You’ve probably heard claims like “Bitcoin mining consumes more energy than all of Argentina” or “Bitcoin mining uses more energy than all of Google operations”. Claims that will earn the raising of eyebrows, but fail to address the fundamental question is the environmental impact of Bitcoin mining is worth the benefits? This question should be broken down into two aspects: energy consumption and hardware churn.
The energy used by Bitcoin miners does three powerful things:
Energy consumption
1.Secures all the wealth stored on the Bitcoin network in a decentralized state.
Most current financial systems are controlled by a centralized entity, banks, credit unions, federal reserve, etc. This means that those central parties can manipulate funds, stop transactions or do whatever they feel is in the “best interest” of whatever source of power is pushing them to act. For example, Canada recently confiscated funds that were donated to a protesting group they did not agree with. Banks, credit unions, GoFundMe, and many other entities were asked to freeze accounts, stop payments or take action in some way to prevent funding the protesters. Because Bitcoin has no single point of control, flexing this level of power is not possible whether you’re an individual or a sovereign nation.
2.Creates a financial incentive that promotes renewable energy sources
Bitcoin mining has become a profitable industry for many companies. One major expense mining companies face is energy costs. What is the cheapest energy long-term? You guessed it, renewables. There is a built-in financial incentive to acquire the cheapest energy for these “for-profit” companies which means every mining company will seek out integrating renewable energies as part of their operational setup. With greater demand for renewables, renewable companies will allocate more funds for research and development to improve wind, solar, and hydro technologies to better fulfill the added market demand. Coming full circle, Bitcoin mining is not only promoting the adoption but also the improvement of renewable energy technology.
3.Provides stability to unstable power grids
An interesting aspect of Bitcoin mining is the ability for miners to be turned on or off ad hoc without affecting operational infrastructure, unlike cement, steel, or any other industrial entity. Because of this, we are seeing grid operators partnering with mining facilities to best make use of the energy grids. In Texas, there was a recent overload on the power grid when a freeze came through and every household had to turn off their heater. With the amount of energy needed to sustain every business and household, the energy grid was at a near collapse and rolling blackouts were pushed to keep the grid intact. Since the freeze, the grid has been expanding with added renewables and with miners leveraging much of the “excess” or unused energy. In the event of another freeze where the household energy consumption is expected to spike, the energy companies would pay the mining companies to turn off a portion of their Bitcoin miners to free up the needed energy supply to the grid. Once the household load subsides, the Bitcoin miners can be turned back on utilizing the freed-up “excess” energy.
Hardware Churn
The physical lifespan of a current ASIC (application-specific integrated circuit) miner is between 2-3 years. Financial lifespan will have a broader range depending on multiple factors such as cost of energy usage, when the miner comes online, the hash rate growth of the network, and what the Bitcoin price does during the miner’s lifespan.
Another factor that’s had a significant impact on mining is the rate at which hardware technology has evolved, specifically for ASIC miners. As soon as a new miner is released, there is a stronger and more efficient miner right around the corner. This has led to a lot of churn with large-scale mining operations quickly retiring old miners and replacing them with new ones.
Given that Bitcoin mining is still relatively new, especially from a commercialization view, mining technology is evolving at a rapid rate which means if you are in the business of mining for profit, you’ll likely continue purchasing the new mining rigs to keep your financial returns competitive with your peers. This leaves many “older” mining rigs in a position of no man’s land where they can’t return profits worth their operational costs and they can’t be re-purposed for any other use.
I believe this is the most valid critique of Bitcoin mining but one that can hopefully be addressed in the near future. There have been a few ideas floating around, such as integrating retired miners with new home energy builds to help offset energy costs while maintaining the Bitcoin network or building miners in a way where once they are decommissioned, they can be better stripped to have their components re-purposed. Either way, hardware churn is a top concern of the Bitcoin community and is likely to be addressed as more hardware manufacturers enter the space.
In Summary
Bitcoin mining is a waste of energy
This critique is COMPLICATED - On one hand, the energy Bitcoin consumes is used to secure all of the stored wealth in a decentralized state, provides stability to power grids, and promote renewable energy development and implementation. On the other hand, the physical miners are often replaced frequently with no real repurposable utility for the retired miners.
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