributing a significant chunk of the world’s bitcoin (BTC) mining operations despite the ban last year, according to the Cambridge Centre for Alternative Finance (CCAF).
From September 2021 to January of this year, China’s contribution to the bitcoin mining network was second only to that of the U.S., according to the CCAF’s Bitcoin Electricity Consumption Index (CBECI), which maps the mining activity around the world based on the geolocational data reported by partnering pools.
Following the crackdown on bitcoin mining in the country last year, China’s share was reduced to 0% in July and August. However, the CCAF’s latest data show that the figure was up to 22.29% in September and fluctuated around 20% in October-January.
This suggests that underground mining activity has been underway in China. “Access to off-grid electricity and geographically scattered small-scale operations are among the major means used by underground miners to hide their operations from authorities and circumvent the ban,” the CCAF said in a statement.
The sudden drop to 0% in July and August followed by a swift increase in the subsequent months suggests mining firms may have been operating covertly and concealing their locations while using foreign proxy services to fend off attention and scrutiny.
Kazakhstan, for example, appeared to be one of the preferred destinations for miners. The Central Asian country’s share of the network climbed above 18% in August last year, according to the CBECI.
By September, miners may have become assured that foreign proxy services were having their desired effect and they need not go to such lengths to conceal their operations in China.
China Makes A Comeback In Bitcoin Mining Despite Government Ban
* ‘Covert Mining Operations’ Behind Rise, Cambridge Center Says
* Hashrate On The Network Climbed To New Highs After 2021 Fall
While the US extended its leading position as the dominant location for Bitcoin mining, China has reemerged as the second-largest locale despite a government ban on the activity last year.
The US accounted for 37.84% of global hashrate, a measure of computing power used to extract the digital currency, between September 2021 to January, according to the Cambridge Centre for Alternative Finance, in a report released on Tuesday. The hashrate, also responsible for securing the Bitcoin network, has made a strong comeback to new highs after falling last year.
Following the mining ban in China last year, the country has seen a sudden surge in activity through “covert mining operations” and has “re-emerged as a major mining hub” grabbing 21.11% of global hashrate, according to the CCAF.
“This strongly suggests that significant underground mining activity has formed in the country, which empirically confirms what industry insiders have long been assuming,” CCAF wrote in the report.
In May (2021), Beijing intensified its efforts to curb the cryptocurrency market. It seems covert mining is still happening in China through routed through virtual private networks that make it appear the computers are operating in another country.
While covert mining operations may be a cause of this resurgence, CCAF’s methodology, which is based on aggregating geolocation data given by partner mining pools, is prone to errors as many miners miners might hide their identity using proxy services like VPNs.
Kazakhstan was third at 13.22%, followed by Canada taking 6.48% of global hashrate. Russia accounted for 4.66%, and has seen cryptocurrency mining operations relegated elsewhere, said the report.
US Lawmakers Urge Environmental Protection Agency To Consider The Potential Benefits Of Crypto Mining
Bitcoin Mining Is A Matter of National Energy Security
Bitcoin mining could have a “substantial stabilizing effect on our energy grids”. They also cited examples of mining operations using flared gas (methane) and renewable energy sources.
Able to utilize a higher mix of renewables, crypto miners are becoming more adept at balancing the load of demand at power grids, while energy giants like Exxon are now exploring new paradigms, such as piloting the use of wasted gas from its North Dakota oil wells to power bitcoin mining operations, for example.
“Digital assets, and their related mining activities, are essential to the economic future of the United States,” said the group of 14 lawmakers.
A group of 14 United States senators and House representatives have signed a letter to the Environmental Protection Agency extolling what they believe are the benefits of crypto mining.
In a Thursday letter, many U.S. lawmakers including pro-Bitcoin Senator Cynthia Lummis and Representative Tom Emmer addressed EPA administrator Michael Regan, requesting the government agency analyze the potential impact of crypto mining in an effort to balance innovation with environmental concerns.
The group of 14 senators and representatives claimed mining could have a “substantial stabilizing effect on energy grids” and cited examples of mining operations using flared gas and renewable energy sources.
“Digital assets, and their related mining activities, are essential to the economic future of the United States,” said the letter. “Favoring one technology over another, including proof-of-work versus proof-of-stake, can stifle innovation, erode future economic gains, and limit affiliated efficiencies.”
— Dennis Porter (@Dennis_Porter_) June 16, 2022
In addition to Lummis and Emmer, the lawmakers who signed the letter were all members of the Republican Party, including Senators Bill Hagerty, Kevin Cramer, and Steve Daines. House Representatives Patrick McHenry, Pete Sessions, Bill Posey, Bill Huizenga, Andy Barr, Anthony Gonzales, Brian Steil, William Timmons, and Ralph Norman also approved the message to EPA administrator Regan.
The Republicans’ request to Regan stood in contrast to an April letter to the EPA from a bipartisan group of 22 lawmakers. They raised “serious concerns” around crypto firms operating in the United States, claiming that the companies contributed to greenhouse gas emissions and were not operating in accordance with either the Clean Air Act or the Clean Water Act.
“Cryptocurrency mining is poisoning our communities,” said the April letter to Regan. “The rapidly expanding cryptocurrency industry needs to be held accountable to ensure it operates in a sustainable and just manner to protect communities.”
In May, the Bitcoin Mining Council responded to the April letter with one of its own, alleging many of the lawmakers’ claims on mining were inaccurate. Many environmental groups, including Greenpeace and the Sierra Club, later urged government agencies under the Biden administration to implement new approaches in their response to crypto mining.
Russia Seems To Be Preparing To Mine Bitcoin With Flare Gas
One of the world’s largest producers of carbon emissions, the Russian gas giant Gazprom aims to reduce its carbon footprint by providing its flare gas for Bitcoin mining.
The Russian government continues to establish links with major players in the cryptocurrency mining industry despite staying skeptical about legalizing cryptocurrency trading and payments.
Russia’s state-owned gas giant Gazprom Neft has entered into a partnership with BitRiver, the largest crypto-mining colocation services supplier in Russia providing hosting services for major crypto mining operations. Gazprom will provide BitRiver’s partner data centers with electricity generated from the associated petroleum gas, the companies officially announced on June 16.
As part of the collaboration, BitRiver will be developing a digital infrastructure based on the oil fields that Gazprom provides crypto mining services from the flare gas.
Gazprom first deputy CEO Vadim Yakovlev emphasized that the business model of Gazprom, itself, doesn’t envision work with digital assets. The gas giant is rather aiming to optimize the use of energy resources ito enable renewable energy by enabling “new ways of beneficial use of associated petroleum gas,” he noted, stating:
“Reducing our carbon footprint is an essential component of Gazprom Neft’s ESG policy. […] By combining technologies and competencies with partners, we create the best industry practices for the efficient and environmentally friendly use of natural resources.”
Gazprom is one of the largest oil and gas companies in Russia and also one of the biggest gas suppliers for the European Union. The oil giant was reportedly ranked as the world’s third-largest producer of carbon emissions as of 2019.
According to the announcement, flare gas-powered crypto mining projects are especially relevant when working in new oil fields that do not have any established gas transmission infrastructure. Another option is to set up such developments on remote oil fields in Siberian regions as such fields are associated with surplus electricity and unprofitable flare gas logistics.
BitRiver founder and CEO Igor Runets noted that the new partnership with Gazprom is part of the company’s ambitious plan to increase its total power capacity to 2 gigawatt in the next two years.
The Russian government had previously considered a project to mine Bitcoin with associated petroleum gas in October 2021.
Russia is a major player in global energy markets as well as Bitcoin (BTC) mining. The country was the third largest BTC hash rate producer in the world as of August 2021, according to the Cambridge Bitcoin Electricity Consumption Index.
According to the latest index update, Russia tumbled to the fifth spot as its BTC hash rate declined to 8.6 EH/s in January 2022 from 13.6 EH/s in August 2021.
Bitcoin Mining Piques The Interest Of Duke Energy. The Nations 2nd-Biggest Electric Company
According to sources, Exxon Mobil, Equinor, La Geo, and ConocoPhillips are also piloting bitcoin mining solutions for the energy industry.
Furthermore, bitcoin mining could potentially stop a significant amount of methane from leaking, according to a report by environmental, social, and governance (ESG) analyst Daniel Batten.
He also stressed that no technology could do it better. According to Batten’s research, by 2045, Bitcoin might potentially reduce 0.15 percent of the world’s CO2-equivalent emissions.
Duke Energy, the second largest electric power provider in the United States, is reportedly considering bitcoin mining.
According to reports, the company intends to incorporate bitcoin mining into its demand response approach.
Lead Rates & Regulatory Strategy Analyst Justin Orkney revealed this on an episode of Troy Cross’ “Bitcoin, Energy, and the Environment” podcast.
Orkney said the company is conducting an ongoing research into bitcoin mining. Before the company implements the mining function to its consumers, he stated that the initiatives are a part of determining how to get the miners to begin operating on the grid.
Duke Energy is an American holding corporation for electric power and natural gas with headquarters in Charlotte, North Carolina.
Duke Energy To Try Bitcoin Mining
In the United States, Duke Energy possesses 58,200 megawatts of base-load and peak generation, which it transmits to 7.2 million homes. The electric utility firm employs around 29,000 personnel.
Orkney stated in the podcast that Duke Energy will combine other energy sources into the microgrid and trial it with varying levels of bitcoin miners prior to submitting a final draft on mining.
Duke has prepared a paper on demand response, originally focusing on the world’s top crypto, Bitcoin, and has already supplied a basic solution to numerous Bitcoin miners.
The United States second-largest electric power company ‘Duke Energy’ is reportedly studying #Bitcoin mining
— Watcher.Guru (@WatcherGuru) July 3, 2022
Before the final report is published, Duke Energy will be using energy sources to leverage its micro-grid in order to help run a series of tests across various categories of miners.
Speaking directly on the subject, Orkney said, “We are exploring general customer phasing concepts. I am working on a Bitcoin demand response study including Bitcoin mining capacity in our system with an eye toward the demand response functionality. We are hoping to do a technology test.”
Notably, a demand response report for the winter peak has already been developed and the company’s primary focus is now on the world’s largest cryptocurrency by market capitalization, Bitcoin.
A demand response functionality comprises changes in the usage of electricity from consumers in response to high-use seasons as part of decreasing demand on the grid while maintaining the reliability of electricity.
He added that the company’s grid serves other demand response initiatives for different industries and that it already hosts several Bitcoin miners on a small-scale basis.
In essence, DR allows energy consumers to reduce or shift loads in order to operate the grid more effectively. By being able to “strategically locate miners on the system. There’s a possibility to partner with these types of customers,” Orkney used the example of bitcoin mining.
The analyst makes note of how bitcoin mining might be a strong technology when it comes to DR components, despite the fact that the majority of the debate focuses on Orkney’s background in solar & pilot studies on demand response.
Orkney emphasized during the interview that some of Duke Energy’s (NYSE: DUK) customers were bitcoin miners. Orkney told the host of the show, “we do have existing customers on our system. They chose to sign up for our demand response programs. These essentially include consenting to restrict usage during specific times of the year that we refer to as events.”
Most of the infrastructure in the United States, including transformers and transmission lines, is older than twenty years. Through DR programs, grid customers, some of which can be bitcoin miners, can help utilities in reducing peak demand. Insufficient transmission capacity can be better managed to increase the dependability of old infrastructure. Orkney suggested that bitcoin mining might be a highly developed DR technique.
According to Orkney, “Bitcoin mining appears to be that really powerful demand response technology where they can be humming at a 100 percent power factor, or using the same amount of electricity all day long, which is known as flatlining, and then within a matter of minutes they can decrease their usage at kind of a pinpoint precision level and hold it for however long they want to, and then bring it right back up.”
Since the network apparently uses 91 terawatt-hours of electricity each year, bitcoin mining has drawn a lot of negative attention in the past year about the industry’s consumption of energy.
Nevertheless, some bitcoiners think worries regarding BTC’s energy usage when it comes to mining are exaggerated. A new study also demonstrates that the Bitcoin network uses 50 times less energy than the traditional banking system.
With its base in Charlotte, North Carolina, Duke operates in six states and provides energy to about 7.5 million electric retail customers. According to Orkney, Duke is the second-largest U.S. energy corporation, if not the largest in some sectors. The American electric power and natural gas holding company also manages 58,200 megawatts.
The environmental impact of proof-of-work (PoW) mining has dominated discussions in several states across the U.S. As a result, many states are considering minimizing outages while improving power supply as part of demand response. As a proponent of mining, Greg Abbott, the Governor of Texas has welcomed crypto miners to his state.
Unlike skeptics, he believes that the state’s electricity grid can be strengthened via demand response programmes.
Mining of PoW coins such as Bitcoin has been criticized for their high carbon emissions which degrade the environment and many critics believe the mining sector should be abolished.
Due to the plunge in cryptocurrency prices which has made mining unprofitable, Bitcoin energy usage declined to yearly lows in June 2022.
According to recent data from the Cambridge Bitcoin Electricity Consumption Index, the United States is home to more than 35 percent of Bitcoin mining worldwide.
The data indicates that the U.S. has surpassed China and Kazakhstan to become the global leader in Bitcoin mining.
Texas Welcomes Crypto Miners
Various U.S. states are currently reviewing demand response as a means of enhancing electricity supply and eliminating power outages. For instance, Greg Abbott, the governor of Texas, welcomed to the Lone Star state crypto-miners from different parts of the globe.
Abbott pointed out that crypto miners can bolster the electricity grid through efficient demand response systems.
Texas consumes and generates the most electricity in the U.S., and has the cheapest electricity rates, and crypto-friendly legislation. According to the Environmental Impact Assessment (EIA), Texas generated about a third of the nation’s wind energy in 2020.
Governments Are Recognizing Cryptos’ Significance
Bitcoin mining has encountered opposition from certain sectors because of its exorbitant electricity consumption and environmental impact.
Demand response programs are viewed as part of the solution to alleviate strain on the current electrical grid as governments have started to recognize the significance of crypto as its popularity grows.
Many nations are also implementing environmentally friendly options to support the crypto industry and lessen its negative effects.
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