How cryptocurrency mining can affect the future of ‘green energy’
Global climate change is a topic that has been heard about even in the most remote places of our planet. Today, this challenging problem is being discussed in the context of cryptocurrency mining. On one side of the debate, there are proponents who believe that cryptocurrencies can solve the world’s top problems. On the other side, those who believe that miners are using a lot of “dirty” energy from coal production in China and natural gas in New York, thereby leaving a destructive footprint on the environment.
The discourse became even more exciting after I stumbled upon the BCEI report published by Square. The authors of the work put forward the idea that the huge need for electricity for mining, on the contrary, will accelerate the global energy transition to renewable energy sources. I analyzed the main theses of this report.
Let’s start with the renewable energy issue. Iceland, for example, has a huge number of affordable and inexpensive renewable sources in the form of geothermal energy. But, unfortunately, it is impossible to build electricity transmission lines in all directions under the Atlantic, and the generated electricity must be used immediately. Therefore, in the absence of demand, a large amount of energy remains unused. For this reason, it is difficult to justify investments in green energy projects.
However, the country found a way out: instead of selling electricity directly, they built aluminum factories in Iceland (such factories consume a lot of energy and are extended by high CO2 emissions). In other words, unused renewable energy sources are converted into a certain value — aluminum.
Now let’s get back to cryptocurrency mining. Crypto mining essentially converts electricity into nominal value in the form of crypto assets (BTC, ETH, etc.). These assets, something like the aluminum produced in Iceland, can then be moved, transferred and transformed. But unlike aluminum, which must be physically sent to its destination, cryptoassets are programmable and can move instantly over an internet connection.
What will happen if we consider cryptocurrency as a product of “clean” power plants? Considering the nature of bitcoin, for example, can help in the development of renewable energy sources (and electrical grids in general) in several ways:
- Connection queues: when new energy resources are developed, an application must be submitted for their connection to the grid. It can take years to connect such queues. In the meantime, these assets can be online and produce bitcoins, as bitcoin miners can take energy until there is a need to sell it to the network.
- Geographic issues: Sometimes the sunniest and windiest places are not the ones with the most customers, so it is difficult to justify the development of new renewable energy sources. Cryptocurrency solves this problem by turning into a kind of “virtual transmission line”.
- Power system timing and balance: Power grids are markets that must maintain a perfect balance between supply and demand. Consequently, grid-connected renewables often have to be turned off if they produce too much energy at the wrong time. Bitcoin can be bought around the clock, seven days a week, 365 days a year.
Bitcoin miners are unique energy consumers as they offer a flexible and light load, provide payouts in globally liquid cryptocurrency and are not location dependent, requiring only an internet connection. These combined qualities constitute an exceptional asset.
The authors of the report believe that combining miners with renewable energy projects can increase profitability for investors and developers, moving these solar and wind energy projects into profitable territory. It is likely that crypto mining will catalyze the transition from fossil fuels to renewable energy sources. This project can really lead humanity to a solution to the global problem of climate change. Realizing all the possibilities and difficulties, I am enthusiastic about this initiative and will continue to follow its development in the future.