To solve environmental problems Bitcoin miners build renewable energy-powered factories

On a dirt road deep in rural Texas, cryptocurrency company Argo Blockchain is building a power plant for the internet age: a cryptocurrency “mining” stronghold that houses the computers that generate new bitcoins.

But unlike other bitcoin mining operations that consume a lot of fossil fuels and generate carbon emissions, Argo claims to be trying to do something environmentally responsible. One morning this month, Argo CEO Peter Wall gave a tour of the 126,000-square-foot construction site, pointing to a row of wind turbines a few miles away, their white spokes glistening in the sun.

He announced that the new facility, an hour’s drive from Lubbock, will be powered primarily by wind and solar. “It’s bitcoin mining heaven,” Wall said. “You look far away and you’ve got renewable energy.”

Facing criticism from politicians and environmentalists, the cryptocurrency mining industry has begun to rebrand to challenge the prevailing view that its power-hungry computers are bad for the climate. The five largest publicly traded cryptocurrency mining companies have all said they are building or already operating factories powered by renewable energy, and industry executives have begun arguing that demand from cryptocurrency mining companies will create opportunities for wind and solar companies.

Since China began cracking down on cryptocurrency mining last spring, forcing some miners to relocate to the U.S., that effort — part PR and part genuine attempt to make the industry more sustainable — has intensified. An industry group called the Bitcoin Mining Council was formed last year, in part to address climate concerns, after Elon Musk criticized the industry for using fossil fuels.

To solve environmental problems Bitcoin miners build renewable energy-powered factories

Argo CEO Peter Wall inspects the 126,000-square-foot facility at the new West Texas facility. Credit: Carter Johnston for The New York Times

Cryptocurrency mining does not involve any pickaxes or shovels. Rather, the term refers to the verification and currency creation processes that are critical to the Bitcoin ecosystem. Powerful computers compete with each other to process transactions and solve complex mathematical problems that require countless number guesses per second. As a reward for this identity verification service, miners will earn new bitcoins, which provide an economic incentive to keep computers running.

In the early days of Bitcoin, cryptocurrency enthusiasts could mine coins by running software on their laptops. But as the digital asset becomes more popular, the amount of electricity needed to generate bitcoin has soared. The researchers estimate that a single bitcoin transaction now requires more than 2,000 kilowatt-hours of electricity, enough to power an average American household for 73 days.

To achieve this, some miners are restoring failed coal plants or using low-cost natural gas to power computers. Last month, a study in the journal Joule found that bitcoin mining worldwide could generate around 6,500 megatons of carbon dioxide annually, the equivalent of Greece’s emissions.

According to the study, the Bitcoin network’s use of green energy also dropped from 42% in 2020 to an average of 25% in August 2021. (The industry argues that its average renewable energy use is closer to 60 percent.) That is partly because of a Chinese crackdown that has cut off sources of cheap hydropower. But it also reflects underlying economic incentives, said Alex de Vries, one of the authors of the Joule study. Renewable energy is an intermittent energy source—the sun is only visible for part of the day, and wind speeds fluctuate wildly.

“If miners want to maximize their profits, all they have to do is put their machines anywhere they can run around the clock,” said Alex de Vries.

Bitcoin’s ballooning energy usage has long angered environmentalists. But the most impressive criticism came from Musk, a longtime supporter of Bitcoin. In May, he said on Twitter that his electric car company, Tesla, would no longer accept cryptocurrency payments because “bitcoin mining and trading increasingly use fossil fuels.”

His tweet put the mining industry into crisis mode. Michael Saylor, CEO of MicroStrategy, a software company that has invested heavily in Bitcoin, got in touch with Musk to discuss climate issues. A group of mining executives, including Saylor and Wall, later met with Musk on Zoom.

“He wanted to make sure the entire industry was on the side of sustainability, so he gave us some guidance,” recalls Saylor. “His encouragement was: ‘Find out how clean and sustainable this energy is. Figure out how clean and sustainable this energy is. How much do you use. (Musk did not respond to a request for comment.)

Following that call, Saylor established the Bitcoin Mining Council, a forum for the industry to share ideas and coordinate environmental strategies. One of its members, TeraWulf, has pledged to run cryptocurrency mining farms using more than 90 percent zero-carbon energy. It has two projects underway, an abandoned hydroelectric coal-fired power plant in upstate New York and a nuclear facility in Pennsylvania.

“Everyone I talk to is talking about carbon neutrality right now,” said Paul Prager, CEO of TeraWulf. “The conversation has completely changed.”

Financial priorities and technical hurdles in the cryptocurrency mining industry, which includes more than a dozen public companies such as Argo, are preventing a sweeping shift to renewable energy. In late 2020, Marathon, one of the world’s largest publicly traded miners, began mining bitcoin at a coal-fired power plant in Montana, citing easy access to cheap energy there.

To solve environmental problems Bitcoin miners build renewable energy-powered factories

Containers with dielectric coolant for mining computers. Credit: Carter Johnston for The New York Times

To solve environmental problems Bitcoin miners build renewable energy-powered factories

Hose for delivering medium coolant to mining computers. Credit: Carter Johnston for The New York Times

In Illinois, cryptocurrency mining company Sangha Systems repurposed an old steel mill in the town of Hennepin. Sangha is run by former lawyer Spencer Marr, who said he started the company to promote clean energy. But about half of the Hennepin power plant’s electricity comes from fossil fuels.

“It’s a compromise we have to make,” Marr said. “It’s a means to an end, allowing us to build our company.”

Texas has become a cryptocurrency mining hotspot, attracting more than two dozen companies. Texas has an unusual incentive system that is perfect for this nascent industry: Texas grid operators offer discount-equivalent subsidies to companies that can quickly unplug when electricity demand surges across the state, allowing energy to flow to ordinary households. Many cryptocurrency mining farms can be turned on or off in seconds, allowing them to utilize incentives with minimal inconvenience.

The deal is part of what attracted Argo. Argo, a London-based company founded in 2017, operates two other mines in the province of Quebec, mostly using hydroelectricity. Wall said Argo was also drawn to West Texas’ abundance of green energy. The facility outside Lubbock will be connected to the western portion of the Texas energy grid, where about 85 percent of its electricity comes from wind and solar infrastructure, including a set of turbines nearly next door to the Argo construction site.

But Wall can’t guarantee that Argo’s new center won’t have a carbon footprint. This requires bypassing the grid and buying energy directly from renewable energy companies.

To solve environmental problems Bitcoin miners build renewable energy-powered factories

The electrical panel of the Argo facility under construction.

“Many renewable energy producers remain skeptical of cryptocurrencies,” he said. “Crypto miners have no credit profile to sign a 10- or 15-year agreement.”

In the future, Argo plans to build its own solar panels on-site in Texas and have agreements with local renewable energy companies to buy energy directly, he said.

The wider cryptocurrency community is divided on whether cleaning up the mining industry is the best way to achieve environmental sustainability. The energy-intensive authentication system that underlies Bitcoin is called “proof of work”; some in the industry are pushing to build new encryption on a different system called “proof of stake” currency, the system consumes only 0.01% of the energy during the mining process.

Wall said he’s not opposed to experimenting with alternative systems. He said he still believes in Bitcoin’s long-term potential to transform finance, although he would like miners to have less extractive-sounding names like “validators.”

It’s a fight he’s unlikely to win. But he said the company will continue to mine bitcoin even in the face of backlash.

“It’s just going to happen. It’s a reality,” he said. “We need to do this in an environmentally friendly way.”

Posted by:CoinYuppie,Reprinted with attribution to:
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