Keeping up with Elon Musk is hard work. For a while, it was all about Bitcoin. But, then, his recent tweet about the energy sources of bitcoin mining made the accusation that all miners are destroying the planet by using dirty fossil fuels to power their operations.
But is this the truth?
It is true that Bitcoin mining already consumes a huge amount of energy, as miners need the cheapest energy sources they can find. But the cheapest energy sources are sustainable resources such as wind, solar and hydro power, which are already used by the majority of miners. In addition, there is an ongoing movement towards sustainable energy in the mining industry in general.
We have been in the industry for a long time, longer than Musk, so we know all the issues and considerations regarding the environmental impact of Bitcoin mining, and we can separate the myths from the reality. Here’s why everyone should stop worrying about it.
What is bitcoin mining?
Bitcoin is a decentralized digital currency running on inflation-resistant blockchain technology, a store of value, and an alternative to government-issued fiat money. Created a little over a decade ago, Bitcoin soared to a market capitalization of $803 billion, grew exponentially in its daily adoption, and spurred an entire financial industry around.
But, where do the bitcoins themselves come from? They are mined by a process miners around the world use specialized hardware to solve for an algorithm that adds block to the blockchain. The miner who solves the algorithm first receives bitcoins as a reward, and also allows a new set of transactions to the Bitcoin blockchain. Then the process starts again.
As you can imagine, mining uses a lot of computing power, and miners need to keep energy costs low to stay profitable, which means miners are looking for the cheapest options available.
The assumption is that the cheapest is the dirtiest.
The myth that Musk unfortunately perpetuates is that all miners use cheap fossil fuels to power their operations, raising red flags about sustainability and the environment. But that’s not true, and that’s why.
Myth #1: Fossil fuels are the cheapest
One myth is that fossil fuels like coal and gas are the cheapest sources of energy, so in wanting to conserve overhead, miners will use these filthy and unsustainable sources. This is not true, because they are not the cheapest. In fact, clean and sustainable energy sources such as hydro, wind and solar are the cheapest, often by a large margin. For example, a 2019 report found that 56% of new utility-scale renewable energy, 90% of hydro, 75% of wind, and 40% of solar are still cheaper than the cheapest fossil fuel option.
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Myth 2: All miners use fossil fuels
The assumption (as indicated by the tweet) is that all miners use fossil fuels, thus destroying the environment. While there are certainly mining operations that still use fossil fuels, many mining operations use cheaper and more sustainable energy sources. ARK Invest and the Cambridge Center for Alternative Finance found that 76% of miners already use sustainable energy sources, and that 95% of Chinese mining is hydropowered in Sichuan Province.
Myth #3: Mining is dirty and unsustainable
Many believe that Bitcoin mining is unsustainable, not only in terms of the energy it consumes but also in terms of the amount of energy it produces, and is seen as a waste. But mining operations are not only looking for cheaper and sustainable energy inputs, they are innovating ways to use their energy output sustainably as well: powering greenhouses, powering other local industries and even heating cities.
Myth 4: Energy consumption is carbon emissions
Bitcoin mining is estimated to use up to 110 TWh per year, which is equivalent to the electricity production of a small country. Many critics point to this figure and say that carbon emissions and their impact on the environment should also be high. But, like a file Harvard Business Review The article notes that “you cannot extrapolate the attendant carbon emissions without knowing the exact energy mix” that goes into Bitcoin energy consumption. As we saw above, many of them are already renewable. In addition, bitcoin mining uses the surplus from other sources of energy that may go to waste. So, Bitcoin’s carbon footprint is much smaller.
Myth 5: The cost is too high
Many point out that Bitcoin’s energy expenditures are comparable to a small country as being too high and too expensive. But, as Coinbase points out, the GDP of a small country could be $400 billion, while the market capitalization of Bitcoin is around $1 trillion. They also noted that bitcoin consumes much less energy than other financial systems, such as mining gold, and even powering bank branches and ATMs.
The reality of the environmental impact of Bitcoin mining is already positive and increasing every day. While many miners are already using sustainable resources, the industry as a whole is struggling to move more operations to sustainable energy sources. This is evidenced by the recent Crypto Climate Accord, which has already secured the support of 45 organizations and individuals who will make efforts to move the cryptocurrency industry to zero emissions by 2030.
Moreover, we are seeing more mining operations moving to countries that have more favorable policies around bitcoin mining, which can provide sustainable energy sources such as wind, hydro and solar. With the recent shutdown of Chinese mining operations, this migration will only accelerate.
Overall, Bitcoin mining not only provides the world with a new alternative for money, but also makes efficient use of global energy. There are bigger issues to worry about than the environmental impact of bitcoin mining because this impact is positive.
Abdulmalek Mirakhmedov, co-founder of Genesis Digital Assets