Bitcoin Miners Want to Recast Themselves as Eco-Friendly

Along a deep dirt road in Texas ’farming country, cryptocurrency company Argo Blockchain is building a power plant for the Internet age: a cryptographic“ mining ”site full of computers that generate new Bitcoins.

But unlike other Bitcoin mining operations, which consume large amounts of fossil fuels and produce carbon emissions, Argo says it is trying to do something environmentally responsible. While Peter Wall, Argo’s chief executive, was conducting a visit to the 126,000-square-meter construction site one morning this month, he pointed to a line of wind turbines just a few miles from the road, with its white rays shining in the sunlight.

The new facility, an hour off Lubbock, would be powered primarily by wind and solar power, he said. “This is the nirvana of Bitcoin mining,” Wall said. “You look into the distance and you have your renewable energy.”

In the face of criticism from politicians and environmentalists, the cryptocurrency mining industry has embarked on a brand-changing effort to challenge the prevailing view that its electricity-consuming computers are harmful to the climate. Five of the largest publicly traded cryptocurrency mining companies say they are building or already operating renewable energy plants, and industry executives have begun arguing that demand for cryptocurrencies will create opportunities for wind and solar companies to open their own facilities.

The effort, partly a public relations exercise, partly a genuine attempt to make the industry more sustainable, has intensified since last spring, when China launched crackdown on cryptographic mining, forcing some mining operations to move to United States. A trading group called the Bitcoin Mining Council was also formed last year, in part to address climate issues, after Elon Musk criticized industry for the use of fossil fuels.

Cryptographic mining does not involve any beak or shovel. Instead, the term refers to a process of verification and currency creation that is essential to the Bitcoin ecosystem. Powerful computers compete with each other to process transactions, solving complex mathematical problems that require quintillions of numerical guesses per second. As a reward for this authentication service, miners receive new coins, which provide a financial incentive to keep computers running.

In the early years of Bitcoin, a cryptocurrency enthusiast could extract coins by running software on a laptop. But as digital assets become more popular, the amount of energy needed to generate Bitcoin has increased. A single Bitcoin transaction now requires more than 2,000 kilowatt-hours of electricity, or enough energy to power the average American household for 73 days, the researchers estimate.

To achieve this, some miners are reactivating damaged coal-fired power plants or using low-cost natural gas to power their computers. Last month, a study in the journal Joule found that Bitcoin mining worldwide could be responsible for about 65 megatons of carbon dioxide a year, comparable to Greece’s emissions.

According to the study, the use of the Bitcoin network of green energy sources has also dropped to an average of 25 percent in August 2021 from 42 percent in 2020. (Industry has argued that its average use of renewable energy is closer 60 percent). result of the repression of China, which cut off a source of cheap hydroelectric power. But it also reflects key economic incentives, said Alex de Vries, one of the authors of the Joule study. Renewable energy is an intermittent source of energy: the sun shines only part of the day and the wind speed varies considerably.

“What a miner is going to do if he wants to maximize profit is put his machine where he can work all day,” Mr. of Vries.

Bitcoin’s growing energy use has long outraged environmentalists. But the criticism that made the strongest impression came from Mr. Musk, a longtime Bitcoin promoter, who said on Twitter in May that Tesla, its electric car company, would no longer accept payments in cryptocurrency due to the “increasing use of fossil fuels for mining and Bitcoin transactions.”

His tweet sent the mining industry into crisis mode. Michael Saylor, the CEO of the software company MicroStrategy, which invests heavily in Bitcoin, has contacted Mr. Musk to discuss the climate problem. A group of mining executives, including Mr. Saylor and Mr. Wall, later met with Mr. Musk for Zoom.

“I wanted to make sure the industry is on the side of sustainability and it gave us a little bit of training,” Saylor recalled. “His breath was: ‘Find out how clean energy is, how sustainable energy is. Find out how much you’re using.'” (Mr Musk did not respond to a request for comment.)

After the call, Mr. Saylor created the Bitcoin Mining Council, a forum for industry to share ideas and coordinate environmental strategy. One member, TeraWulf, has pledged to run cryptocurrency mines using more than 90 percent carbon-free energy. It has two projects under construction: a coal-fired hydroelectric plant in upstate New York State and a nuclear power plant in Pennsylvania.

“Everyone I’m talking about right now is talking about carbon neutrality,” said Paul Prager, CEO of TeraWulf. “The language has changed absolutely.”

But financial priorities and technology barriers in the crypto mining industry, which includes more than a dozen listed companies like Argo, are preventing a complete shift to renewable energy. In late 2020, Marathon, one of the largest publicly traded mining companies, began extracting Bitcoin at a coal plant in Montana, citing easy access to cheap energy.

In Illinois, cryptocurrency mining company Sangha Systems is reusing a former steel mill in the town of Hennepin. Sangha is run by a former lawyer, Spencer Marr, who says he founded the company to promote clean energy. But about half of the energy from Operation Hennepin comes from fossil fuels.

“It was a commitment we had to make,” Marr said. “It was a means to an end that allowed us to establish ourselves as a company.”

In recent months, Texas has become a hot spot for cryptographic mining, attracting more than two dozen companies. The state has an unusual incentive structure that fits well with the nascent industry: the Texas grid operator offers a discount to businesses that can quickly shut down when electricity demand increases statewide, allowing energy to flow. to common owners. Many cryptographic mines can be turned on or off in seconds, allowing them to take advantage of the incentive with minimal inconvenience.

That agreement was part of the attraction of Argo, a London-based company founded in 2017 that runs two other mines in Quebec, using primarily hydroelectric power. Wall said Argo was also drawn to the vast green energy in West Texas. The facility outside Lubbock will be connected to the western sector of Texas’ power grid, where about 85 percent of the electricity comes from wind and solar infrastructure, including a set of turbines that are located virtually next to Argo’s work.

But Mr Wall cannot guarantee that the new Argo center will have no carbon footprint. That would require avoiding the grid and buying energy directly from a renewable energy company.

“Many of those renewable energy producers are still a little skeptical of cryptocurrency,” he said. “Cryptocurrencies do not have credit profiles to sign agreements for 10 or 15 years.”

In the future, he said, Argo plans to build its own solar panels instead of Texas and negotiate agreements with local renewable energy companies to buy energy directly.

The wider cryptocurrency community is divided on whether cleaning up the mining sector is the best path to environmental sustainability. The energy-intensive authentication system underlying Bitcoin is known as the “working test”; some in the industry are pushing to build new cryptocurrencies on a different system called the “participation test,” which uses only 0.01 percent of the energy consumed in the mining process.

Wall said he had no objections to experimenting with an alternative system. Still, he said, he believes in the long-term potential of Bitcoin to transform finances, though he wants miners to be called something that sounds less extractive, like “validators.”

That is a battle that is unlikely to win. But even in the face of violent reaction, he said, companies will continue to mine Bitcoin.

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

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