Six Surprising Ways Bitcoin Mining Benefits the Environment, and more

1. Six Surprising Ways Bitcoin Mining Benefits the Environment

Most people believe Bitcoin only pollutes the environment, courtesy of endless literature discussing its negative implications. However, new studies suggest otherwise; Bitcoin is on the front line in the fight against climate change. Here are six interesting ways you might not know Bitcoin mining benefits the environment.

1. A Leading Customer for Renewable Energy

Its often argued that Bitcoin mining is detrimental to the environment because it mostly depends on energy from sources that pollute the environment. For instance, Cambridge Centre for Alternative Finance claimed coal to be the leading energy source for Bitcoin mining but also admitted their research had not included off-grid mining. Instead, hydro at 23.12% is the biggest source of energy for all Bitcoin mining, as noted by Batcoinz.

When you consider that Bitcoin mining is a power-intensive venture that gets more competitive with time courtesy of Bitcoin halving, you realize that miners need ways to reduce costs and stay profitable. Integral in this clamor for profitability by Bitcoin mining companies is reducing power costs which is feasible with renewable sources. This explains why Bitcoin has become the highest user of sustainable energy (52.6%), overtaking sectors such as banking, industrial, Gold, and Agriculture, according to a study by Batcoinz.

2. Helps Manage Excess Energy Supply

Power oversupply doesn’t in itself harm the environment. In fact, it could be beneficial as it ensures a stable and reliable energy grid. However, the solutions implemented to manage excess electricity threaten the environment. The common response is curtailment; renewable energy sources, often plagued with irregular production, are closed. This inherently leads to a lost opportunity to reduce reliance on fossil fuel-based power.

The environmental impact of excess electricity supply squarely depends on how it is mitigated. Bitcoin mining can utilize excess energy, hence reducing curtailment and waste. Renewable energy sources will not have to be shut down during excess power production as Bitcoin miners will utilize the energy.

On the other hand, during normal power production periods, the Bitcoin mines can be easily regulated or shut down to allow substantial energy on the grid. Hence, the opportunity to reduce reliance on fossil fuel-based power is maximized.

3. Great Solution for Power Under-supply

Power undersupply is equally not great for the environment. Likewise, its consequences can indirectly contribute to environmental concerns. First, it increases our reliance on fossil fuels. During power undersupply, conventional power plants (coal and natural gas) are activated to meet the demand and exacerbate greenhouse gas emissions.

Secondly, when power undersupply leads to localized blackouts or outages, backup power sources like diesel generators may provide temporary electricity. These generators emit pollutants and greenhouse gases, contributing to air pollution and climate change.

Bitcoin mining is a great solution to managing periods of power undersupply by acting as a demand response technology. In essence, whenever peak demand periods occur, and the power grid is constrained, the Bitcoin mining operations, courtesy of their flexibility, can reduce their energy consumption and the energy redirected to other critical needs. So power stations get the confidence to maximize renewable energy generation, knowing their supply will always be met.

4. Effective Peak Load Management Solution

Peak load management involves several strategies and measures employed by power stations and grid operators to manage the highest levels of electricity demands. Peak load occurs when there’s a significant increase in electricity consumption, which can strain the power grid leading to outages and instability.

Often, power utilities build gas peaker plants (engines or turbines that burn natural gas) to provide a temporary supply of extra energy during these periods. These plants are expensive and less environmentally friendly. Other mitigation measures include smart grid systems, demand response programs, time-of-use pricing, and typical energy storage utilities.

Bitcoin mining operations are flexible in adjusting energy consumption based on the grid demand. During peak load periods, load shifting from mining activities frees up electricity for critical uses. This offsets the need for gas-peaker plants.

5. Solution for Methane Emissions Reduction

According to an Australian Academy of Science research, methane is 30 times more impactful to global warming than carbon dioxide, the most prevalent greenhouse gas.

The largest methane emissions sources are agriculture, fossil fuels, and waste, including landfills. Many solutions have been suggested to reduce methane from the atmosphere, as the UNEP targets a 45% reduction by 2045.

No solution, however, comes close to what Bitcoin mining can achieve; a 23% reduction of all global methane emissions, as per a study by Batcoinz. This is possible if Bitcoin energy needs can be met by combusting methane from methane collectible sources such as landfills, flared gas from gas plants, and biogas from intensive agricultural activities.

Two Bitcoin companies (NodalPower and Vespene Energy) are using energy from the combustion of methane acquired from landfills. More Bitcoin mining companies are innovating similarly to stay profitable.

6. Resolves Time of Day Curtailment

Time of day curtailment is the reduction or restriction of electricity generation intentionally to reduce oversupply or as a result of energy production factors. Renewable energy sources such as solar and wind are often subject to fluctuations in production due to changes in weather conditions, affecting their energy production factor. Solar energy, for instance, cannot be generated at night. Also, during periods of high power generation met with low power consumption, deliberate curtailment is enacted for the grid’s safety.

Bitcoin mining provides a solution to time-of-day curtailment by absorbing excess electricity generated during high periods. Miners can strategically operate their mining equipment to complement the energy supply, fully utilizing power from renewable energy sources and reducing wastage. Consequently, Bitcoin mining gives renewable energy plants the stability they need to run without any curtailment, making them reliable and great alternatives to fossil fuel energy plants. And with less reliance on the latter, the world breathes more.

2. Bitcoin Miners Face ‘Stress Test’ in Next Halving: JP Morgan

Bitcoin miners will face headwinds as the hash rate reaches new record highs ahead of the upcoming halving event next spring, with volatile electricity costs and competition among miners pushing up the cost of production, according to analysts at global financial giant JP Morgan.

Hash rate refers to the computational power used to mine a cryptocurrency. The halving event, which occurs roughly every four years, will reduce miners’ rewards by half.

“The upcoming bitcoin halving event in April/May 2024 could be a stress test for Bitcoin miners,” writes JP Morgan analyst Nikolaos Panigirtzoglou and colleagues in the firm’s latest Flows and Liquidity report, which the firm shared with Decrypt.

“[It] would reduce the issuance rewards from 6.25 to 3.125 BTC, implying a reduction in miners’ revenue, effectively increasing Bitcoin’s production cost at the same time,” the report explains. “As a result, while Bitcoin halving is seen as having a positive effect on the bitcoin price given the production cost acted historically as a floor, it poses a challenge for bitcoin miners.”

According to the analysis, and based on a global average cost of electricity of $0.05/kWh, it costs around $20,000 to mine a Bitcoin, which is currently worth around $30,000, per CoinGecko. But JP Morgan said the volatility of the hash rate points to the use of a variety of energy sources, meaning miners with access to lower-priced power have an advantage.

In fact, the company said, a one-cent increase in the cost per kilowatt hour translates to a $4,300 increase in the cost of Bitcoin production.

“Post halving this sensitivity would double to $8,600, thus increasing the vulnerability of higher-cost producers,” the firm noted.

There has been some good news for miners, however.

“Institutional interest in bitcoin mining has provided support to struggling miners, with investments in mining rigs from companies like Galaxy Digital and Grayscale Investments,” it observed. Galaxy Digital recently acquired Argo Blockchain, and Grayscale spun off an entity focused on Bitcoin mining hardware.

“Tether, the world largest stablecoin issuer, also plans an investment in a bitcoin mining site in El Salvador,” according to the report.

Nonetheless, the price of Bitcoin and transaction fees will need to rise significantly to offset the lower block reward.

JP Morgan also observed that “the decline in hype surrounding cryptocurrencies poses an additional challenge for miners’ revenues,” including “the decline in the hype around Ordinals.”

The number of daily Ordinals inscriptions recently hit an all-time high, but Bitcoin fees did not sustain earlier highs along with them.

“Going forward, it seems unlikely that the Bitcoin hash rate will continue to rise at the same pace post the April/May 2024 halving event without any sustained rise in the Bitcoin price above its production cost or a large increase in transaction fees that could offset the reduction in issuance rewards,” JP Morgan concluded.

3. Bitcoin’s Carbon Footprint: A Call to Arms for Banks and Asset Managers

Bitcoin’s Carbon Footprint: A Call to Arms for Banks and Asset Managers (Provided by Finance Magnates)

As the global need for clean energy solutions and eco-friendly practices grows, leading environmental organization Greenpeace has released a new report urging banks and asset managers to influence bitcoin to tackle its significant pollution issue. Has been done,

The Financial Structure Behind Bitcoin

“The report focuses on nine major financial institutions that are providing the glue holding the bitcoin ecosystem together,” says Joshua Archer, who leads the bitcoin campaign for Greenpeace USA.

According to Archer, these financial giants have an important responsibility that they are not currently taking with the seriousness it deserves. They are the invisible pillars that hold the bitcoin network together, and their influence can be crucial in addressing the cryptocurrency’s environmental issues. The institutions in question, which include industry giants such as BlackRock, Vanguard and JPMorgan Chase, collectively hold controlling shares in bitcoin mining companies worth a fortune. More than $1.35 billion by April 2023, according to a Greenpeace report.

Bitcoin: The dark side of cryptocurrency

While cryptocurrencies have revolutionized the world of finance, they are not without their disadvantages.

Bitcoin, the largest of these digital currencies by market capitalization, is also the most polluting. This substantial carbon footprint is not only a result of its size, but also the energy-intensive nature of the blockchain transaction verification process.

Bitcoin miners operate data centers filled with specialized machines that work tirelessly to solve complex puzzles – a process that consumes enormous amounts of electricity and produces significant carbon emissions. Banks named in the report include JPMorgan Chase & Co.

Recognized as a leading bitcoin supporter. The financial powerhouse controls shares in 17 bitcoin mining companies, which were worth more than $26 million in April 2023. In addition to its substantial investments in bitcoin mining, the institution also offers a range of products and services designed to help clients invest in the controversial digital currency. The Greenpeace report paints a vivid picture of the potential impact of these financial institutions on the future environmental impact of bitcoin.

It is an urgent call to action, urging those in power to acknowledge their influence and steer bitcoin towards greener practices. If taken care of, the financial industry could play a decisive role in curbing the pollution problem associated with the world’s leading cryptocurrency.