Over the past year Bitcoin has been under closer public scrutiny given articles discussing the massive amounts of energy required to mine new Bitcoin and maintain the network. Bitcoin mining is the process through which new Bitcoin is introduced in circulation, based on a Proof of Work (POW) algorithm which requires computers to solve complex math problems, consuming massive amount of energy in the process. In exchange for solving these algorithms, miners are awarded Bitcoin in return.
This May, Elon Musk tweeted concerns over Bitcoin’s energy usage and suspended Tesla’s program of accepting Bitcoin as payment. He also mentioned that Tesla would resume embracing Bitcoin when at least 50% of the global Bitcoin mining is using renewable energy.
In September of last year, a report by the Bitcoin Mining Alliance where miners voluntarily submit statistics on the consumption, estimated the network used 36.8% renewable energy. In July of this year, an updated report signals that statistic has moved up to 56%, greatly reducing the carbon footprint behind Bitcoin.
A reason for this shift is recent regulatory crackdowns on Bitcoin mining in China, which handles an estimated 63% of mining operations in a grid which has a 56.8% dirty coal mix. Miners are leaving the country looking for other places to mine Bitcoin. The main factor determining profitability and location for Bitcoin miners is energy cost, and today renewables such as solar, wind, and hydro are the cheapest forms of energy available. Stranded energy is particularly attractive given their nature. This is power generated in remote places by renewables, that due to grid limitations is not taken advantage of and wasted. Bitcoin mining can happen anywhere, and it makes it a geographical independent buyer of energy. Some examples of these places include West Texas with overbuilt wind capacity, Quebec with massive amounts of Hydro, or any other location fit for the building of renewables.
In a CNBC interview with Mike Colyer, CEO of Foundry, a crypto mining company said “Miners around the world are looking for stranded power that is renewable. That will always be your lowest cost. Net-net this will be a big win for Bitcoin’s carbon footprint.”