Tesla CEO Elon Musk delivered a surprise on the crypto industry earlier this month, retracting the company’s decision to start taking Bitcoin (BTC) as a form of payment for various car sales after being acclaimed as a champion of sorts by many inside the global digital asset market. Bitcoin mining processes were cited as being too resource-intensive and unsustainable in the long run.
Musk, as expected, became a heel almost quickly, particularly among Bitcoin maximalists, who began branding him a sell-out and a market manipulator. Regardless of the name-calling, the encounter appeared to put a spotlight on the crypto mining industry’s energy consumption. This is best demonstrated by the fact that a growing number of crypto companies have recently declared their plans to switch to greener energy sources.
Bitfarms, a publicly-traded North American Bitcoin mining startup, announced earlier this month that it has succeeded in powering nearly 1.5 percent of the Bitcoin network using 99 percent renewable energy. Furthermore, the concept of carbon-neutral exchange-traded funds (ETFs) is swiftly gaining ground around the world, with many large investment management firms, including Toronto-based Ninepoint Partners LP, already taking steps to achieve this.
Finally, BitMEX, a crypto derivatives trading platform, recently declared its decision to become carbon neutral, while Marathon Digital Holdings, a Bitcoin mining company based in the United States, intends to reach its carbon neutrality objective of 70% in the near future.
Is going green the only option?
We spoke with Sam V. Tabar, chief strategy officer for Nasdaq-listed Bitcoin miner Bit Digital and former head of capital strategy for Bank of America Merrill Lynch, to learn more about whether the mining business is headed in the right direction. According to him, the “switch to green” is already happening at a rapid pace across the global mining scene, and he goes on to say:
“Many miners, particularly publicly traded miners seeking to optimize returns for shareholders and stakeholders, have been aggressively pursuing sustainable energy methods. This, we believe, is a critical component of enhancing our sustainable operations and reducing our environmental impact.”
When asked about Bit Digital’s environmental initiatives, Tabar pointed out that, despite powering roughly 2% of the global Bitcoin network, the majority of the company’s energy comes from carbon-neutral sources including hydroelectricity, solar energy, and other wind-based technology.
He also mentioned that as the industry moves toward a more digitized future, more companies will hire well-known independent Environmental, Social, and Governance (ESG) consultants to help them self-monitor, set goals, provide transparency, and improve their percentage of green electricity and other sustainability initiatives.
“We’re currently working with independent ESG consultancy APEX,” he continued. We can create benchmarks to continuously improve as we shift toward 100 percent renewable energy by monitoring our sustainability and mining footprint.”
Is it possible that renewable energy is actually less expensive?
Matt Hawkins, CEO of multi-algorithm CPU and GPU miner Cudo, told us that behind the scenes, numerous significant companies in the crypto business have already begun to migrate to renewable energy, which he believes is a positive step forward for the sector as a whole. He went on to say:
“In many cases, renewable energy is less expensive and thus more appealing to mining farms, provided that this power source is stable and unaffected by seasonal fluctuations, such as the dry season in China, when mining farms previously moved operations to fossil fuel-powered facilities during the dry season.”
While we’re on the subject of China, Hawkins believes that the continued migration of hashing power out of the nation is a significant plus, especially in terms of the Bitcoin network’s decentralization. Tabar also believes that the prohibition on cryptocurrency-related activity has been a blessing in disguise for US miners looking for new ways to generate clean energy in the country.
Is nuclear energy a viable alternative to consider?
While much of the discussion around renewable energy has centered on solar and wind, Compass Mining, a North American mining and hosting company, announced that it had signed a 20-year deal with nuclear fission startup Oklo, which will provide the mining farm with 150 megawatts of energy once its mini-reactors are deployed within the next two to three years.
In addition, according to data given by the United States, Nuclear reactors do not contribute to any type of air pollution when they are operational, according to the Energy Information Administration. In this regard, Compass CEO Whit Gibbs believes that switching to nuclear power will lower the cost of mining for his company “considerably.” In addition, Compass is in talks with the crypto-friendly city of Miami about using power from the Turkey Point Nuclear Plant in Florida.
Hawkins maintained his conviction that “it all comes down to cost efficiency” when it comes to Bitcoin mining, adding that when the market is buoyant and bullish, Bitcoin mining is lucrative throughout most locations, regardless of the electricity expenses paid. He continued, ”
“Mining is a labor-intensive activity that requires a lot of energy. As a result, the more clean and green energy sources that mining farms may consume, the better for the industry and our world. The catch here is that you should make sure you’re not simply stealing green energy from towns and cities to run Bitcoin operations.”
The future’s miners
After China announced a blanket ban on its mining business earlier this month, Bitcoin suffered the largest difficulty drop in its decade-long history. Following this move, BTC’s difficulty ratio plummeted to 45 percent, allowing many mining farms to produce larger quantities of BTC for a cheaper cost per unit.
Since the prohibition, the crypto business has made rapid progress toward long-term sustainability, with Musk recently implying that, despite Tesla’s decision to accept Bitcoin payments, the crypto industry may be on its way to a greener future. Not only that, but recent research from the Cambridge Centre for Alternative Finance reveals that the amount of energy consumed to mine BTC has decreased.
As a result, only time will tell how the Bitcoin mining sector develops in the future, especially as more and more miners migrate to crypto-friendly areas, such as those in the Nordic countries or Central Asia, where renewable energy is plentiful.