Is Bitcoin now going green?
Among crypto-critics, Bitcoin’s reputation is primarily that of an energy guzzler. Along with money laundering, the high power consumption is the main point of criticism – not entirely without reason, since in the past the whales among the mining companies primarily looked at the availability of cheap energy when choosing a location. This led to mining sometimes being carried out in countries with questionable treatment of human rights, political opposition or with an electricity mix that was anything but green. However, the global rethinking and the trend towards green energy and sustainability has now also reached the mining industry. In addition, there is political pressure from many countries such as Australia, the USA or the European Union. Fraud, money laundering and irresponsible use of energy are to be curbed or combated.
Calculating until the processor smokes
The high power consumption stems not only from classic mining, but also from the validation of transactions. The computers have to solve complex mathematical tasks – this is only possible at an economically reasonable level, if high-performance computers are used in sufficient numbers – and these are real power guzzlers, but also heat generators. Thus, energy is needed both for operation and for cooling the systems. Reason enough for the industry to think about alternative, resource-saving validation methods: away from PoW, towards PoS or optical Proof of Work (oPoW) – until this is achieved across the board, the search for locations with cheap electricity remains a priority.
Green, cheap electricity
The computing power in proof-of-work networks like Bitcoin is measured in hashes. The hash rate is then the total computing power. The University of Cambridge has set up the “Cambridge Bitcoin Electricity Consumption Index”, which shows on an interactive map how high a country’s hash rate is. The front-runners are the USA, ahead of Canada and Russia. But small countries with a green energy mix can also be interesting for mining: Norway, for example, could become interesting here for two reasons: On the one hand, 100 per cent of the electricity for Bitcoin mining in Norway is generated from renewable energies, and on the other hand, Norway is known for its low electricity prices compared to other European countries. In addition, the electricity price is cheaper the further north you are within Norway. This is particularly interesting with regard to the heat issue in mining: logically, the required cooling capacity is lower in a colder environment, and the heat produced can be used locally, for example for heating or hot water.
Grid stability thanks to mining
In all discussions on the subject of renewable energies, availability is always a sticking point: the sun cannot be switched on at the push of a button, a coal-fired power plant can. The wind does not blow constantly around the clock, but a nuclear reactor reliably produces the amount needed to ensure the stability of the electricity grid and also to cover consumption peaks. In this case, renewable energy even causes a problem: in some cases massive surpluses are produced that cannot be consumed. With regard to grid stability, the plants then even have to be throttled back – this is where the mining companies come into play: they absorb the surplus energy at discounted prices and shut down the computing power “at the push of a button” in the event of increased energy demand, such as cold or heat waves. A mining farm can thus function as an electricity battery, so to speak, without having to resort to expensive pumped-storage power plants.
With this contribution to the green energy mix and environmental friendliness, Bitcoin also becomes interesting for institutional investors who are, however, concerned about their reputation. This is where sustainable standards can help – sustainability credentials or certificates, and a new market is already opening up here: similar to the trade in CO2 certificates, less sustainable states or companies could “greenwash” themselves, so to speak. In any case, regardless of technological developments in the validation method, bitcoin mining can make a valuable contribution to making renewable energies more interesting for land use.