Bitcoin is either the big polluter of the digital age or a lucrative tailwind that renewables need.
Two clear and opposing points of view.
After all, like Elon Musk famous tweeted in May, explaining its rationale for suspending Tesla’s vehicle purchases using bitcoin: “We are concerned about the increasing use of fossil fuels for bitcoin mining and transactions, particularly coal, which has the worst emissions of all fuels… less than 1% of bitcoin’s energy / transaction. “
Separately, Twitter’s Jack Dorsey said he’s investing in a solar-powered bitcoin mine.
Stephen Pair, CEO of BitPay, told Karen Webster that bitcoin-related activity will boost renewable energy simply because it requires energy to be processed – and the economy requires cheaper production, this which naturally leads to the adoption of cost-effective sources of electricity. It’s a virtuous cycle, in other words, where the adoption of bitcoin increases the adoption of renewables, and the adoption of renewables paves the way for more widespread adoption of cryptos.
The precedent is there. As CoinShares estimated in its report titled “The Bitcoin Mining Network: Trends, Average Creation Costs, Electricity Consumption, and Sources,” about 73% of bitcoin miners harness some form of renewable energy to power hardware and the software that ultimately creates bitcoin.
But then again, the crackdown on mining is in place, depending on where you look.
China, of course, represents the zero point for bitcoin production, where data indicates that the country is responsible for the production of more than half of the branded crypto.
As Pair said, the great energy debate isn’t necessarily intended as a way to criticize or attack bitcoin. But when it comes to the real economy of production, he added, “there is a lot of misunderstanding.”
And in its crudest terms, the real energy tradeoff can be viewed this way: Yes, energy is used in the production of cryptocurrency. But bitcoin, he said, functions as a store of value. And a store of value pushes consumption today into the future – offsetting the energy used in production right now.
“My personal thesis is that anything that serves as a useful store of value must be a net conservator of energy,” Pair explained. “If it didn’t, it wouldn’t retain its value, as the system would constantly need people selling it to finance energy use.”
Going a little deeper into the different angles of the debate, the substantive fights between opponents and supporters of bitcoin over clean and dirty sources and the environmental impact, he said that crypto production is an extremely competitive industry. .
PYMNTS’s own research confirms consumers’ desire to use crypto in their daily purchases, which will prompt creators and miners to keep up the pace of operations in order to meet anticipated demand … and to keep up the pace of operations, they will turn to cheaper inputs for production.
Keep the margins in mind
Competition “forces miners to find the cheapest sources of electricity” to maintain production and increase margins, Pair said.
Increasingly, these pressures are driving miners towards renewable energies. With renewable sources such as water and wind, there are usually excess levels of energy that wind farms and wind turbine operators can sell to miners for the purpose of generating income. Anywhere there is excess energy that would otherwise be wasted, this is where miners would find the cheapest energy.
“Bitcoin mining is playing an increasingly important role in renewable energy as mining changes the economics of renewable energy,” he asserted, thus encouraging the use and production of renewable energy. renewable energies. Miners are turning to solar power, he said, and the money they spend on that energy ultimately spurs innovation in the form of better and cheaper solar panels.
Where the miners will go
With a nod to where mining will go, now that such a large swath of production is banned in China, Pair said, mining will migrate out of the country, perhaps. in people’s homes.
“The mining equipment is worth a lot of money, and I’m sure it will be sold and go elsewhere in the world to be used and brought back online,” he noted. The pace of bitcoin production may be slowed down, but since the release is over, because embedded in the source code, the system will always adjust.
“You still get a block every 10 minutes, and the same bitcoin supply will be released as before,” he said.
Mining performs an important function, which is to secure this blockchain production system. Right now there is a small subsidy for miners, but it decreases over time. Ultimately, miners receive money tied to the transaction fees that users pay when bitcoin changes hands. Market forces will ultimately decide how much power is needed and how secure this blockchain is, Pair predicted.
The decentralized nature of bitcoin production also benefits from the decentralized nature of power generation itself, he said. A proof-of-work blockchain like bitcoin, he said, “is ultimately a very secure blockchain” because just about anyone can get solar panels, install them, and run a bitcoin miner – n ‘ anywhere in the world. (Proof of work helps validate bitcoin production and prevents the creation of multiple chains, which may have different information.)
There are other ways the crypto ecosystem can continue to change the adoption of renewable energy sources. According to Pair, governments can impose taxes on non-renewable forms of energy and environmentally destructive forms of energy, making them prohibitive to use in the production of bitcoin and crypto.
“This will not only change bitcoin mining, but all the use of electricity, to these more renewable forms, ”he said.