Energy-intensive crypto mining is not an ideal candidate for sustainable energy despite the increased focus on using renewables in this sector, according to Alex de Vries, creator of the Digiconomist website tracking crypto's energy consumption.
The move towards using more renewables in Bitcoin Mining came in early June with the establishment of the Bitcoin Mining Council with help from Tesla CEO Elon Musk to promote energy usage transparency and "accelerate sustainability initiatives worldwide."
Twitter CEO Jack Dorsey also took to this cause on June 5 with the announcement of a new $5 million investment in Bitcoin mining using renewables for his American financial services company.
On June 9, El Salvador became the first country to accept Bitcoin as its official currency. On the same day, the country’s president Nayib Bukele instructed state-owned geothermal companies to mine Bitcoin using 100% clean, renewable and zero-emissions energy from geothermal sources.
However, hydropower operating in China's southwestern Sichuan province is currently the only major source of renewables in the Bitcoin network, de Vries said.
This hydropower source is problematic outside of the rainy season in Sichuan, as it forces miners to move north to provinces like Xinjiang to generate cryptocurrencies from cheap coal.
The nature of the Bitcoin network, which means millions of devices all around the world are undertaking 150 quintillion processes and calculations every second requires lots of uninterrupted power, de Vries explained.
Other renewable sources like solar energy pose problems with their inability to generate consistent and sufficient power for full-day trading without interruptions of shutdowns.
“Shutting down for any period of time is extremely unattractive for these Bitcoin miners that have only a very short period of time to earn back their investment. In terms of profit maximization, they will always prefer never having to shut down,” he said.
"This makes them the ideal customer for obsolete fossil fuels rather than renewables since these are both cheap and a source of constant power," he added.
- Need for incentives for Bitcoin miners to deter from coal generation
De Vries was scathing of initiatives like the Bitcoin Mining Council, which he claimed to have no real effect due to the absence of incentives for miners to use more renewables.
He stressed the need for heavy subsidization to switch to renewables given the direct competition from miners located in countries like Iran, which has a hydrocarbon-based economy.
He said that caring for the environment is a luxury that cannot be afforded in a competitive market where survival is dependent on paying the lowest rates.
Commenting on the investment of financial services and digital payments company, Square, to build an open-source, solar-powered bitcoin mining facility, de Vries predicts that miners will not be tempted by this strategy as running full time on coal is consistently more profitable than running half time on solar.
"It is also worth noting that no amount of renewable energy will ever resolve the network's sustainability issues when it comes to hardware. A single Bitcoin transaction is equivalent to throwing away an iPhone 12 mini in terms of material weight, which is something that cannot be solved with green energy," he concluded.