Go green or die? Bitcoin miners aim for carbon neutrality by mining near data centers

Bitcoin (BTC) mining has always been a controversial topic. But, Bitcoin’s Proof of Work (PoW) model has reached new levels of concern as major decision makers and investors are paying more attention to ESG factors.

As such, many crypto miners are highlighting environmentally friendly practices by getting carbon offsets. However, some might argue that this is not enough to guarantee green bitcoin mining. Other risk factors may also be related to carbon credits.

For example, Kevin O’Leary – Canadian businessman known as “Mr. Cool” for his role on Shark Tank – He told Cointelegraph that he usually indexes public mining companies such as Marathon Digital Holdings and Riot Blockchain Inc. and others. However, O’Leary noted that once these companies claimed carbon neutrality through carbon offsets, their stocks fell dramatically. O’Leary believes this is because the US Securities and Exchange Commission (SEC), may soon plan to review carbon credits. O’Leary expressed his concern, saying:

“Carbon offsets are not auditable. So indexers like me got rid of those stocks – we had to sell. The only way institutions would now invest in bitcoin mining is for those companies to claim there was no carbon involved at all.”

Bitcoin mining and data centers

In order to ensure no carbon mining, O’Leary explained that Bitcoin miners must build parallel to data centers. This would then allow miners to efficiently use the excess energy deleted from data centers to mine bitcoin, resulting in a “no carbon offset,” a process that produces zero carbon emissions.

Bitcoin miner Bitzero started implementing such a model two years ago in Norway. Akbar Shamji, CEO and founder of Bitzero, told Cointelegraph that the company initially built an infrastructure partnership with the local government in Norway two years ago that prompted the region to launch unused hydropower generation for bitcoin mining:

“This was a perfect opportunity for us to test this idea. At the same time, big data companies have started using renewable energy sources in places like Norway, but this has not been profitable for the region. We have built a long-term, low-cost energy source that is 100% carbon-neutral. To beat the market. We made a profit when we mined the first bitcoin in December 2021.”

Recognizing the huge demand for data storage today, Shamji further explained that electricity generated from data centers must be properly harnessed. “We call this the ‘Norway model’. Electricity generation is there but it’s still stuck at high voltage. So, we implemented the electrical step from high voltage to low yield transformers and substations, which allowed us to efficiently drive containers full of ASIC miners.”

In other words, Bitzero derives power directly from excess capacity at local hydropower plants, resulting in no carbon offset. At the same time, Shamji explained that Bitzer offers stationary data centers made from sustainable, local materials consisting of heat capture technology.

“In the case of bitcoin mining, when electricity passes through these computers, the Proof of Work algorithm does not consume much energy to generate it. If this is not implemented, the heat generated by these computers will return to the air and be completely lost. Although the carbon displacement model is not adopted. Broadly speaking so far, Shamji said Bitzero typically mines 129 bitcoins per month, using 40 megawatts of power, adding that this will eventually rise to 110 megawatts.

Crypto mining company Argo Blockchain is also planning to open a data center in West Texas to conduct mining operations. While Argo does not take a zero carbon offset approach, Argo CEO Peter Wall told Cointelegraph that the company aims to become carbon neutral:

“There is a huge amount of renewable energy in West Texas, and Argo’s mission is to mine bitcoin in the most environmentally friendly way possible. We chose Dickens County in particular due to the presence of a substation adjacent to the property we chose to build Helios, our new major mining facility.”

Like Shamji, Wall realizes that the clean energy that runs through the substation located in Dickens County, Texas, is stranded and not being used. “There isn’t a lot of local demand or local loads to use that energy, so we felt this was a strong opportunity to help stabilize the network,” he noted.

Interestingly, energy and gas companies are also setting up stores in areas that emit energy. For example, Alex Tapscott, author and co-founder of the Toronto-based Blockchain Research Institute, told Cointelegraph that energy producer ExxonMobil has been quietly mining bitcoin in the Bakken, North Dakota, area for a year as part of a plan to reduce emissions from flared gas. .

North Dakota gas torch. Source: Joshua Dubeck

“The pilot project was successful enough that the company plans to roll it out on a much larger scale. ConocoPhillips is reportedly working on a similar project,” Tapscott said. Additionally, energy company Grid Share recently announced plans to open a Bitcoin mining data center next to a hydroelectric dam on New Zealand’s South Island to support 100% renewable energy in the region.

According to Tapscott, these initiatives may come as a surprise to many people who believe that Bitcoin mining is carbon-intensive. He explained that such models can be useful in reducing the carbon footprint:

“A typical Bakken well produces oil but also natural gas that is flared or burned in the atmosphere. This is an important source of carbon that enters the atmosphere. Instead of burning gas, Exxon has partnered with Denver-based Crusoe Energy to capture the gas and turn it into generators where it mines Bitcoin”.

Tapscott added that Crusoe found that Bitcoin mining reduces global carbon emissions by up to 63%. “Gas that had no way to reach the market and would have burned directly into the atmosphere instead, gets a useful purpose as fuel for minting new bitcoins.”

Zero carbon emissions

While green bitcoin mining has always been a “buzzword,” some would argue that these initiatives, along with zero carbon offsets, have become essential for mining operators who want to stay in business.

For example, lawmakers are seeking legislation to completely ban non-green mining operations. This was recently shown by the state of New York, where lawmakers aim to restrict bitcoin mining operations with a proposed bill currently making its way through the state capitol building in Albany.

Meanwhile, the Kazakhstan government recently proposed requirements for crypto-mining operators to report electricity consumption and “technical specifications” for connecting to the power grid prior to commissioning.

Although initiatives such as Crypto Climate Accord aim to achieve net zero emissions from electricity consumption from participating companies by 2025, this also raises concerns in terms of how to achieve this. Tapscott noted:

“This is a commendable goal, as long as it doesn’t force Bitcoin to be something it isn’t. For intelligence, some have suggested changing the Bitcoin underlying code so that it uses the least power-intensive Proof of Stake consensus mechanism. That would be wrong. Proof of Work is a feature that gives the network flexibility and strength.”

From an investor perspective, O’Leary added that he will only invest in Bitcoin mining companies and data centers that can prove to be a sustainable source of energy going forward:

Private capital must comply with environmental, social and governance factors. ESG was once a marketing term, but now it’s a real thing. I can’t go through a Securities and Exchange Commission audit, and I can’t find an auditor who will sign these statements anyway. The crypto industry is at an interesting inflection point.”

In O’Leary’s view, bitcoin miners are already facing an inflection point, but regulatory clarity remains in doubt. Bill Tapscott, CEO of CarbonX – a carbon trading company in the financial technology – told Cointelegraph that the disclosures proposed by the US Securities and Exchange Commission (SEC) are similar to those already provided by many companies based on widely accepted disclosure frameworks, Such as the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol. He explained:

“The disclosure establishes a baseline through which the next step for the government or regulator is to introduce a carbon tax or emissions cap and a trade regime, such as ARB’s California Quebec Market or RGGI. Carbon credits are part of these programs and have been ‘audit’ for years.”

In light of this, Tapscott explained that mining operators will need to report their emissions, which are likely to be high if the energy stems from fossil fuels even from glow gases, or low if it is from green sources like hydropower. “However, these companies can eliminate the risk of future carbon costs by investing for a long time in carbon credits,” he said.