Bitcoin requires an immense amount of energy. Heres why thats sparking a crypto backlash | PBS NewsHour

jackie sawicky first learned that a bitcoin mining operation was coming in corsicana, a rural texas town 60 miles south of dallas, was on april 27, when she stumbled upon a video of facebook of a meeting at the local public library. The keynote speaker was Chad Everett Harris, the optimistic Executive Vice President of Riot Blockchain, a Bitcoin mining company based in Castle Rock, Colorado. Bald and comfortably plump, Harris wore a suit jacket and open-collared shirt over blue jeans and delivered his message with the enthusiasm of a motivational speaker.

“We’re going to Corsicana to build the world’s largest [bitcoin mining facility],” Harris announced, describing the four-building, 400,000-square-foot complex that will occupy 265 acres of number-crunching machines. “We convert energy into opportunity.”

read more: landmark bill to limit energy-intensive crypto mining passes new york legislature

Reading: Bitcoin council to energy usage

riot already operates the nation’s largest bitcoin mine in rockdale, texas. when someone in the audience asked harris what attracted him to corsicana, the county seat of navarro (pronounced “nah-verr-o” in local slang), he answered he without hesitation. “The Navarre switch!” he said, referring to part of the 192-mile, 345-kilovolt transmission line that moves power from western Texas to eastern parts of the state, where demand is high. “And water,” he added. “You can pay a lot to get power somewhere. but you can’t get water.”

“He literally told us,” says Sawicky, “that he was coming to exploit our resources.”

For some people, bitcoin, the most valuable and well-known of the approximately 10,000 cryptocurrencies currently in circulation, is nothing more than a pyramid scheme; to others, it represents the future of money: decentralized, unregulated, and tracked in a virtual ledger in the digital cloud that everyone can inspect, known as a blockchain. but its production consumes dizzying amounts of electricity. As of May 2022, the global sum total of bitcoin mining operations had an annual energy budget nearly equal to that of the entire country of Argentina, or the Czech Republic, or, according to the University of cambridge, all kettles in england boiling water for 26 years.

In warmer climates, mining cryptocurrencies using the bitcoin method, known as “proof of work,” typically requires water to cool down hot, fast-running machines while playing the bitcoin lottery (riot says it will use a new corsicana technology that reduces water consumption). Proof-of-work mining is essentially a high-stakes guessing game: Computers spend all day throwing out random 64-digit numbers until one matches the “correct” number, as determined by Bitcoin’s managed consensus protocol. On the global network of bitcoin servers, “you have 200 quintillion guesses every second of the day nonstop,” explains alex de vries, a researcher at the school of business and economics at the vrije universiteit amsterdam. “and even with that, only one machine gets it right every 10 minutes.”

The correct answer is recorded in the bitcoin block chain and the winner gets a reward: 6.2 bitcoins. That’s not as much money as it used to be: In the current coin slump, each coin brings in around $20,000, down from a November 2021 high of just under $68,000.

Due to its high demand for electricity, proof-of-work cryptocurrency mining has not been well received in all corners of the world. Miners seek cheap power to maximize their profits, but their energy-intensive activities often drive up electricity costs for everyone. Even when mining plants run on renewable energy, critics say, they often exploit existing clean energy resources at the expense of ordinary consumers, who are then forced to buy more expensive and often dirtier energy.

in bonner, montana, a small town in missoula county, the bitcoin company hyperblock was established in 2016 and almost immediately began cutting off the community’s hydroelectric power supply from the salish-kootenai dam; County Commissioner Dave Strohmaier called the plant’s energy use “grotesque” and equal to a third of the county’s household demand. hyperblock went bankrupt when bitcoin crashed at the start of the covid pandemic. the county subsequently enacted a zoning ordinance, the first of its kind, requiring, among other things, that cryptocurrency miners supply their own renewable energy sources.

A similar scenario has played out in upstate New York. Initially, the region attracted crypto miners with its abundant supply of cheap hydroelectric electricity from the 2.6-gigawatt Niagara Power Project. In 2017, when the bitcoin company Coinmint moved into the vacant space behind the family dollar store in Plattsburgh, a city of fewer than 20,000 people, electricity costs were a third of the national average. Bitcoin miners had registered as industrial consumers, says Colin Read, a professor of economics and finance at the State University of New York, Plattsburgh, who was also the mayor of Plattsburgh at the time. “and our industrial rate was less than 2 cents per kilowatt hour, which could be the lowest in the world.”

See also: Top 20+ how is blackrock different hottest, don’t miss

But Plattsburgh, which runs its own municipal utility, also has a monthly fee for electricity use. if the city exceeds that quota, it has to go elsewhere for electricity, forcing everyone’s utility bills up. in the winter of 2018, residents who heated their homes with electricity saw costs rise 30 to 40 percent, according to read.

plattsburgh quickly placed a moratorium on new crypto mining operations while city officials figured out how to make them more efficient. “We put in place a regulation that says bitcoin miners have to recycle some of their heat,” Read says. after that, “they just weren’t interested in coming here anymore. they always migrate to places with less regulation.”

bitcoin mining has faced similar challenges in other countries. China, despite once being the world’s largest supplier of application-specific embedded chips used in crypto mining, declared all virtual currency activities illegal in the fall of 2021, in part because mining “produces high carbon emissions. (The country’s central bank also wants to develop its own digital currency.) Iceland’s national power company, Landsvirkjun, which once lured cryptocurrency miners with its climate-friendly geothermal power, began denying power to new miners in late 2021. They will even go, where the wilderness is free from supervision. of peer-to-peer currency had allowed entrepreneurs to circumvent international sanctions, it found that crypto mining was overloading its network so much that the government was forced to ban it, first for four months starting in May 2021, then again in December. next, as the demand for heating depleted your electricity supply.

neither the energy consumption, nor the water, nor the volatility of bitcoin has deterred texas elected leaders, who have welcomed the industry with effervescent enthusiasm. “Blockchain is a booming business Texas needs to be in on,” Governor Greg Abbott tweeted last summer after signing a bill recognizing cryptocurrency into the state’s commercial code. (Texas was the second state to do so, after Wyoming.) And miners have come, reveling in the state’s wide open spaces, where the rattling fans that cool their hard-working equipment can operate without disturbing neighbors, and plenty and cheap energy keeps overhead low. While China was once home to 75% of the crypto mining business, the United States is now home to 40% of the activity, with a quarter of it occurring in Texas.

Three days after Harris’ announcement at the Corsicana Library, Jackie Sawicky founded Concerned Citizens of Navarro County to organize opposition to Riot Blockhain’s plans for Corsicana. More than 600 people have signed a petition to stop the mine, and the group has more than 500 members on its Facebook page, where Sawicky and others post news about their state’s power grid and water problems.

read more: From the stock market to cryptocurrencies, six months of punishment for investors

“We’re going to pay higher electric bills to upgrade Ercot’s network to accommodate these locations,” he says, referring to Texas’ independent system operator, the Electric Reliability Council of Texas. The grid conspicuously collapsed under the strain of winter storm Uri in 2021, cutting power to more than 4 million homes and businesses, many of which relied on electricity to heat their buildings. Hundreds of people died from exposure to extreme cold or medical equipment failure.

Harris has been adamant in the news that mining only uses excess energy when demand is low; when the network is overloaded, ercot gives them credits for shutting down, which the miners can do in a matter of minutes. That way, he says, Riot’s involvement in “demand response” can stabilize Ercot’s unstable and isolated network.

That’s at least partially true, says de Vries, the Dutch researcher. But the company’s involvement in demand response is not exactly altruistic. Riot Blockchain’s filings with the Securities and Exchange Commission, he notes, clearly state that the company will pay just 2.5 cents per kilowatt hour for its electricity, 10 to 11 cents less than the current residential rate. That figure “represents our contractual cost of power,” confirms Riot Blockchain spokesperson Trystine Payfer, minus credits the company earns for participating in the utility’s “demand response” program. that program is a good deal: it means that when the electricity supply is scarce and not voluntarily shut off, the company gets energy credits. If electricity prices spike as high as $9 per kilowatt hour, as they did during the winter storm of 2021, it might be more profitable to go offline than to continue mining bitcoin.

“Our utility provider doesn’t actually pay us the amount credited each month,” payfer emphasizes, “rather, we have the right to apply the credits to future [bills].”

However, de vries argues, it’s hard to see how that won’t drive up prices for everyone. The utility still has to buy the power, he says, and the credits it issues under the demand response program come from the same pool of money that other customers finance when they pay their bills.

“We have a saying here in Texas,” says Sawicky. “Don’t pee on my boots and tell me it’s raining. and that’s pretty much what’s happening.”

Not all communities have fought against bitcoin mining like sawicky’s group has. Initially built on 100 formerly forested acres near Alcoa’s former aluminum plant, Riot Blockchain’s Rockdale facility has, by most accounts, been a boon to the community, which had long been a business town that revolved around the now closed factory. “We rebuilt the animal shelter,” Harris said at the Corsicana kickoff meeting. “When I found out that kids didn’t have lights in their parks, we put lights in the baseball fields. for a year, we rented an entire hotel”. bitdeer, another bitcoin mining company, set up shop nearby and purchased emergency ventilation kits for rockdale volunteer firefighters.

See also: How to Handle a Downgrade You Disagree With –

but corsicana, sawicky argues, is different. “People came to Navarro County for agriculture, ranching, and open space. we have wildlife. we have two pairs of nesting bald eagles and tons of migratory birds. I care about all of them.”

mainly concerned with electricity prices. Electricity prices in Texas are already up 70 percent from what they were a year ago. “We have a 15 percent poverty rate in Navarro County,” Sawicky notes. “We can’t pay more for electricity than we already pay.”

Some ambitious bitcoin miners have tried to remove their pressure on utilities by buying their own fossil fuel plants to power their mining activities. the coal-fired greenidge power plant in new york’s finger lakes region, decommissioned in 2010 and revived seven years later as a gas-fired plant, in 2021 became a gas-fired bitcoin mine; 120 miles to the west, in northern Tonawanda, Canadian crypto miner digihost intends to inhabit a gas-fired power plant that is still in operation, using the power from the plant to mine his currency.

but more such projects in new york state could be in jeopardy if governor kathy hochul signs a pending bill that institutes a two-year moratorium on new fossil-fueled proof-of-work crypto mining in the condition. The bill, approved by New York lawmakers June 3, is designed to give the state time to assess how the technology fits with the state’s 2019 climate law, which commits New York to having a 100 percent cent of emissions-free electricity by 2040. state law to be the first in the country to restrict cryptocurrency mining.

read doesn’t think the bill does enough. “Even if bitcoin miners don’t use hydrocarbons,” she says, “they are displacing renewable energy” that would be used for other purposes. “and there’s no easy way to measure that.” bitcoin, she says, will continue to increase fossil gas-based energy use in the state, regardless of whether miners use clean energy or not. Governor Hochul has also not committed to signing the legislation. Both she and New York City Mayor Eric Adams, who asked her to consider a veto, have received significant donations from the crypto industry.

There are ways to reduce the energy use and consequently the climate impact of cryptocurrency mining. Some energy companies have developed plans to capture fugitive methane from oil and gas drilling and divert it to power plants dedicated to bitcoin mining. Crusoe Energy has already started such operations in North Dakota and Colorado and plans to expand to Texas and New Mexico. Another company, Casper, Wyoming-based Jai Energy, was founded specifically to harness waste gas to mine bitcoin. In theory, the process could be a net win for the climate, since methane from oilfields is typically burned or vented with ether, releasing fast-acting gases that warm the planet into the atmosphere.

An even better alternative, read says, is to switch from proof-of-work mining to another process, known as “proof-of-stake”. it doesn’t use exorbitant amounts of power, because it doesn’t involve millions of computers taking 200 quintillion tries per second on a random number. “Instead of trying to win the lottery in 10 minutes,” he explains, he makes a big deposit to show that he has a stake in the outcome. “you make sure you don’t corrupt the system” when you verify an entry on the cryptocurrency blockchain. If you do not verify correctly, you will lose your investment.

Proof-of-stake “means you can have everything in crypto without having all these environmental issues,” read says. several coins, such as cardano and peercoin, exclusively use proof of stake; ethereum, the second most valuable currency after bitcoin, is in the process of transitioning to proof of stake.

In fact, “nearly all cryptocurrencies are mined with proof of stake right now,” read says. “We just don’t hear much about it because bitcoin makes up 99 percent of all cryptocurrency capitalization.” There may come a day when you get car and home loans on a smartphone with decentralized digital currency. but that coin probably won’t be an energy-guzzling proof-of-work bitcoin.

“bitcoin”, says the text, “is the model t of cryptocurrencies”.

This article is reproduced with permission from Yale Environment 360. First published June 21, 2022. Find the original story here.

See also: General 20+ nysearca:arkq best


Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also
Back to top button