Helena, Mont. Over the past year, a crypto-mining company has had what appears to be the ideal location for thousands of power-hungry computers running around the clock to verify bitcoin transactions: the foundations of a coal-fired power plant in rural Montana.
But as pressure grows on the crypto industry to control the environmental impact of its massive electricity consumption, Marathon Digital Holdings has made the decision to pack up its computers, called miners, and move them to a wind farm in Texas.
“For us, it just comes down to the fact that we don’t want to run on fossil fuels,” said the company’s CEO, Fred Thiel.
In the world of bitcoin mining, access to cheap and reliable electricity is everything. But many economists and environmentalists have warned that as the still widely misunderstood digital currency increases in price — and with it its popularity — the mining process that is central to its existence and value is becoming increasingly energy-intensive and potentially unsustainable.
Bitcoin was created in 2009 as a new way to pay for things that are not subject to central banks or government oversight. While it is not yet widely spread as a payment method, its popularity as a speculative investment has increased despite fluctuations that can cause its price to fluctuate significantly. In March 2020, one bitcoin was worth just over $5,000. That jumped to a record high of over $67,000 in November before dropping to just over $35,000 in January.
Ce nt ra l to bi tco in technology is the process by which transactions are verified and then recorded on what is known as the blockchain. Computers connected to the bitcoin network race to solve the complex calculations verifying transactions, with the winner winning newly minted bitcoins as a reward. At the moment, when the machine solves the puzzle, its owner is rewarded with 6.25 bitcoins – a total value of about $260,000. The system is calibrated to issue 6.25 bitcoins every 10 minutes.
When bitcoin was first invented, puzzles could be solved using a regular home computer, but the technology is designed so that solving problems becomes more difficult as more miners work on it. These miners today use specialized machines that don’t have screens and look more like a high-tech fan than traditional computers. The amount of energy computers use to solve puzzles is increasing as more computers join the effort and puzzles become more and more difficult.
The company said that Digital Marathon, for example, currently has about 37,000 miners, but it hopes to get 199,000 online by early next year.
Determining how much energy the industry is using is tricky because not all mining companies report their use and some operations are mobile, and storage containers full of miners move across the country in search of low-cost energy.
The Cambridge Bitcoin Electricity Consumption Index estimates that bitcoin mining used about 109 TWh of electricity over the past year — close to the amount used in Virginia in 2020, according to the US Energy Information Center. The current usage rate will run at 143 terawatt hours over an entire year, or about the amount used by Ohio or New York State in 2020.
The Cambridge estimate does not include the energy used to mine other cryptocurrencies.
The defining moment in the debate over bitcoin’s energy use came last spring, when just weeks after Tesla Motors announced it was buying $1.5 billion in bitcoin and would also accept the digital currency as a payment for electric cars, CEO Elon Musk joined critics in calling on critics. Industry energy use and said the company would not take it as payments.
Some want the government to intervene in the regulation.
In New York, Gov. Cathy Hochhol is under pressure to declare a moratorium on the Proof of Work mining method — used by bitcoin — and to deny air quality permits for a project at a modified coal-fired power plant. on natural gas.
A New York state judge recently ruled that the project would not affect the air or water of nearby Seneca Lake.
“Restarting or expanding coal and gas plants to make fake money in the midst of a climate crisis is downright crazy,” Yvonne Taylor, vice president of Seneca Lake Guardians, said in a statement.
Ann Hedges of the Montana Environmental Information Center said that prior to the advent of the Digital Marathon, environmental groups expected the coal-fired power plant in Hardin, Montana, to close.
“It was the hour of death,” Hedges said. “We were getting their quarterly reports. We were looking at how much they were working on. We were seeing it keep declining year after year – and last year that completely changed. It would have disappeared if it weren’t for the cryptocurrency.” Hedges said the crypto industry “needs to find a way to reduce energy demand” and needs to be regulated. “That’s it. It’s not sustainable.” Some say the solution is to switch from Proof of Work to Proof of Stake Verification, which some cryptocurrencies already use. With Proof of Stake, cryptocurrency transfers are set to validate computers, rather than making them compete. The people or groups that earn the most from their cryptocurrency are more likely to get the work — and the reward.
While the method uses much less electricity, some critics argue that the Proof of Stake blockchain is less secure.
Some companies in the industry acknowledge there is a problem and are committing to achieving net zero emissions – adding zero greenhouse gases to the atmosphere – from the electricity they use by 2030 by signing a crypto-climate agreement, similar to the Paris climate agreement.
The agreement states that “all crypto communities must work together, urgently, to ensure that crypto does not exacerbate global warming, but instead becomes a net positive contributor to the vital transition to a low-carbon global economy.”
Marathon Digital is one of several companies pinning their hopes on tapping into excess renewable energy from solar and wind farms in Texas. Earlier this month, Block-Stream Mining and Block, formerly Square, announced the start of work in Texas on a small off-grid mining facility using Tesla’s solar panels and batteries.
“This is a step to prove our hypothesis that bitcoin mining can fund zero-emission energy infrastructure,” said Adam Buck, CEO and co-founder of Blockstream.
The companies argue that cryptocurrency mining can provide an economic incentive to build more renewable energy projects and help stabilize power grids. Miners give renewable energy generators a guaranteed customer, making it easier for projects to get financing and generate power at full capacity.
Thiel said miners are able to contract for low-priced energy because “all the energy they use can be shut down and put back into the grid at any moment.”
In Pennsylvania, Stronghold Digital is cleaning up hundreds of years of waste coal by burning it to create what the state classifies as renewable energy that can be sent to the grid or used in bitcoin mining, depending on energy requirements.
The Pennsylvania Department of Environmental Protection is a partner in the business, which is using a relatively new technology to burn waste coal more efficiently and with fewer emissions. Coal piles are left alone and can catch fire and burn for years, releasing greenhouse gases. When wet, coal waste leach acid into the area’s waterways.
After coal waste is used to generate electricity, what’s left is “toxic-free fly ash,” which has been state-registered as clean compost, said Stronghold Digital spokeswoman Naomi Harrington.
As Marathon Digital is gradually moving 30,000 miners out of Montana, it is leaving tens of millions of dollars in mining infrastructure behind.
Ju stbecause M a ra – thon not wanting to use coal-fired power anymore doesn’t mean there won’t be another bitcoin miner to replace it. Thiel said he assumes the power plant owners will find a company to do so.
“There is no reason not to do that,” he said.
When bitcoin was first invented, puzzles could be solved using a regular home computer, but the technology is designed so that solving problems becomes more difficult as more miners work on it.