Bitcoin (BTC), mining has been controversial since its inception. Bitcoin’s proof of work (PoW), however, has raised new concerns as investors and senior decision-makers pay more attention to governance, environmental, and social factors.
Many crypto miners have taken up carbon offsets to promote environmentally-friendly practices. However, not all of this can guarantee green Bitcoin mining. Carbon credits may also have other risk factors.
Kevin O’Leary, a Canadian entrepreneur best known as “Mr. Cointelegraph spoke with Kevin O’Leary, a Canadian entrepreneur best known for his role in Shark Tank. He said that he usually indexes public mining companies such as Riot Blockchain Inc. and Marathon Digital Holdings. O’Leary noted that these companies had their stock prices drop dramatically after they claimed carbon neutrality via carbon offsets. O’Leary believes that this is due to the United States Securities and Exchange Commission’s (SEC) plans to soon audit carbon credits. O’Leary expressed concern by stating:
“Carbon offsets cannot be audited. Indexers like myself sold those shares. Institutions will not invest in Bitcoin mining if companies claim that there is no carbon involved.
Bitcoin mining and data centres
O’Leary suggested that Bitcoin miners build parallel to data centers in order to achieve zero carbon mining. This would allow mining companies to use the excess energy from data centers efficiently to mine Bitcoin. It would also result in zero carbon displacement, which is a process that emits no carbon emissions.
Bitzero, a Bitcoin mining company, began using such a model in Norway two years ago. Akbar Shamji (CEO and founder of Bitzero) explained to Cointelegraph that Bitzero initially formed an infrastructure partnership in Norway with the local government two years back. This allowed the region’s hydroelectric power generation to be released for Bitcoin mining.
“This was the ideal opportunity to test our idea. During this time, large data companies began to use renewable energy sources in Norway. However, this was not profitable for the region. To gain an advantage over the market, we have created a long-term, low cost 100% carbon displacement power source. When we mined our first Bitcoins in December 2021, we hit revenue.”
Shamji explained that data storage is in high demand and suggested that electricity generated by data centers be harnessed. This is the “Norway model.” Electricity generation exists, but it is still at high voltage. He said that they had taken the electrical step down from high to low voltage and installed substations, which allowed them to drive ASIC miners in efficient containers.
Bitzero gets power from local hydro plants’ surplus capacity, which results in zero carbon displacement. Shamji also explained that Bitzero delivers fixed data centers that are made from local and sustainable materials, which include heat capture technology.
“In the case Bitcoin mining, electricity passes through these computer and the PoW algorithm generates very little energy. He stated that if this was not implemented, the heat generated by these computers would return to the atmosphere and be lost completely.” Shamji stated that Bitzero mines an average of 129 bitcoin per month using 40 megawatts power. However, a zero-carbon displacement model has yet to be widely accepted. He said that eventually this number will grow to 110 megawatts.
Argo Blockchain, a crypto mining company, plans to open a West Texas data center to run mining operations. Argo Blockchain’s CEO Peter Wall told Cointelegraph that while the company isn’t taking a zero carbon displacement strategy, he said that Argo aims to become carbon-neutral.
“There is a lot of renewable power in West Texas. Argo’s mission to mine Bitcoin in an eco-friendly manner is ours. Dickens County was chosen because it has a substation which is close to the property where we built Helios, our flagship mining facility.
Wall, like Shamji is well aware that the clean power flowing through Dickens County’s substation in Texas is stranded. It is not being used. He noted that there isn’t much demand for or load in the area to use this power. “We felt that this was an excellent opportunity to stabilize the grid.”
It is not surprising that energy and gas companies also set up shop in areas where there is energy emitted. Alex Tapscott (author and cofounder of the Toronto-based Blockchain Research Institute) said that ExxonMobil, an energy producer, has been quietly mining Bitcoin for over a year in North Dakota’s Bakken area as part of a plan designed to reduce emissions from flared natural gas.
North Dakota gas flare. Source: Joshua Doubek
“The pilot project was so successful that ConocoPhillips plans to expand it. Tapscott said that ConocoPhillips was working on a similar project. Grid Share, an energy company, recently announced plans for a Bitcoin mining data centre to be located next to a hydroelectric dam in New Zealand’s south Island. This will support renewable energy of 100%.
Tapscott said that these initiatives might be surprising for many people who believe Bitcoin mining is highly carbon-intensive. Tapscott explained that such models can help reduce carbon footprints.
Bakken wells are known for producing oil, but also natural gas that is burned or flared into the atmosphere. This is a major source of carbon entering our atmosphere. Exxon has partnered up with Denver-based Crusoe Energy in order to capture the gas and divert it into generators that can mine Bitcoin.
Tapscott also mentioned that Crusoe discovered Bitcoin mining could reduce the world’s carbon footprint up to 63%. “Gas that was not able to reach market and would have been burnt into the atmosphere, instead finds a useful purpose in the form of fuel to create new Bitcoin.”
Zero carbon emissions
Green Bitcoin mining is a term that has been around for a while, but some argue that it is now a critical component of mining operations that want to remain in business.
Legislators are trying to pass legislation that would ban all non-green crypto mining operations. This was displayed by the State of New York. The state legislature is currently working on a bill to limit Bitcoin mining operations.
The government of Kazakhstan has proposed that cryptocurrency miners must report their electricity consumption and provide technical specifications for connecting to the power grid.
Initiatives like the Crypto Climate Agreement aim to reduce net-zero electricity consumption by the companies involved by 2025. However, there are concerns about how this can be achieved. Tapscott noted:
“This is a noble goal, provided it doesn’t force Bitcoin to be something that it isn’t. Some have suggested that Bitcoin’s underlying code be changed to use the less-energy-intensive proof-of stake consensus mechanism. This would be a mistake. “Proof-of-work” is a feature that provides resilience and strength to the network.
O’Leary stated that investors will only invest in Bitcoin mining companies and data centers that are able to provide a reliable source of energy.
“Private capital must comply with environmental, governance and social factors. ESG used to be a marketing term but is now a real thing. I cannot be subject to an SEC audit and can’t find an auditor willing to sign these statements. The crypto industry is at an interesting crossroads.
O’Leary’s point is that Bitcoin miners face an inflection point. However, regulatory clarity remains ambiguous. Cointelegraph was told by Bill Tapscott (CEO of CarbonX), a fintech company that trades carbon. He said that the SEC’s disclosures would be similar to the disclosures that many companies provide, based on widely accepted disclosure frameworks such as the Task Force on Climate-Related Financial Disclosures or the Greenhouse Gas Protocol. He elaborated:
“Disclosure establishes a baseline, from which a government’s or regulator’s next move will be to introduce a carbon tax (or an emissions cap-and-trade system), such as the ARB’s California Quebec Market or RGGI. These programs include carbon credits, which have been ‘audited” for many years.
Tapscott explained that miners will have to report their emissions. These will be higher if they are derived from fossil fuels, such as flare gases, and lower if they are derived from green sources, like hydroelectric. He said that these companies could de-risk future carbon cost by investing in carbon credits for a long time.
Eileen Wilson –Technology and Energy
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