Bitcoin industry chiefs champion its clean energy credentials

Industry best practice means that more than half of Bitcoin mining by leading producers is powered by renewable energy and the sector could fund a swing towards clean energy production, a conference in London heard.

“You have a concept called grid congestion that exists where you might have a power plant that generates four gigawatts of energy, but the grid’s [capacity] may only support half a gigawatt transmission – so three and a half gigawatts is wasted,” said Fred Thiel, chief executive of Marathon Digital Holdings.

Canada Computational Unlimited Corp co-founder Romain Nouzareth said Bitcoin was unfairly singled out as an environmental villain.

“If you want to point fingers, it’s not going to solve anything,” he said. “We must look at what the real consumption of energy is. Comparing the energy consumption of Bitcoin to the energy consumption of Sweden is not fair because

Bitcoin is a worldwide industry. More than 58 per cent of the energy that we use is renewable.”

To militate against excess stress on national grids or wastage, Mr Thiel said the world would move towards a model where electricity is generated at the point of consumption.

“You’re going to move from central utility to micro grid, and you’re going to have highly distributed Bitcoin mining using emerging technologies which can essentially be left for a year,” he said.

“And that will fund that infrastructure buildout. Bitcoin mining will go and fund all this renewable energy.”

The framing of Bitcoin as environmentally progressive rather than harmful is likely to raise eyebrows among the scientific community, which has criticised mining.

In research released last year, the Cambridge Centre for Alternative Finance estimated Bitcoin uses about 110 terawatt hours a year – 0.55 per cent of global electricity production, equivalent to the annual energy usage of Sweden.

Furthermore, Bitcoin can be mined almost anywhere, with critics suggesting this disproportionately affects poorer communities.

The phenomenon has been called “the great mining migration” – miners seeking the cheapest locations.

From a regulatory perspective, many financiers see the decentralised digital currency as problematic.

“There’s a long tail of retail investors who have invested in cryptoassets,” the Bank of England’s deputy governor, John Cunliffe, told a Wall Street Journal sponsored event this week.

“Do they all understand what they’ve invested in? I think not. For that long tail of retail investors, I’m not sure they do understand. They don’t really see this as a financial investment.”

He also raised concerns about the currency’s volatility spreading into the broader financial system.

“There’s no intrinsic value around cryptoassets, they move with sentiment. They’re being moved mainly as a risky asset, and prices have been going down pretty consistently,” Mr Cunliffe said.

That position is one Bitcoin chiefs at the AIM summit in London would dismiss as being overly pessimistic.

Pessimism and fear, said Jaime Leverton, chief executive of Hut 8 Mining, are part of any technological shift. She cited emails and mobile phones as two recent examples.

“Bitcoin is the great disrupter, similar to what email did for the postal service,” she said.

“When email was launched, the US Postal Service said email is going to boil the oceans, all of this energy being used to to process these transactions. They tried to introduce a stamp tax.”

Whether her perspective is coloured by tribalism or not, one thing is sure – Bitcoin mining as a concept is largely behind a societal purdah.

What is Bitcoin mining? To create Bitcoins, mining using the Proof of Work protocol is required where miners effectively race against time to verify transactions on blockchain, the virtual record of who owns which Bitcoins – the cryptocurrency equivalent of a bank.

The process is a free-for-all and uses computing power, with miners aware that the more power, the greater their chance of success.

In practice this means an awful lot of computers and transitory hardware required to run 24 hours a day, seven days a week, working in concert while expending vast sums of energy.

It is not just the composition of Bitcoin’s energy mix which Mr Nouzareth said stood up well to other industries, it is also the efficient way in which this energy is used.

“It is extremely good for the grid because it doesn’t create fights,” he said. “We can stop mining immediately when the country, province or state needs energy.”

Mr Nouzareth’s chagrin is emblematic of an industry which feels unfairly traduced.

“For me, what is darker than the image [of Bitcoin] is people pushing the bogus agenda to say that we are a nasty industry, whereas we are absolutely not, and we are working and showing we are moving in the right direction.

“The real waste of energy is this subject – it’s a non issue.”

Mr Thiel said nuclear energy would soon make the topic obsolete. “I think we will see [nuclear] come back because of what’s happened here in Europe with this energy crisis, and we’re going to see small modular nuclear reactors … very safe, very self contained,” he said.

He also forecast Bitcoin mining’s spread into Africa and the Middle East after China disavowed the practice.

“One of the benefits … is that a lot of mining moved to North America and North America is now approaching 50 per cent [of the world’s total],” he said.

“And today we’re going to continue to see mining built out in the developed world.

“Less so in Europe because of energy constraints, but certainly Latin America, Africa, Middle East are definitely going to be a hotbed.”

Love it or hate it, Bitcoin is not going away.

Fred Thiel of Marathon Digital Holdings says nuclear power is central to answering Bitcoin mining’s energy question