No matter what the opponents of new technologies and cryptocurrencies say, mining stimulates the development of environmentally friendly methods of energy extraction. In recent years, this thesis has been accepted as a given by economists, environmentalists, and even eco-activists (the latter not with the greatest enthusiasm, but still).
Mining companies are looking for more efficient and less costly ways to produce energy, investing huge amounts of money and highly skilled human resources. And their efforts are proving to be very fruitful.
This article is dedicated to the environmental aspect of cryptocurrencies in the context of the impact of mining on the environment: as we know, it is the Proof-of-Work algorithm, which requires the use of mining methods, that is considered the most harmful to the environment.
Why do miners care about environmental issues?
The environmental concerns of bitcoin mining are due to the fact that it requires a large amount of electricity. The high energy consumption of cryptocurrency networks is due to the fact that the mining of coins in blockchains that use the Proof-of-Work (PoW) algorithm is achieved through complex calculations (the work of miners). And to perform these calculations, miners need powerful equipment that runs on electricity. The more powerful the equipment, the higher the power consumption and the higher the chance of being rewarded for their work.
At the same time, bitcoin miners’ rewards are halved every four years, in line with the halving of the first cryptocurrency’s code to regulate issuance.
The decrease in earnings forces miners to find cheaper sources of energy. On the other hand, cryptocurrency opponents, eco-activists, and regulators are putting pressure on mining companies to find greener methods of cryptocurrency mining.
These factors naturally incentivize companies to adopt more cost-effective and energy-efficient mining algorithms.
Again, the origin of the electricity is a key consideration. The development of alternative energy sources is welcomed by environmentalists, subsidized by the authorities and can be cheaper. Thus, today’s miners are reducing the share of “dirty” energy (especially that produced by coal-fired power plants) in the energy consumption structure in favor of environmentally friendly, renewable energy.
Briefly about the situation in the mining business
Despite the bullish trend of bitcoin and its 113% growth in 2024, statistical data show a decline in the stock prices of most mining companies. Only 7 out of 25 publicly traded mining companies recorded stock price gains. These companies are companies like:
- Core Scientific;
- TeraWulf;
- Bitdeer;
- Hut 8;
- Iris Energy;
- Northern Data;
- Cipher.
After the scheduled halving in April, the reward per block dropped from 6.25 to 3.125 BTC. In the early months of the spring, miners’ daily revenue fluctuated between $60 million and $70 million; however, in the record December 2024, when the value of bitcoin surpassed $100,000, miners’ daily revenue did not exceed $50 million.
In addition, on the last day of the year, bitcoin’s mining difficulty hit another all-time high, peaking at 109.78 T. This number increased by more than 50% over the course of the year, putting additional pressure on the profitability of coin mining. Record hash rates and the complexity of mining are forcing companies to upgrade their infrastructure to meet the growing technical demands — and miners are reporting more than a 100% increase in operating costs. According to analysts at TheMinerMag, publicly traded miners have earmarked approximately $3.6 billion for facility upgrades, equipment purchases and improvements through 2024. There is also a diversification of investment portfolios in favor of AI projects that can reduce energy consumption in mining.
In light of the above, we can see that today we are in a situation where increasing efficiency and reducing costs is almost a matter of survival for mining companies. And the transition to environmentally friendly mining methods is one of the effective ways to solve these problems.
Green mining technologies in use today
Studies conducted by the United Nations earlier this decade told us that “dirty energy” from coal-fired power plants accounts for about 45% of total energy consumption in coin mining, which is the reason for cryptocurrencies’ significant carbon footprint in the atmosphere. This data can be compared to information from The Bitcoin ESG Forecast report. In it, analysts say that by 2024, more than half of the electricity used in the mining process will come from green sources, and this trend will continue to grow strongly. The search for low-cost generation is driving the use of renewable energy in mining: in many countries, green energy production is subsidized by governments and is becoming more affordable compared to fossil fuel generation.
One publicly traded mining company that has successfully implemented blockchain sustainability solutions is the US mining company MARA Holdings (Marathon Digital Holdings until August 2024). In the spring of this year, MARA entered into an agreement with the Kenyan government to invest $80 million to build green energy data centers. As part of the agreement, the mining company commits to optimizing renewable energy projects across the country to be seasonally efficient. Marathon Digital has previously implemented similar activities in Paraguay and the United Arab Emirates, but they were not as comprehensive.
Also on the eve of the Christmas holidays, the company launched its second heat supply project in Finland. It allows the heat generated by cryptocurrency mining to be redirected to heat residential buildings. In December, MARA announced that heat from mining had begun to heat the homes of another 67,000 Finns. A pilot project to heat the town of Satakunte, with a population of 11,000, was successfully launched in June this year.
Incidentally, in the conditions of the energy crisis, the mining industry located in certain regions improves the situation with jobs and reduces the cost of electricity for the population. Owners of power grids can reduce their costs and prices for consumers due to the fact that miners allow balancing consumption. Thus, even though local residents sometimes complain about the noise generated by the equipment, mining contributes to lower fees while increasing revenues to local budgets.
Mining companies strive to maximize the use of heat generated by cryptocurrency mining. For example, KryptoVault in Norway uses it to dry wood and algae, while ASIC miners in Paraguay use the heat from their rigs to dry mangoes. In New York, for example, an attempt has been made to recycle heat from mining to heat a pool complex.
Help in implementing green mining is also coming from friendly companies. In particular, in April 2024, PayPal blockchain researchers came up with an environmental initiative in the crypto industry, further incentivizing miners to switch to green energy. PayPal and EnergyWeb specialists developed a mechanism of “crypto economic incentives” for accredited green miners, based on the principle of giving them priority in processing transactions and receiving additional bonuses.
Government regulation of mining
Mining may be allowed even in countries where cryptocurrencies are not a recognized means of payment. In some jurisdictions, this type of activity requires a license, while in some jurisdictions it does not.
Usually, restrictive regulatory measures are applied to mining companies in regions where there are risks of power shortages. Governments then impose certain limits or even a ban on mining.
Sometimes bans stem from government policies that eradicate any payment initiatives that are alternatives to or compete with local currency. Such repressive measures against cryptocurrencies in general and mining in particular are seen, for example, in China, where an official ban on bitcoin mining has been in place since 2021.
Governments in developed countries usually take the path of soft restrictions on mining, seeking to introduce norms and rules for the industry. For example, the Norwegian Ministry of Digitalization launched regulatory initiatives this year requiring information about the ownership of mining companies and the services provided by such businesses. The government is interested in doing this in order to minimize the harmful impact of cryptocurrencies on the environment through the carbon footprint and at the same time support green blockchain solutions. According to the initiators of the innovations, their task is only accounting and control.
Mining and Climate Change. An alternative viewpoint
A group of experts from Exponential Science published a month ago a curious report on the impact of banning mining on ecology and climate. According to the conclusions drawn by the scientists, rash restrictions or a ban on cryptocurrency mining through mining can lead to unpredictable ecological changes on the planet. The essence of the report is that banning mining in environmentally friendly regions will do more harm than good, as it will lead to the migration of mining farms to countries with an already unfavorable ecology. This will provoke the accumulation of harmful substances in specific locations, which will be much more difficult to deal with.
In their report, the experts call for a concerted effort to ensure the environmental sustainability of blockchains, per se, by supporting green cryptocurrencies, the use of renewable energy sources and other initiatives, rather than imposing restrictions in specific areas. The scientists insisted on a responsible approach based on the outcome of research rather than superficial judgments.
The future of mining and the environment
When discussing the future of mining in terms of environmental issues, we can note the following:
- Despite all the benefits of the energy-efficient Proof-of-Stake vs Proof-of-Work consensus algorithm, bitcoin developers have no plans to switch to it. Proof-of-Work provides unprecedented security, decentralization, and value for the first cryptocurrency, so mining is a must.
- The eco-activists of Greenpeace’s US division have curtailed their campaign against bitcoin mining, as evidenced by their long silence. They have not published anything angry and denunciatory about the total pollution caused by mining the first cryptocurrency for at least half a year. By the way, no other offshoot of the environmental organization has publicly shared the outrage of the US division, which may speak to its bias.
- Erroneous judgments that mining is the greatest evil in the matter of environmental degradation on the planet are gradually fading into oblivion, shattered by the results of numerous authoritative studies on the subject.
So the crypto mining industry continues to develop and implement new, more efficient ways of extracting electricity, bringing undeniable benefit to humanity in addressing the issues of environmental improvement and sustainable development.
Thank you for your attention.
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