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Ignore the headlines – Bitcoin mining is already greener than you think

Is it possible to mine bitcoins (B T c) Using only 100% renewable energy sources and providing the same economic benefits as those using carbon-based sources? The answer is yes, according to Square’s condition Analysis On the cost of renewable energy and their impact on bitcoin mining.

Unfortunately for our industry, Number Of Headlines and Headlines tweets Bitcoin has increased in value in recent months regarding its energy use and potential environmental impact. Increased media scrutiny has led to increased calls for regulatory action and even a proposed bill in the New York State Senate Will give three years of deferment On non-renewable bitcoin mining in the state.

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This is a debate where both sides have a point. Critics are right: Bitcoin mining consumes a lot of electricity. Cambridge Center for Alternative Finance an estimate The total electricity used worldwide by bitcoin miners is an average of 113 terawatt-hours per year. This would put Bitcoin’s energy use between the United Arab Emirates and the Netherlands, two countries with a combined population of around 170 million people, which is certainly much higher. However, the Cambridge Center for Alternative Finance’s recent “Third Global Cryptoasset Benchmarking Study” Shows That 76% of miners are using at least some renewable energy in their operations and that 39% of the energy consumption in proof-of-work mining, such as mining bitcoin, is from renewable sources.

related: Is bitcoin a waste of energy? Advantages and disadvantages of bitcoin mining

Now that we have discussed the energy consumption and carbon footprint of bitcoin mining, let’s try to put those figures in context. Looking at three directly relevant comparisons: the United States electricity grid, the traditional finance system, and gold mining.

Electricity grids, traditional finance and gold mining

Let’s compare bitcoin mining to the electrical grid overall. US Energy Information Administration data Shows That about 20% of US electricity generation for 2020 was from renewable sources. This means that 40% of its energy consumption comes from renewable energy, with bitcoin mining being twice as green as the entire national grid, reflecting the industry’s conscious decision to reduce its carbon footprint.

Moving towards traditional finance, there are two important lenses to evaluate the industry: 1) financing fossil fuel projects and 2) the carbon footprint of the industry. The former is an important part of the discussion, as transferring deposits from traditional financial institutions reduces their ability to fund environmentally destructive activities.

According to the Rainforest Action Network’s “Banking on Climate Chaos – Fossil Fuel Finance Report 2021” released in March, the world’s 60 largest commercial and investment banks have gave $3,80 billion — yes, US$3.8 trillion — worth of funding for fossil fuels since the Paris climate agreement was signed in 2015. Think about it for a minute – Paris Agreement The world’s definitive step towards combating climate change, and yet, the world’s largest banks have provided financing equivalent to Germany’s GDP, the world’s fourth-largest economy, since its signature. For fossil fuels.

For all the old, exaggerated criticisms of bitcoin as a means of money laundering, terrorist financing and many more, the traditional finance industry has an incredible amount to answer as far as using its capital for destructive activities being done.

Given the carbon footprint of traditional finance, Published in May Galaxy Digital “On the energy consumption of bitcoin: a quantitative approach to a subjective question”, which is a breakdown of the energy consumption of bitcoin mining and how bitcoin is often compared in two industries: traditional banking and gold mining. Traditional banking system Analysis Sees the energy consumption of the world’s top 100 global banks, breaking down their energy consumption into four primary categories: data centers, branches, ATMs and card network data centers. Using publicly available data from industry leaders, Galaxy estimates that energy consumption will be approximately 260 TWh per year. This is more than double the energy consumption of bitcoin mining and does not specifically cover the major pillars of the system, including central banks and clearinghouses due to the lack of reliable data sources, suggesting that many may materially exceed .

With its analysis of the traditional banking system, Galaxy’s analysis of gold mining shows what may be only a subset of the industry’s total energy consumption. Using the World Gold Council’s own analysis Implied The 2019 report titled “Gold and Climate Change: Current and Future Impacts”, and limiting the scope of analysis to direct greenhouse gas emissions, greenhouse gas emissions from electricity purchased by gold miners, and refining and Of greenhouse gas emissions associated with recycling, Galaxy estimates that the industry’s electricity consumption associated with greenhouse gases will be 240 TWh per year. At the base level, this means that gold consumes about 85% more energy per year than bitcoin mining. However, given that the Cambridge Center for Alternative Finance has estimated that about 40% of the energy consumption of bitcoin mining is from renewable energy, this means that non-renewable energy consumption of gold mining is 3 compared to bitcoin mining. Is fold.

Bitcoin’s Green Potential

It is not enough to be better than your worst comparisons. To realize our full potential for bitcoin and bitcoin mining, we have to do better as an industry. We believe that the two major levers for doing so are deliberative regulation and industry action, but the inclusion of the former may surprise you. Shouldn’t Bitcoin be filled with people who reject the rules?

The truth is that regulation is neither good nor bad in itself, but it depends on how it is formulated. Thoughtful, specific regulation can give oxygen to an industry by supporting innovation, encouraging good actors, discouraging poor actors and convincing the public. Look no further than the state of Wyoming, where legislators have been working with blockchain industry leaders since 2017 to pass 22 laws that provide a clear and encouraging regulatory environment that has since brought tens of billions of dollars of business into the state. .

Also, overly broad, blunt regulation, like the anti-mining legislation proposed in the New York State Senate, can kill an industry. We look forward to working with regulators to help create a regulatory regime that gives oxygen to the industry while addressing very legitimate public interest concerns at the same time.

related: Once the innovators and regulators work together, the blockchain will thrive

In the end, we come to the stakeholders who bear the greatest burden, but have the greatest potential to transform bitcoin mining into decarbonizing: the industry itself. With an estimated 40% of total energy coming from renewable sources – which is part of the overall electric grid in the US – we should be proud of our progress.

However, we are clear in saying that there is still more to do. We Believe That crypto climate agreement is a great first step. We encourage everyone in our industry to not only sign the agreement and meet their goals of reaching net-zero emissions from electricity consumption by 2030, but to exceed those goals as soon as possible Huh. We believe this will happen, not only because it is the right thing to do, but because those who adopt 100% renewable strategies in the industry will be rewarded.

related: The future of bitcoin mining is green, and Russia has the best chance

The market is the ultimate arbiter of success, and we believe that the era of responsible capitalism is upon us – investors and consumers vote with their wallets, supporting responsible actors, while eliminating those whose actions have negative externalities. Comes.

This article does not contain investment advice or recommendations. Every investment and business move involves risk, and readers should do their own research when making decisions.

The views, opinions and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointegraf.

Dan tollhurst Griffon Digital Mining co-founded in 2020 with a vision to build an ESG-powered bitcoin minor, and looks forward to the day when all bitcoin mining will be done using renewable energy sources. He has deep expertise as a strategy executive in a career spanning five continents from his time at Netflix, The Walt Disney Company and Booz & Company. He holds an HBA and MBA from Ivey Business School at Western University and a JD from Osgod Hall Law School at York University. He spends his free time roaming the parks of London, traveling and cheering on his beloved Toronto Raptors.