The pressure from environmentalists on mining companies and the cryptocurrency sector continues unabated. Despite efforts to dispel myths about the extent of environmental damage, willingness to cooperate, desire to adhere to the concept of sustainable development, and widespread implementation of green initiatives, the crypto industry is still forced to take a defensive position in relation to the claims of eco-activists.
Let’s take a look at the current state of green initiatives in mining, what experts think about the extent of mining’s impact on the environment, and what they see as the prospects for green mining in 2024 and beyond.
The environment and the current state of mining
This year began with Greenpeace criticizing the Bitcoin ETF in the US. The crypto industry had been waiting for this event for more than a decade, as it was in a constant conflict with the Securities and Exchange Commission over a technicality. When the long-awaited approval for the first spot bitcoin ETF was granted on January 11, Greenpeace issued a statement saying that “this is a victory for Wall Street executives, but a defeat for the climate and society. The organization insisted on “significant and measurable changes in bitcoin mining practices” and called on the major companies investing in the first cryptocurrency to focus on technologies that reduce energy consumption in mining and reduce the harmful effects of mining on the climate, rather than on profits.
Emotions have been running high since March 2022, when environmentalists began actively lobbying governments, developers, and mining companies to switch bitcoin from the proof-of-work consensus algorithm to the more energy-efficient and environmentally friendly proof-of-stake. At the time, environmentalists launched the “Change the Code, Not the Climate” campaign.
Then, in mid-July of this summer, Greenpeace continued its assault on Wall Street with calls to take responsibility for polluting the environment with the carbon footprint of cryptocurrency mining. Trinity Capital, Stone Ridge Holdings, BlackRock, Vanguard and MassMutual – companies that support mining – were among the top “pollution sponsors” driven by purely economic, not environmental, incentives.
In its report, the organization compared the mining industry to “a combination of the tobacco and fuel industries” and accused the financial giants of misreporting, hypocrisy, and phony green initiatives.
The report was based on the fact that the companies only promote the ideas of using renewable energy for mining and improving energy efficiency in cryptocurrency mining in words and on paper, but in reality the situation is not progressing, and the “green image of mining” promoted in the mass media is speculative and misleading.
By the way, Greenpeace started accepting bitcoins as donations in 2014. At the time, the organization appreciated the environmental benefits of cryptocurrency, which included privacy and lower fees compared to traditional banks. Then, however, it was suspended after a sensational tweet by Elon Musk, in which he expressed concern about the use of large amounts of coal for mining. This post, by the way, was the catalyst for all the hype.
Participants of the crypto-community and crypto-companies strongly criticize the statements of environmentalists. Their main argument is the active use of renewable energy for mining operations, which stimulates the global development of green energy sources, as well as the release and circulation of environmentally friendly cryptocurrencies with a zero carbon footprint.
In general, passions are running high: environmentalists are protesting and the crypto community is opposing. Let’s try to understand how things really are.
What is the vector of movement towards sustainable cryptocurrency mining?
The natural factor for the mining industry to stay afloat and grow is to find cheap energy resources. Bitcoin has a finite supply that halves miner compensation every four years, so mining companies are constantly looking for energy-efficient mining methods.
Mining regulations and environmental requirements increase tax pressure, the amount of investment required, and operating costs.
Bitcoin mining companies are also aware that as public interest in the green agenda increases, they will be able to attract additional sources of funding if they move in this direction.
The impact of environmental regulations on mining and the companies’ desire to remain competitive has now resulted in the following figures 40% to 70% of the energy used by miners comes from renewable sources. In fact, mining companies are physically moving their technical capacities from one region to another, depending on the seasonal fluctuations of renewable energy sources. For example, during the rainy season, they locate in areas rich in hydroelectric power, while at other times of the year they switch to wind, geothermal, or other types of energy.
Nick Carter, renowned economist, cryptocurrency expert and co-founder of Coin Metrics, in response to concerns about how mining affects carbon footprints and that CO2 emissions from bitcoin mining will trigger global warming, argues that the link between cryptocurrency energy use and carbon is weakening year by year. In his opinion, advanced companies see the future of mining with an ecological approach, so the situation with the negative impact of the crypto sector on the environment cannot develop.
Professionals in the industry are creating specialized associations, such as the Crypto Climate Accord or the Bitcoin Mining Council, whose mission is to innovate in mining to reduce energy costs by switching to renewable sources and reducing the carbon footprint.
Large mining companies purchase CO2 emission allowances and allocate funds to environmental projects that reduce greenhouse gas emissions and create renewable energy generation capacity.
In this way, the major players in the sector act as a single buyer of energy, creating all the conditions for the deployment of clean energy generation capacity. In addition, the rapid development of blockchain technology itself stimulates the creation of more productive equipment with lower energy consumption.
By the way, over the past decade, the normalized cost of wind and solar energy has dropped significantly. Wind energy has become 70% cheaper and costs in the range of 2-5 cents per kW*h, while solar energy has become 90% cheaper at 3-4 cents per kW*h. While the cost of energy from fossil sources is more expensive (ranging between 5-7 cents per kW*h). In addition to mainstream green energy sources, alternative new directions are also being developed, such as energy from waste, harnessing ocean thermal energy, recycling associated gas used for cryptocurrency mining, or burning tires.
All of these measures increase the efficiency and sustainability of mining.
Comparisons with other industries are also instructive. Let’s look at some figures from the Galaxy Digital report.
Annual energy consumption by sector:
- Bitcoin Mining — 113.89 TWh;
- Gold production — 240.61 TWh;
- Banking — 263.72 TWh.
Critics do not always accurately, and often biasedly, compare the energy costs of mining to other sectors of the economy because they use incomplete data. Bitcoin has been accused of being environmentally unfriendly while turning a blind eye to complete information about other sectors. The above data took into account the aggregate of most energy-consuming activities of banks (bank branches, ATMs, payment systems, data centers, etc.) and gold mining companies. Therefore, according to analysts, it is this data that is as close to relevant as possible, despite the limited access to information.
Bitcoin mining has long since outgrown the stage of “home enthusiasts,” and the niche is now tightly occupied by multi-billion dollar corporations and high-tech farms with massive computing power. However, it is quite difficult to accurately calculate the carbon footprint of cryptocurrencies. It is estimated that bitcoin’s annual carbon footprint is about 70-90 million tons of CO2, which is about 0.2% of the world’s carbon emissions. And yes, these numbers can be compared to the emissions of individual small nations. Like Sweden or Ukraine, for example.
But here we need to take into account the contribution of the first cryptocurrency to the global financial systеm, which can be talked about endlessly. And also its aspiration to become more environmentally friendly, backed by real actions. Today, more than 50% of the energy used to mine BTC comes from green, renewable sources. According to MMR analysts, the green mining trend will capitalize at least $18 billion by 2029.
The reduction of environmental damage is also positively influenced by “carbon reporting” and the development of the regulatory environment. Companies are being audited for “sustainability” and receiving certificates of compliance, which improves their image and interaction with regulators.
There are precedents in the history of mining companies related to environmental compliance requirements by regulators. And now the IMF is considering a global tariff increase for bitcoin miners.
The proposal was made in August of this year. It involves increasing the cost of electricity for mining companies worldwide by 85% in the form of a direct tax. IMF experts believe that this measure will only significantly reduce carbon emissions through a competent fiscal policy. According to the forecasts of the fund’s economists, direct taxes will serve as an additional measure to force miners to reduce emissions by about 100 million tons, and the funds received will be able to provide 3.5% of global electricity consumption. The economists also emphasized the need for coordinated global implementation of the tax. This will eliminate the risks of relocation of production facilities and companies to more favorable jurisdictions.
Conclusion
We see that the arguments of critics are often exaggerated and superficial. The issues of blockchain network principles, the functions of miners and the energy consumption structure require in-depth study before making judgments.
Companies, crypto-enthusiasts and academics are aware that bitcoin’s energy efficiency is far from ideal. However, compared to other areas of human endeavor, it looks pretty good.
Also, to stay afloat, mining companies need to minimize costs. And cheapening renewable energy sources are exactly the solution to this problem.
So, most experts’ opinions are inclined to the fact that the positive future of sustainable cryptocurrency mining is predetermined, and we will still witness it.
Thank you for your attention. Invest safely and profitably!
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