Concerns about the environmental impact of crypto are growing rapidly. Bitcoin, the first and most popular cryptocurrency, is designed to be energy-intensive, as it is “mined” by millions of high-powered computers around the world.
This puts enthusiasts in a difficult position. Crypto tokens, they claim, will power a decentralized internet, altering the economics of banking, finance, gaming, shopping, entertainment, and even human interaction.
However, if cryptocurrency, which is already worth $2 trillion, is the future, this industry, like any other, cannot afford to ignore climate change and must embrace sustainability. Ether, the second-most popular cryptocurrency, uses a lot of power, just like Bitcoin, but its developers are planning a switch to a more environmentally friendly mining method.
DealBook brought together three prominent experts to debate the solutions for greening crypto: Alex de Vries, a data scientist who created the Bitcoin Energy Consumption Index; Kathleen Breitman, co-founder of the Tezos blockchain network; and Paul Prager, CEO and founder of the Bitcoin mining company Terawulf and an energy industry veteran.
The following are edited excerpts from the discussion. The full debate can be heard in the audio player above.
calculating the cost
The energy used by computers to generate new digital tokens via a process known as “proof of work” accounts for a large portion of crypto’s environmental impact. This necessitates a significant amount of processing power: according to some estimates, the server farms competing to generate new Bitcoins consume as much electricity annually as a small country such as Chile or Belgium.
DealBook: Why does crypto mining use so much energy?
De Vries: Mining is the process of adding new blocks to the Bitcoin blockchain. These transactions will result in Bitcoin rewards. The energy consumption occurs when you are attempting to complete these blocks for the blockchain. Around three million machines are playing a massive game of ‘guess the number,’ generating 140 quintillion guesses every second of the day, nonstop. Then they get to work on the next part of the blockchain, which is the most energy-intensive. And not every cryptocurrency requires it.
Given newer cryptocurrencies that use less energy, is Bitcoin mining already outdated?
Breitman: I started a competing project, but I think it’s telling for the purposes of our discussion that no cryptocurrency launched in the last four or five years has used proof of work, and that’s because it’s outdated technology. I would argue that some of the associated energy costs are justified by the goal of what they do. However, I would qualify that. Using a technology that imposes an unnecessary environmental tax — which, as someone who believes in man-made climate change, I strongly oppose.
Bitcoin as a battery
Green energy is wasted if it is not used as soon as it is generated. The holy grail of the energy industry is batteries that can store renewable energy when the sun isn’t shining or the wind isn’t blowing. For the time being, these do not exist at the required scale. However, some believe that Bitcoin could be used as another type of “battery.” It has the potential to store the value of renewable energy by converting intermittently available local solar and wind energy into a globally traded digital asset with an infinite shelf life.
Some argue that another way to make Bitcoin mining more sustainable is to use “stranded” or wasted energy, such as capturing the power of flare gas at oil patches to mint digital money.
Can crypto mining be made sustainable?
Prager: When you have an electrical grid, you want it to become more sustainable over time. There should be a lot more renewables. These are intermittent energy supply options — hydro, solar, and wind — that we will be sourcing for our mining capacity. You want a consistent load, which allows the grid to be robust. You always have this load that is Bitcoin mining, but that load could go away. When there are supply strains, it may be turned off for 200 hours per year. As a result, it’s beneficial to the grid. That’s a win-win situation for everyone.
Does the metaphor of Bitcoin as a battery make sense?
Breitman: A one-way battery isn’t the same as a battery. Texas has Bitcoin mining operations. There was a crisis going on, and people were freezing to death. Why couldn’t they use the energy stored in the Bitcoin battery? This isn’t a battery.
How else can Bitcoin help with wasted energy?
Prager: At the end of the day; our country has a massive amount of electricity that is simply stranded or wasted. So, once again, context. You’ll need spinning reserves for this. If everyone wants sustainability, and I certainly do, you need flexible baseload facilities to be able to develop the grid. That is what zero-carbon Bitcoin mining accomplishes.
Does using excess energy to mine crypto make it more sustainable?
De Vries: Bitcoin consumes a lot of energy; but if it’s energy that would otherwise be wasted, it’s not a big deal. That is a large number of so-called stranded assets. However, in many cases, those assets are fossil fuels. China recently banned Bitcoin mining because it was ultimately responsible for the revival of coal mines. Similar examples can be found in the United States and New York; where a gas plant was resurrected as a result of Bitcoin mining.
Beyond electricity
The mining technology, which quickly gets outdated and generates toxic electronic waste; is an often-overlooked aspect in the environmental cost of crypto.
Source: The New Hork Times