Bitcoin Mining Under the Microscope

In a previous blog, we asked, “How green can crypto go?” Apparently, much greener, whether by choice or by force. There have been several notable developments in the crypto-climate discussion following the January 2022 congressional hearing that left many uncertain about the industry’s regulatory future. We highlight a few of them here.

Talk About Timing

In just a few short months, governments and activists have moved in on the crypto-mining industry and its environmental impact, and one of the industry’s worst fears—increased scrutiny of mining activities—appears to be coming to a head, at least in New York. On June 3, the New York State Senate voted to impose a 2-year moratorium, or pause, on any new Proof-of-Work (PoW) mining that uses fossil fuel, a move that some crypto advocates argue is singling out the mining industry. However, the bill still needs to be signed by New York Governor Kathy Hochul to become law.

Soluna Computing provides a good breakdown of what the proposed New York bill will and will not prevent¹. Of note, the bill is “not a ban”² on all mining in New York, but rather is aimed at facilities that use carbon-based energy, which contribute to carbon emissions. The bill will prevent the development of any new carbon-based PoW mining facilities, as well as any increase in energy consumption for existing operations that use carbon-based energy. The bill will not impede the development of new mining facilities that do not rely on carbon-based energy and/or the PoW protocol. Existing operations, even those that use carbon-based fuel, can continue to operate, so long as their energy consumption remains the same.³

The New York bill was first passed by the State Senate just weeks after President Biden’s March 9th Executive Order on the responsible development of digital assets. The Executive Order called on several agencies to produce a report on distributed ledger technology’s potential to impede or advance climate goals, including “the effect of cryptocurrencies’ consensus mechanisms on energy usage, including research into potential mitigating measures and alternative mechanisms of consensus and the design tradeoffs those may entail.”  President Biden was referring to the ongoing debate about PoW vs. Proof of Stake (PoS)⁴, which was deliberated during a congressional hearing earlier this year.

Greenpeace USA, along with other environmental groups, launched the “Change the Code, Not the Climate”⁵ campaign on March 29, specifically targeting Bitcoin and its PoW validation. The campaign makes four claims regarding Bitcoin’s purported energy consumption, resurrection of fossil fuels, CO2 emissions, and software codes, and asks the public to sign a petition to “tell big tech and finance corporations to stop Bitcoin from polluting the planet.”

In early May, the Bitcoin Mining Council (BMC) responded to a letter from Jarred Huffman, a US representative from California, and 22 other members of the US Congress to the Environmental Protection Agency (EPA), now known as the Huffman letter.⁶ The Huffman letter called on the EPA to address concerns that crypto facilities are “polluting communities and are having an outsized contribution to greenhouse gas emissions.” The BMC letter rebutted the claims in the Huffman letter as previously debunked misconceptions about Bitcoin and digital assets mining⁷. The BMC letter argued that: (1) Mining facilities are data centers—no different than the ones operated by giants like Amazon, Google, Apple, Microsoft, and Meta—that simply purchase electricity made available to them on the open market; data centers are not power generation facilities; (2) emissions are a function of electricity generation, and Bitcoin mining, in and of itself, does not release pollutants; and (3) “PoS is not a mining technology” and is “qualitatively different [from] PoW,” and it is therefore misleading to say PoS is more energy efficient than POW considering they achieve different things.⁸

Green Mining

While increased regulations could accelerate the mining industry’s transition to renewable energy, some companies are already making major plays toward greener mining. Take, for example, the proof-of-concept project led by Block, Blockstream, and Tesla to mine Bitcoin using solar power. The zero-emissions facility is still under construction in Texas, but is expected to be completed by the end of the year. Block and Blockstream will use Tesla’s solar and storage (battery) technology, known as “Megapacks,” to, for the first time, power an entire facility. The project will feature a publicly available dashboard that shows real-time performance metrics, including energy output and total Bitcoin mined. Future versions of the dashboard⁹ would capture solar and storage performance data, and, if the project is successful, the companies will add wind power to the mix in hopes of scaling the project.

Even as the mining industry continues to move toward renewable energy, it is likely that we will continue to hear arguments from both sides. As we previously pointed out, lawmakers would benefit from better data and deeper conversations with mining experts and leaders. The wide gulf between the arguments made in the Huffman and BMC letters suggests a massive gap in understanding about mining activities’ true impact on the environment and climate goals. We look forward to the crypto-climate report requested in Biden’s Order, due in September 2022,¹⁰ which may bridge this gap to some extent.

This article was authored by Trisha Gangadeen.