Bitcoin Doesn’t Incentivize Green Energy

A Rebuttal to CoinShares’s November 2018 Mining Report

The cryptocurrency community loves a good narrative: “Fat Protocols Thesis;” “Bitcoin as a Store of Value;” “Miner Death-Spiral” — the list goes on. Spurred on by a recent CoinShares report on mining trends, Bitcoiners have taken to arguing that the network’s energy demand has a net-positive environmental impact. Their reasoning is that, as energy buyers of last resort, miners have been drawn to cheap renewables in otherwise hopelessly remote locations: “stranded assets.”

… further studies may yet prove that, at least in terms of the environment, not only does cryptocurrency do no harm, it could actually be doing good… Bitcoin mining may in fact be acting as an electricity buyer of last resort.

— Pg. 10, The Bitcoin Mining Network

This reasoning incorrectly assumes a) that renewable energy implies carbon-free and b) that energy markets operate as free markets. Miners cannot chase after curtailed energy for free, nor do they have any market incentive to pursue environmentally-friendly operations. This post will demonstrate how the…