Our weekly crypto newsletter is here! Learn more about the BTC-energy dilemma, what the heatwave means for Texan miners, and how the blockchain works!
The Crypto-Energy Dilemma
Headlines like “Bitcoin mining uses more electricity than a small country” or “Bitcoin mining will cause global temperatures to rise by two degrees Celsius” have attracted negative press about cryptocurrencies’ energy consumption and carbon emissions. Well, how accurate are these assertions? What if cryptocurrencies like Bitcoin could be the most prominent promoters of the transition to renewable energy that we could have ever dreamed of?
As interest in Bitcoin grows, its rising market price increases the incentive to implement more sophisticated hardware to mine the network and compete against other computers, thus requiring more energy. What started with a few early hobbyists using an everyday CPU quickly became an industry of custom machines called ASICs (application-specific integrated circuits), which became the most efficient equipment for mining and producing thousands of times more hashes per second than CPUs.
According to the “Cambridge Bitcoin Electricity Consumption Index,” on average, Bitcoin consumes 129.22 TWh annually, more than many countries do in a year. However, what needs to be considered is where this energy comes from. According to the Bitcoin Mining Council (BMC), Bitcoin mining employs a greater sustainable energy mix than any major country or industry. Because BTC mining isn’t dependent on the location, anyone who can produce electricity at a cheap rate can monetize it by mining BTC. This eliminates some of the risks of investing in renewable energy in areas that can’t reach the energy market. Thus, although energy-intensive, Bitcoin mining doesn’t have to be a pollutant, and if done in areas rich in green energy, it can even incentivize its further production.
A Heatwave Adds Heat to Crypto Mining Controversies
The mainstream press is brimming with reports on what is framed as the crypto industry’s “dirty little secret” – the high energy consumption required for crypto mining. The latest news that has added fuel to the fire came from Texas.
Following the authorities’ announcements about an upcoming heatwave expected to hit Central Texas, Bitcoin miners have agreed to turn off operations to reduce the impact on the grid. Thanks to the cooperation with the authorities, more than 1,000 megawatts were redirected from Bitcoin mining to commercial use.
This latest situation has intensified the debate on the high electricity demand for proof-of-work crypto mining. The US state has become the heart of large-scale mining operations since the Chinese ban on crypto mining in 2021. Mining companies have flocked to the Texas rural areas to invest, thanks to the state’s low energy costs and water availability. Electricity grid operator ERCOT estimated that by 2023, crypto mining would increase the state energy consumption by as much as if another Houston city was added to the grid.
Crypto 101: How Does Blockchain Work?
A distributed Excel spreadsheet! That’s how the hosts of the Grumpy Old Geeks podcast explained what blockchain is during one of their episodes. Imagine blockchain as a bunch of distributed computers that form a network. For this network to be useful, society needs to ensure that each participant receives an identical version of the “spreadsheet.” Coming up with an algorithm to achieve such a level of synchronization within distributed networks is one of the classic old-school computer science problems and one of the hardest to solve since the ‘70s. Until the 21st century, when blockchain technology came along.
Blockchains can track and record transactions between all participants in a network. The “spreadsheet” gets distributed across the blockchain to each participant, and then each node verifies it. Learn more about blockchains here.