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Bitcoin Miners Seek ‘Greener’ Pastures in U.S.

by Ed Burke and Kelly Burke, Dennis K. Burke Inc.

Digital currency creation still has a very real and significant carbon footprint

For years, environmentalists have been calling out the world’s biggest cryptocurrency for excessive energy consumption and its associated environmental impact.

Bitcoin is created through a data “mining” process. The mining involves solving complex mathematical problems with computers using an incredible amount of processing power that consumes huge amounts of electricity.

When the price of one bitcoin topped $64,000 in April, it drove a massive growth in the amount of electricity consumed by bitcoin miners, generating major controversy over the environmental impact of mining the cryptocurrency.

Bitcoin later experienced a major sell-off after Tesla CEO Elon Musk suspended bitcoin payments for vehicle purchases on May 12 due to environmental concerns.

After China decided to expel its bitcoin miners in May, more than 50 percent of the hashrate — the collective computing power of miners worldwide — dropped off the network.

China’s big crypto crackdown this spring set off a chain reaction in the mining world.

It took half the world’s bitcoin miners offline practically overnight. Fewer people mining has meant less machines running and less power being consumed overall, which slashed bitcoin’s environmental impact.

China’s new crypto rules also took offline a lot of older and more inefficient mining equipment that was probably long overdue for retirement and will never be turned back on. The overall bitcoin network will now be mostly made up of more efficient gear that gets about double the hashpower for the same amount of electricity.

China shutting its doors to crypto mining has set off a massive migration. Many miners have begun to move elsewhere.

Greener Also Means Cheaper

Because miners compete in a low-margin industry, where their only variable cost is typically energy, they are incentivized to migrate to the world’s cheapest sources of power, which are increasingly renewable. A lot of these miners are headed for cheaper pastures in the U.S., and experts say this will improve bitcoin’s carbon footprint.

The U.S. has become the new hotspot for the world’s crypto miners. In the last six months, the country has jumped from fifth to second place and now accounts for nearly 17 percent of all global bitcoin miners. Although China was solidly in first place as of April, with 46 percent share, America’s share of the market is likely a lot higher now since the Chinese government booted miners in May.

In fact, bitcoin’s energy consumption recently experienced a massive drop, according to data from Cambridge University.

Bitcoin’s total estimated annual electricity consumption has decreased by nearly 60 percent, falling from an all-time peak of more than 143 terawatt hours (TWh) in May to as low as 62 TWh in early July, according to data from the Cambridge Bitcoin Electricity Consumption Index (CBECI). This is the lowest energy consumption rate recorded since early November 2020.

Today, bitcoin draws roughly 70 TWh of energy per year, or one-third of a percent of the world’s total electricity production. While that might sound like a big chunk, it’s less than half of what it was in May.

Are Miners Really Cleaning Up?

The global bitcoin mining sector reached a 56 percent sustainable power mix in Q2, according to estimates from a Bitcoin Mining Council (BMC) press release. One of the BMC’s core aims is to provide transparent and verifiable data on renewable energy usage in the Bitcoin mining industry.

However, the validity of the data and estimates resulting from BMC’s survey is unclear, as it relies heavily on voluntary and self-reported responses from a small segment of miners. The BMC notes that its estimates for annualized power consumption are based on its own “analysis, assumptions and exploration.”

To get an accurate read of bitcoin’s carbon emissions would require exact knowledge of the energy mix used to generate electricity for each bitcoin mining operation.

U.S.-based bitcoin mining operators have seen a huge uptick in business. Whit Gibbs, CEO and founder of Compass, a bitcoin mining service provider, says that retail hardware and hosting sales have increased nearly 300 percent since mid-June.

Darin Feinstein, founder of Blockcap and Core Scientific, says he’s seen a rapid rise in mining operations looking to relocate in North America, mostly in the U.S.

Clean energy’s rise in the U.S. should be good for bitcoin’s carbon footprint.

But energy consumption is not equivalent to carbon emissions. While it is relatively easy to determine the amount of energy that is consumed by the bitcoin network, it is much harder to determine its carbon footprint.

Each year, investment bank Lazard releases a breakdown of energy costs by source. Its 2020 report shows that many of the most common renewable energy sources are now either equally or less expensive than conventional energy sources like coal and natural gas. And the cost of renewable power keeps going down.

As a result, most miners new to North America will be powered by renewables, or natural gas offset by renewable energy credits. It’s estimated that more than 50 percent of bitcoin mining in the U.S. is now powered by renewables.

In the long run, the migration to the U.S., where innovation around bitcoin and renewables is already underway, will be an overwhelming positive for bitcoin’s energy mix.

Ed and Kelly Burke are respectively, Chairman of the Board and Senior Marketing Manager at fuel distributor Dennis K. Burke Inc. They can be reached at 617-884-7800 or ed.burke@burkeoil.com and kelly.burke@burkeoil.com.