It is often said that money is a shared fiction. I give you a sheet of paper or, more likely these days, a piece of plastic. You give me eggs or butter or a white chocolate mocha frappuccino, and we both walk away satisfied. with cryptocurrency, the arrangement is more like a shared metafiction, and the instability of the genre is presumably part of the excitement. Dogecoin, a cryptocurrency that was created as a spoof, has risen in value by 8,000 percent since January, due to a combination of GameStop-style pumping and booster tweets from Elon Musk. On Tuesday, which the sponsors proclaimed Dogeday, the cryptocurrency was valued at more than fifty billion dollars, which is more than the market capitalization of Ford. coinbase, a cryptocurrency exchange, went public last Wednesday; almost immediately, it was worth more than g.m.
The integration of cryptocurrencies, as they are called, is obviously a big deal for the world of finance. it’s also a big problem for the world of, well, the world. This is particularly true of the ur cryptocurrency, bitcoin. Like dogecoin, bitcoin has recently increased in value. in April 2020, a coin was worth about seven thousand dollars; Today it is worth more than fifty-five thousand. (reached a record high of $64,895.22 on April 14, but has since dropped). As the cost of investing in bitcoin has skyrocketed, so has the potential profit from “mining” it. bitcoin mining is, of course, purely metaphorical, but the results can be just as destructive as in reality.
According to the Cambridge Bitcoin Electricity Consumption Index, worldwide bitcoin mining operations now use energy at a rate of nearly one hundred and twenty terawatt-hours per year. This is the annual domestic electricity consumption of the entire nation of Sweden. According to the Diginomist website, a single bitcoin transaction uses the same amount of energy an average American household consumes in a month and is responsible for about a million times more carbon emissions than a single visa transaction. At a time when the world desperately needs to reduce carbon emissions, does it make sense to dedicate the value of Sweden’s electricity to a virtual currency? the answer would seem, quite clearly, to be no. and yet here we are.
The Greenidge Generating Station in Dresden, New York, is located on the shores of Seneca Lake, approximately one hour southeast of Rochester. it was originally built in the 1930s to run on coal; over the decades, new units were added and older ones closed. the power plant ceased operations in 2011 and sat idle until it was purchased by a private equity firm and converted to run on natural gas. In 2017, under the ownership of Greenidge Generation Holdings, the plant reportedly began operating as a “peak plant” to provide power to the grid at times of high demand. (A spokesperson noted that the plant “has permission to operate 24/7.”) then in 2019 it was announced that the plant would power bitcoin mining.
Mining is the process by which bitcoin is created and accounted for. Instead of being approved by, say, a bank, bitcoin transactions are recorded by a decentralized network: a blockchain. miners compete to record the latest “block” of transactions by solving cryptographic puzzles. the first to reach the solution is rewarded with newly minted bitcoins. miners today receive 6.25 bitcoins per block, which, at current values, is worth more than three hundred thousand dollars.
It’s unclear exactly who invented bitcoin, so no one knows what this person (or people) was thinking when mining protocols were first established. But, as Cornell Tech computer scientist Ari Juels recently explained to me, the deal appears to have been designed with fairness in mind. anyone who dedicates a processor to the company would have as much interest in the outcome as anyone else. however, as is often the case, the ideal was soon subverted.
“What was quickly discovered is that specialized computing devices, so-called mining equipment, are much, much more effective at solving these puzzles,” Juels said. “and, in addition, there are economies of scale in the operation of these mining groups. therefore, the mining process, which was originally carried out by a loose federation of presumably individual participants with ordinary computing devices, has now been strongly consolidated.”
Because rig “farms”, which are essentially like server farms, consume a lot of energy, bitcoin mining operations tend to look for cheap electricity. Roughly 70 percent of bitcoin mining today takes place in China. (A recent study found that the associated electricity consumption could “potentially undermine” China’s efforts to reduce its carbon emissions.) Russia is also a bitcoin mining hub: there are large operations in Siberia, where cold temperatures help keep rig farms from overheating. as is iran, where electricity is subsidized.
In the United States, where roughly seven percent of the world’s bitcoin mining is located, finding cheap power can be tricky. A few years ago, miners “came down on” the city of Plattsburgh, New York, about a hundred and fifty miles north of Albany, which gets much of its electricity from hydroelectric dams in St. lorenzo river. Power is relatively cheap, but once Plattsburgh uses up its allotment, it has to buy more at higher rates. Bitcoin mining increased the cost of electricity in the city so dramatically that in 2018, Plattsburgh enacted a moratorium on new mining operations.
Buying a generating station, as Greenidge Generation Holdings has done, is one way to avoid the problem. let others pay retail; greenidge now draws his power “behind the meter”. The company recently announced that it would go public, via a merger with a nasdaq-listed company called support.com, and boasted that it “hopes to be the first publicly traded bitcoin mining company with a power plant of full ownership.” In the announcement, Greenidge said that it planned to more than double its bitcoin mining operations in Dresden by the fall of 2021, and double it again by the end of 2022. It further stated that it intends to “replicate its vertically integrated mining model in other energy sites.”
In order to expand its operations in Dresden, Greenidge will have to burn more and more natural gas, which will consequently produce more greenhouse gas emissions. The company’s plans have sparked demonstrations in the Finger Lakes region. on Saturday, a hundred protesters marched to the gates of the plant.
“This is a test case,” Joseph Campbell, president of the Seneca Lake Guardian, the group that organized the march, told WRFI, an Ithaca radio station. Two days later, the local planning board approved Greenidge’s request to build four new structures on the site, to house more mining platforms. Planning board members said they were barred for legal reasons from considering the broader implications of their decision. “We know bitcoin is a huge waste of energy,” planning board chairman David Granzin said. “but we are bound by law.”
Whether this is in fact the case is debatable. what is beyond debate, or should be, at least, is that this is a matter that should not be left to a local planning board to decide. there is no way new york or usa. uu. as a whole, to meet its emission reduction targets if old generating stations, instead of being closed, are converted to bitcoin mining operations. greenidge may become the first mining company with a “wholly owned power plant,” but unless the state or federal government steps in, it won’t be the last: another cryptocurrency company, digihost international, has already applied for the New York State. public service commission to obtain permission to purchase a natural gas station near buffalo. As representatives of EarthJustice and the Sierra Club recently put it in a letter to officials at the New York Department of Environmental Conservation, “additional scrutiny. . . it is essential to prevent the floodgates from opening for other retiring power plants.”
andrew yang, the former presidential candidate now running for mayor of new york city, has said he wants to turn the city into a cryptocurrency mining hub. it is hard to imagine a worse idea. the city is already thinking about spending billions of dollars to protect itself from sea level rise; rising emissions is pretty much the last thing you need. Forward-thinking politicians should think of ways to not push bitcoin mining, but bury it.