Does Bitcoin Have an Energy Problem? (below)

Bitcoin does not pollute the environment as critics claim, and can contribute meaningfully to the advancement of energy development as current industry trends become the norm.

“Bitcoin Mining Mobility & Bitcoin as a Battery

Another key feature of Bitcoin mining is that Bitcoin mining is mobile, and miners only need access to electricity and the Internet to successfully mine. For example, miners can mine bitcoins in remote areas where relatively cheap renewable energy is available that cannot be transported to other locations for use. In this case, the miner is able to monetize the cheap, unused energy.

In light of this, industry professionals sometimes use a mindset that treats “Bitcoin as a battery”. Bitcoin does not physically have the ability to store energy. However, miners can use the idle energy and convert it into bitcoins. Bitcoin doesn’t make energy transferable, it makes value transferable.

Looking further, first, bitcoin mining is a freely accessible industry. The profitability of bitcoin miners is limited by the difficulty of adjusting to mining difficulties and price fluctuations. Therefore, the best way to remain consistently profitable is to control what power and operating costs can be controlled. Second, bitcoin mining goes on all day long, and energy companies will adjust electricity prices when there is an oversupply. Miners can take advantage of relatively cheap off-peak energy sources for mining. Bitcoin does not store units of energy for later use, but it stores the value of a unit of energy for later use. In this way, we can go a step further and call Bitcoin a load-balancing value battery.

Especially in the United States, there is an urgent need to invest in the transmission and distribution (T&D) grid. If energy companies build new revenue streams by establishing bitcoin mining operations, there will be more available capital to invest in grid and infrastructure improvements. Greenidge Generation in Dresden, New York is an example of a power plant that is using expansion of bitcoin mining as an additional revenue stream.

Does Bitcoin Have an Energy Problem? (below)

Modular Generator for Mining Bitcoins with Natural Gas

Source: Upstream Data Inc.

Another benefit of bitcoin mining is the ability to use natural gas (mainly methane) to mine bitcoins in oil fields. It is not economically feasible to transport natural gas to where it needs to be used. The result is that the gas has historically been burned or emitted directly into the atmosphere causing more damage to the environment. companies such as Crusoe Energy Systems, EZ Blockchain, Great American Mining and Upstream Data are taking advantage of the oversaturated natural gas market, the coin mining mobility and by installing modular generator units in oil fields to reduce natural gas pollution and efficiently convert it into electricity for bitcoin mining. This strategy makes energy producers more revenue efficient and reduces their pollution footprint.

Finally, all of this energy use has a side effect in the form of heat emissions from mining operations. Bitcoin mining operations have emerged in Iceland, Russia, and other cold regions to reduce the cooling costs associated with mining. It is now possible and achievable to use the heat released from bitcoin mining to reduce HVAC costs and lower the price of heating homes in colder climates. There are even reports of miners using the heat emitted to heat greenhouses and chicken coops. We can take a peek at the future applications of bitcoin mining activities through these innovations.

“Payment Processors and Bitcoin – Addressing a Potential Alternative

At the outset, we outlined why comparing Bitcoin to a country is not particularly useful. Comparing third-party payment processors to Bitcoin is similarly misleading. The argument is that third-party payment processors like Visa spend much less energy than Bitcoin, while also facilitating more transactions.Visa uses a fraction of Bitcoin’s energy, about 0.25 TWh versus about 125 TWh, to process an average of 150 million transactions per day and is capable of processing over 24,000 transactions per second, compared to Bitcoin’s approximately 3 – 4 million. This conclusion is incomplete due to the omission of two important factors: the actual energy used by Visa and Bitcoin’s transaction scalability.

First, it’s not just Visa’s technology stack that is holding back the Visa payments track. Because Visa transactions use government-issued currency, it is difficult to directly calculate the energy rationing that Visa relies on to facilitate transactions. If we can consider the energy use of various institutions and industries, the true cost of Visa includes the energy consumption of “bills and minting”, “banking systems” and “defense”. Unlike this, Bitcoin’s payment network transmits native tokens to settle final transactions, governed by the same rules and protocols, which is why proponents are so excited about it. Bitcoin is more than just a payment network. Bitcoin is also the currency of transmission.

Second, a single transaction on the Bitcoin blockchain does not equal a single payment. As Nic Carter put it in a CoinDesk article called The Frustrating, Maddening, All-Consuming Bitcoin Energy Debate. “Bitcoin offers fast, highly guaranteed final settlement. This means that traders can trust that the transfer of value is absolutely irrevocable in a short period of time. This allows Bitcoin to scale to huge sizes – multi-billion dollar transactions are common, and settlements don’t happen by accident …… Thus, Bitcoin is best understood as a high-integrity utility-scale settlement network, similar to Fedwire ……”

The end of the Bitcoin settlement mechanism is the “first layer” to building a thriving, decentralized financial ecosystem. While the specifics of near-chain, side-chain, “second layer” and off-chain transactions are beyond the scope of this report, the important point is that a single Bitcoin transaction can represent hundreds, thousands or millions of related transactions. Simply counting transactions at the “block level” or “layer 1” of Bitcoin is incomplete. Bitcoin is a simple value exchange system that can transfer $10 billion in value just as easily as $100 billion. Regardless of the size, the mechanism and system remain the same.

Does Bitcoin Have an Energy Problem? (below)


In this report, we have outlined the environmental considerations for investing in bitcoin. The conversation about decarbonization and bitcoin needs to continue. On the surface, Bitcoin looks like a potential stumbling block to sustainability requirements simply because of its energy use. However, suggestions that Bitcoin is entirely good or bad for the environment are one-sided.

Our primary goal is to emphasize that bitcoin and ESG investment mandates are not the exact opposite of each other. An investment in Bitcoin can be considered an investment in ESG, given its potential impact on the energy use and generation portfolio. Bitcoin already uses a significant amount of renewable energy, and most miners have access to renewable energy. As political and environmental pressures increase, miners are likely to shift to using more renewable energy. Most importantly, energy companies can thrive by monetizing wasted energy as the innovative technology driving bitcoin mining moves into the mainstream. Bitcoin is helping to improve some aspects of clean energy. In this regard, ESG supporters should be optimistic.

We look forward to further research so we can learn more about Bitcoin’s energy use and carbon footprint. In the end, we hope this report will spark deep discussions in boardrooms, Zoom, government halls, and dinner tables about the true energy cleanliness of bitcoin.

Source: CoinDesk Research

Author: George Kaloudis

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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