Can Dirty Crypto Turn Clean and Green? - OZY | A Modern Media Company

Can Dirty Crypto Turn Clean and Green?

Can Dirty Crypto Turn Clean and Green?

By Tom Cassauwers

An employee wearing a protective face mask inspects mining rigs mining the Ethereum and Zilliqa cryptocurrencies at the Evobits crypto farm in Cluj-Napoca, Romania.
SourceAkos Stiller/Bloomberg via Getty

WHY YOU SHOULD CARE

Cryptocurrency mining consumes massive amounts of energy. But an unlikely marriage with energy firms could help save the planet — and Bitcoin's reputation.

By Tom Cassauwers

  • Cryptocurrency mining consumes as much energy as the whole of the Netherlands, making it a polluting industry contributing to climate change.
  • But a growing number of crypto firms are now using wastes and excess energy from the fossil fuel and renewables sectors, helping reduce emissions and change their reputation.

In an empty field in the middle of a Texas forest, a yellow gas generator is connected to a gray container filled with weird-looking devices that have fans at the end and red wires coming out. It’s a video that went viral, racking up 2 million views and thousands of comments since it was posted as a tweet in February.

Most replies to the tweet criticized what at first glance appears to be a Bitcoin mining operation that’s drawing its energy from gas. To many, it captured the marriage of two climate change villains: fossil fuels and Bitcoin. What Matt Lohstroh, the co-founder of the startup Giga Energy Solutions, wanted to show with the video was that the coupling of those two environmentally dirty industries could in fact make both cleaner.

Cryptocurrencies have an energy problem. The Bitcoin network alone consumes as much energy as the entire Netherlands. But dig a little, and you’ll find a surprising green revolution afoot that could allow cryptocurrencies to work in conjunction with sustainability goals.

We cannot keep using fossil fuels to mine cryptocurrencies.

Peter Wall, CEO, Argo Blockchain

A growing number of companies like Giga Energy Solutions are using natural gas, a wasted byproduct of oil drilling, to fuel their cryptocurrency mining. Gas flaring would otherwise add to emissions. Bitcoin miners are also increasingly turning to renewable energy sources. And some are tying up with green energy firms in ways that help the latter become more sustainable.

“The more we can move Bitcoin mining to zero emissions, the less concern there will be over the energy usage,” says Peter Wall, CEO of the mining company Argo Blockchain. “We cannot keep using fossil fuels to mine cryptocurrencies.”

That’s not an easy statement to make for the head of a firm like Argo, primarily active in North America. The company operates several data centers that mine cryptocurrencies, including Bitcoin. They keep the network running and register transactions in virtual currencies. Yet that consumes a lot of energy. Before they can register transactions, Bitcoin miners need to solve mathematical puzzles. The miner who first solves one can register a block of transactions and gets a prize in Bitcoin, a process that repeats itself every 10 minutes on average, which leads to Bitcoin miners having massive data centers full of specialized, energy-consuming computer chips that are solving these puzzles around the clock.

But instead of depending on fossil fuels, Argo is now building a massive data center in Texas that hopes to utilize a boom in renewables in the state. It already operates a site in Quebec, Canada, that benefits from cheap hydropower. “It’s pretty straightforward: Climate change is real, and renewables are the future,” says Wall. “The faster cryptocurrency miners can get together and start using 100 percent renewables, the better.”

Bitcoin Mining Comes to the Arctic Circle

A Bitcoin sculpture made from scrap metal is installed outside the BitCluster cryptocurrency mining farm in Norilsk, Russia.

Source Andrey Rudakov/Bloomberg via Getty

In fact, cryptocurrency mining and the renewable energy sector can help each other. Solar and wind energy, the two fastest-growing renewables, are unpredictable by nature. We don’t exactly know when the sun will shine or for how long the wind will blow, making it hard to regulate the production of energy from these sources and leading to both overproduction on some occasions and a deficit on others.

Battery technology and better-integrated grids are the most likely solutions to this problem, but in the short run, cryptocurrency might be the friend renewables need. “Sometimes there’s too much renewable power,” says Wall. “A company like us can act as a load-stabilizing force.”

Under an agreement it’s negotiating with energy providers for its Texas site, Argo would crank up mining during periods of overproduction, absorbing the load, and dial it down when the renewable energy is in short supply. In return, it gets a lower energy bill from the providers. These types of so-called demand-response contracts already exist in other industries, but the flexibility of cryptocurrency mining might make it the ideal regulator for renewable energy fluctuations.  

But cryptocurrencies could have their most visible impact in reducing gas flaring. “During oil drilling, there’s associated petroleum gas coming out of the ground,” explains Sergii Gerasymovych, CEO of EZ Blockchain. Because gas pipelines are harder to build in regions with oil drilling, “companies are often forced to burn the gas.” The International Energy Agency (IEA) calculated that in 2018, gas flaring caused 275 million metric tons of CO2 emissions. That’s more than the carbon emissions of Argentina.

Companies like EZ Blockchain instead use the gas to power Bitcoin mining. According to Gerasymovych, this cuts 20 to 30 percent of CO2 emissions, and up to 70 percent of other harmful substances like volatile organic compounds, or VOCs.

Not everyone eyes the cryptocurrency industry’s claims of a shift. Alex de Vries, a data scientist at the Dutch Central Bank and creator of the Bitcoin Energy Consumption Index, which tracks Bitcoin’s energy usage, agrees there is some renewable energy in the cryptocurrency’s network. According to a Cambridge study, about 39 percent of the energy used by cryptocurrency miners is renewable. Yet that doesn’t make the network as a whole green. “On the whole, it’s not clean at all,” says de Vries.

Inside Bitmain Technologies Ltd.'s Bitcoin Mine

A technician makes repairs to bitcoin mining machines at a mining facility operated by Bitmain Technologies Ltd. in Ordos, Inner Mongolia, China.

Source Qilai Shen/Bloomberg via Getty

And even though some miners like Argo are looking at clean energy, many of their counterparts still get power from dirty sources. Several Chinese miners, for example, rely on coal to power their operations. Problems with coal plants in the province of Xinjiang recently led to a drop in the hashrate, or the measure of total computing power, of the Bitcoin network by up to a third for a few days.

De Vries also points to how the computer chips that miners use are ecologically damaging to produce, requiring specific minerals and metals. These chips wear out in a few years from their intense operations. “It’s absurd to operate a coin that is this energy-intensive in times of climate change,” de Vries says.

Wall from Argo also agrees his industry needs to do better. But he believes Bitcoin can be redeemed. Argo has even set up a mining pool — a group of miners who will mostly rely on clean energy. “There’s a lot of talk about how Bitcoin should become more eco-friendly,” he says. “Now it’s time for action.”

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