Bitcoin mining is very energy-intensive and requires an enormous amount of computing power
Alessandro Bianchi / Reuters
Bitcoin mining can support the development of renewable energy technologies by enabling faster returns on green investments, according to the head of one of the largest crypto miners in North America.
Mike Colyer, CEO of Foundry, a sister company of the big Bitcoin player Grayscale, told Insider that he thinks Bitcoin could be “a bridge between our current generation of energy and this future world of renewable energy generation.”
His argument is that the boom in green energy creation has created oversupply in many areas that can be difficult to manage and costly for renewable energy companies.
According to Colyer, locating bitcoin mines near renewable energy projects can help manage this oversupply, which in turn helps develop environmentally friendly technologies.
“This allows for faster payback on those solar or wind projects, which means that more of them can be built faster in regions where it wasn’t previously attractive, as they would be producing too much power for the grid in that area,” he said .
Other miners have repeated this argument, although the secret nature of the industry makes it difficult to estimate the rate of change.
And many remain unconvinced. With the price of Bitcoin soaring this year, disputes over intense energy consumption have intensified. Due to climate concerns, some investors are concerned about the world’s largest cryptocurrency.
Bank of America analysts said in a note on Wednesday that Bitcoin was “not good news for the environment” and estimated that it uses almost the same amount of electricity as the Netherlands.
“The estimated energy consumption of Bitcoin has increased by over 200% in the last two years, which brings great environmental risks with it,” wrote the analysts, including the commodity strategist Francisco Blanch. They found that most of the mining is done in China, where coal dominates.
Bitcoin is “mined” when computers are connected to the cryptocurrency network to verify transactions. As a reward for this work of solving puzzles, miners can sometimes receive small amounts of Bitcoin.
Huge amounts of computing power are now being used to mine Bitcoin, with more being pulled up when the price can skyrocket.
According to Colyer, bitcoin mining is increasingly using renewable energy as green electricity becomes cheaper. His mining company Foundry is owned by Grayscale owner Digital Currency Group and also provides financing and advice on equipment.
“The Bitcoin algorithm is relentless in its pursuit of efficiency and cost reduction,” he said. “It’s built in, it’s unstoppable. Every miner in the world is constantly looking for ways to make the production of Bitcoin cheaper. And the cheapest energy [in North America] is renewable energy. “
According to a report from the University of Cambridge last September, 39% of proof-of-work mining is powered by renewable energy, mostly hydropower.
Michel Rauchs, a subsidiary of the Cambridge Center for Alternative Finance, told Insiders it was difficult to get an accurate estimate of the “green” Bitcoin values.
He said inside China that the renewable portion of mining changes during the year was due to “seasonal migration patterns” with miners switching to hydropower plants during the rainy season. “So it really comes down to what time … you watch this,” he said.
Bank of America analysts argued that because of the structure of the system, Bitcoin’s energy consumption will only worsen, making mining more difficult over time.
“The increasing complexity of the system ultimately leads to a vicious circle of increasing prices, increasing hash performance, increasing energy consumption and ultimately increasing CO2 emissions,” they write.
According to Colyer, Foundry is working on a number of ways to make mining greener. “We’re focusing on the newer technology, like immersion degradation, where the machines are actually put in a coolant and not using air cooling … We work with the flare gas staff who are tracking the flare gas emissions.”
However, many investors are concerned about how long it could take for Bitcoin to be green.
Bank of America said, “As renewable energy production increases over the next 20 years, quantum computers reduce energy use, and new, more efficient crypto assets continue to emerge, the cryptocurrency space could potentially find ways to reduce its carbon footprint.
“However, a rapid increase in the adoption of Bitcoin poses a major risk and thus results in a low environmental rating for Bitcoin.”