BODEN, Sweden: There is a modern gold mine in snowy Swedish Lapland. But instead of spikes and shovels, it is full of thousands of computers.
These machines, known as mining platforms, are working all day to find new cryptocurrency units, in this case ethereum, the second largest token in the world.
To do this, they must compete with others around the world to find the answer to a complex mathematical puzzle, which grows in difficulty as more and more computers, known as “miners”, join the network. The aim is to ensure the security of the system and prevent fraud.
This ethereum mining facility is run by Hive Blockchain, a company that focuses on using clean energy to extract cryptography.
Benjamin Hall | CNBC
The whole process is backed up by something known as “working proof.” And it consumes an incredible amount of energy. Bitcoin, the world’s largest digital currency, also uses this framework. It now consumes as much energy as whole countries.
Governments around the world are increasingly concerned. Some countries, such as China, have even banned cryptographic mining.
Change to renewables
The mine in question, a warehouse-type building located in the military town of Boden, houses a total of 15,000 of these mining platforms. At 86,000 square feet, it is larger than a standard football field.
The facility is run by Hive Blockchain, a Canadian company that focuses on using green, renewable energy to undermine cryptography.
At 86,000 square meters, the Swedish mining facility in Hive is larger than a standard football pitch.
Benjamin Hall | CNBC
The Swedish operation of Hive is driven by a local hydroelectric plant in Boden, in the north of the country. The region is known for its cheap and renewable surplus electricity.
“In northern Sweden, 100% of the energy is hydraulic or wind,” said Johan Eriksson, Hive’s adviser. “It’s 100% renewable.”
Eriksson says cryptocurrencies are using the excess energy capacity that would otherwise be wasted; in other words, it is not necessary for households in the region.
But the large amount of energy required to conduct operations such as Hive has alarmed officials.
Finansinspektionen, the Swedish financial control body, is calling on the European Union to ban cryptographic mining because of its huge energy use.
“Extensive use of renewable energy for cryptocurrency mining could jeopardize Sweden’s climate targets,” Victoria Ericsson, a spokeswoman for the agency, told CNBC.
These machines, known as mining platforms, work all day to find new cryptocurrency units.
Benjamin Hall | CNBC
The development of fossil-free electric vehicles, batteries and steel should take precedence over cryptographic mining, he said.
“There are alternative consensus testing mechanisms available that would significantly reduce energy consumption,” Ericsson added.
“We do not consider it reasonable to exclude Bitcoin and the crypto world from the work that other sectors of the economy are doing to improve energy efficiency.”
Is decarbonization enough?
Edinburgh-based encryption firm Zumo is part of the Crypto Climate Accord, a coalition of companies that aims to achieve zero net emissions in the crypto industry by 2030.
Kirsteen Harrison, Zumo’s climate policy adviser, says the initiative is working on software that could verify the energy source used in cryptographic mining as renewable.
“There are a lot of trials with that right now,” he said. “If that succeeds, hopefully it will leak to the rest of the industry.”
However, just decarbonizing cryptocurrency production may not be enough, according to some activists.
Greenpeace and other environmental groups are calling for the bitcoin community to replace its work test mechanism with a so-called “participation test.” This would eliminate the huge computational cost of verifying new cryptographic transactions.
Ethereum is currently in the middle of a long transition to the participation test, a measure that advocates say would reduce its power consumption by more than 99%. And other cryptocurrencies, such as cardan and solan, already operate with participation test networks.
But, as Harrison explains, moving a cryptocurrency away like bitcoin from the working test is easier said than done.
“I don’t think there’s an option to end the job test, precisely because no player has control of the system,” he says.
Not everyone is on board
Although Hive and other crypto companies are increasingly turning to green energy to power their operations, there are many others who still disagree with the switch to renewables.
Some are deliberately using gas that would otherwise be burned to generate electricity for cryptographic mining, for example.
Since China banned cryptocurrency mining, bitcoin supporters hoped this would make the cryptocurrency greener.
But a peer-reviewed study published in February found that bitcoin mining only got dirty in 2021, and miners flocked to regions that were more dependent on coal and other fossil fuels, including Kazakhstan and southern U.S. states like Texas. and Kentucky.
Part of the problem is the decentralized nature of cryptocurrencies like bitcoin. Although there are now several groups claiming to represent the industry, bitcoin has no central authority and anyone can participate in the network.