Bitcoin’s newest puzzle: How to effectively go green
HELENA, Mont. — For the past year, a company that “mines” cryptocurrency had what seemed the ideal location for its thousands of powerthirsty computers working around the clock to verify bitcoin transactions: the grounds of a coal-fired power plant in rural Montana.
But with the cryptocurrency industry under increasing pressure to rein in the environmental impact of its massive electricity consumption, Marathon Digital Holdings decided to pack up its computers, called miners, and relocate them to Texas.
“For us, it just came down to the fact that we don’t want to be operating on fossil fuels,” said company CEO Fred Thiel.
In the world of bitcoin mining, access to cheap and reliable electricity is everything. But many economists and environmentalists have warned that as the still widely misunderstood digital currency grows in price — and with it popularity — the process of mining that is central to its existence and value is becoming increasingly energy intensive and potentially unsustainable.
Bitcoin was created in 2009 as a new way of paying for things that would not be subject to central banks or government oversight. While it has yet to widely catch on as a method of payment, it has seen its popularity as a speculative investment surge despite volatility that can cause its price to swing wildly. In March 2020, one bitcoin was worth just over $5,000. That surged to a record of more than $67,000 in November 2021 before falling to just over $35,000 in January.
Central to bitcoin’s technology is the process through which transactions are verified and then recorded on what’s known as the blockchain. Computers connected to the bitcoin network race to solve complex mathematical calculations that verify the transactions, with the winner earning newly minted bitcoins as a reward. Currently, when a machine solves the puzzle, its owner is rewarded with 6.25 bitcoins — worth about $260,000 total. The system is calibrated to release 6.25 bitcoins every 10 minutes.
When bitcoin was invented it was possible to solve the puzzles using a regular home computer, but the technology was designed so problems become harder to solve as more miners work on them. Those mining today use specialized machines that have no monitors and look more like a high-tech fan than a traditional computer. The amount of energy used grows as more computers join the effort and puzzles are made more difficult.
Marathon Digital, for example, currently has about 37,000 miners, but hopes to have 199,000 online by early next year.
Determining how much energy the industry uses is difficult because not all mining companies report their use and some operations are mobile, moving storage containers full of miners around the country chasing low-cost power.
The Cambridge Bitcoin Electricity Consumption Index estimates bitcoin mining used about 109 terrawatt hours of electricity over the past year — close to the amount used in Virginia in 2020, according to the U.S. Energy Information Center. The current usage rate would work out to 143 TWh over a full year, or about the amount used by Ohio or New York state in 2020.
Cambridge’s estimate does not include energy used to mine other cryptocurrencies.
A key moment in the debate over bitcoin’s energy use came last spring, when just weeks after Tesla Motors said it was buying $1.5 billion in bitcoin and would also accept the digital currency as payment for electric vehicles, CEO Elon Musk joined critics in calling out the industry’s energy use and said the company would no longer be taking it as payment.
Marathon Digital is one of several companies pinning its hopes on tapping into solar and wind farms in Texas. Earlier this month the companies Blockstream Mining and Block, formerly Square, announced they were breaking ground on a small, off-the-grid mining facility using Tesla solar panels and batteries.
“This is a step to proving our thesis that bitcoin mining can fund zeroemission power infrastructure,” said Adam Back, CEO and co-founder of Blockstream.