Comments on the White House report on the climate implications of crypto mining

  • The OSTP acknowledges that PoW and PoS may not grant identical assurances, and there remains uncertainty as to whether PoS might be a perfect substitute for PoW
  • The OSTP acknowledges the interesting developments in mining with otherwise-flared or stranded natural gas (often released as an unsaleable byproduct of oil extraction)
  • The report meaningfully acknowledges the contributions to grid flexibility miners can offer via participation in demand response programs
  • The report notes the potential to mine with stranded renewables
  • And importantly, the report offers only lukewarm recommendations
  • Presenting virtually no new data
  • Ignoring contributions of industry subject matter experts
  • Relying on the partisan De Vries / Digiconomist
  • Relying on the conflicted Gallersdorfer, Klaassen, and Stoll
  • Citing the absurd Mora et al 2018
  • Urging caution on data while using it recklessly
  • Pushing a “can’t win” approach to miners using renewables
  • Refusing to project Bitcoin’s energy consumption trajectory
  • Making stupid and counter-productive recommendations

The White House presents virtually no novel data

This report is mainly regurgitation of data presented (and in some cases dreamed up) by academia and bloggers. I can tell that the authors have very limited experience with the debates around PoW, or are being lazy in their approach and citing folks willy-nilly, because they cite Mora et al 2018 (genuinely unforgivable) and have an extremely heavy reliance on De Vries/Digiconomist, as well as Stoll, Klaassen, and Gallersdorfer. The Mora reference is shocking. It’s a bit like reading a scientific government report on the history of the moon landing and finding a reference to a conspiracy website claiming that the entire thing was faked.

The White House totally ignores any contributions from industry subject matter experts

So this is to be expected. The OSTP doesn’t cite any of the great work on mining done by Coinshares. They don’t cite Bitcoin Net Zero by Ross Stevens/NYDIG and myself — even though they ask for help modeling Bitcoin’s future energy and emissions profile. They don’t cite Arcane Research, even though the OSTP covers many of the topics where Arcane demonstrates helpful expertise. They don’t cite any of the data aggregated by the Bitcoin Mining Council, which aggregates sustainability data for half of the Bitcoin mining network.

  • The personal blogs of a Dutch Central Bank employee with a widely documented antipathy to the subject matter and a clear anti-crypto motive
  • Non-peer-reviewed content published in the “commentary” sections of journals like Joule and Nature Climate Change
  • Non-peer-reviewed journal content published by authors with a serious, commercial conflicts of interest
  • Non-peer-reviewed journal content written by undergraduates, thrice-debunked in its own journal, widely considered junk science
  • Reports published by a for-profit ‘carbon ratings institute’ listing numerous Proof of Stake cryptocurrencies as clients — indicating a clear anti-PoW bias

Reliance on De Vries / Digiconomist

The De Vries body of work is neither academic, scientific, nor unbiased. He is a blogger who works for the Dutch Central Bank (an anti-crypto institution), an affiliation he routinely fails to disclose on his papers. He maintains an extremely antagonistic outwards stance towards his subject, Proof of Work cryptocurrencies, evident in his tweets. His Digiconomist website is just that — a personal website. It’s a hobbyist project run by an obviously conflicted individual. It’s not academia tier, not even close. His motive and mission is to exaggerate Bitcoin’s climate impact, whether it’s energy consumption, emissions, or e-waste (the White House paper cites him heavily on all three topics), which he does with gusto.

  • Bitcoin Energy Consumption Index: personal blog, not peer reviewed (cited over a dozen times)
  • Revisiting Bitcoin’s Carbon Footprint, with Gallersdorfer, Klaassen and Stoll (2022) — commentary in Joule, no required peer review
  • Renewable Energy Will Not Solve Bitcoin’s Sustainability Problem (2019) — commentary in Joule, no required peer review

Reliance on Gallersdorfer, Klaassen, and Stoll

These three academics (who also collaborate at times with De Vries), also rely on this same trick of getting blog posts published in journals under the “comment” section. Their tactic is actually more insidious, because rather being motivated by an anti-PoW ideological crusade like De Vries, they actually do cash in on their academic efforts with a consultancy called the Crypto Carbon Ratings Institute (CCRI). The basic model appears to be the following: obtain credibility by publishing quasi-academic work lambasting the emissions associated with PoW, and use that to sell ESG-focused reports to help Proof of Stake blockchains [pdf] launder their reputations. These blockchains can then proudly proclaim themselves green (even if a financial consortium happily claiming to be green because it’s NOT Bitcoin is an absurdity), armed with a report from verified academics™ with a track record of publishing on PoW (never mind that many of the articles aren’t peer reviewed).

Citing Mora et al

There’s not a lot of things that can shock me here, but the inclusion of Mora et al as a citation really did surprise me. It’s well-known as probably the worst paper ever written on the topic of Bitcoin’s emissions impact. Entitled “Bitcoin emissions alone could push global warming above 2°C,” Mora et al is a running joke in the mining space.

If only there was a sign that something might be amiss

Deeply conflicted approach to data

The report stresses in many places the uncertainties involved in these estimates. That’s a step forward from the old model of governments simply rebroadcasting lunatic estimates or projections around Bitcoin’s climate impact and using that to set policy.

“Can’t win” approach to miners using renewables

Probably the most frustration portion of the report concerns miners utilizing stranded natural gas or mining with renewables. Basically, the report dismisses all the efforts of miners to decarbonize their operations, laying out extremely narrow conditions in which mining with renewables might be considered acceptable. Suffice to say, I’ve never encountered the government insisting on conditions this stringent to any other buyer of grid electricity. Given that the report considers a full ban on mining in the US, the dismissal of miners’ genuine efforts to decarbonize should be deeply alarming. The OSTP sets them up to fail with a “can’t win” approach.

Real time ERCOT prices show divergences driven by insufficient transmission
  • Bitcoin miners aren’t subsidizing the addition of new renewables in any way. This isn’t true. For instance, Aspen Creek is just one example of a miner that focuses on mining with renewables with additionality, meaning that they are bringing new power to bear, and only consuming part of it.
  • Electricity is geographically fungible; that is, it can be transmitted anywhere at no cost instantly. In reality, power needs transmission and ends up trapped in pockets throughout the grid. Miners buying this power when it is negatively or cheaply priced are directly improving the economics of these renewable installations, and making it easier to justify building more.
  • There are no ancillary benefits to having a flexible load on grid. This isn’t true either. Miners are a uniquely responsive load that can enhance grid flexibilization. Ever more renewable grids need massive flexibility from both the supply AND demand side. Miners can do this better than any other load resource, period. Here’s a great paper explaining this. More flexibility = more renewable penetration.

Refuses to even take a guess on future energy trajectories

While the OSTP House is willing to repeat De Vries’ unscientific fever dreams about Bitcoin’s emissions with no issues whatsoever, they oddly draw the line at projecting future energy usage. This is a really odd move, because doing a back of the envelope projection for Bitcoin’s future energy demands is really very simple, and should be within the reach of the Scientists at the OSTP.

The OSTP recommendations are stupid and counter productive

The report recommends the following:

  • It consumes energy, but it doesn’t matter where that energy is produced
  • It is fully digital, so requires no physical infrastructure aside from electricity, transformers, and a datacenter
  • It is completely interruptible, and can be curtailed fully at any time, so it could be fully offline whenever the grid needs it (a feature that renewable grids increasingly require)
  • Because it’s fully digital, it can be rendered as sustainable as its electricity inputs, and indeed, by most measures, it appears to be more sustainable than any single other heavy industry in the US
  • It renders a service giving property rights to the entire world
  • It buys up low or negatively-priced renewable energy, vastly improving the economics of new and existing renewable projects that would otherwise not be able to monetize
  • If the industry goes away, the infrastructure built could be repurposed for other location-agnostic uses, like the generation of green hydrogen, a key part of the renewable transition
  • It mitigates emissions associated with unavoidable gas flaring, a byproduct of oil extraction
  • It rebuilds a high-energy infrastructure in the heartland of America, laying the groundwork for a desperately needed reshoring of industrial capacity
  • If you ban it, its aggregate emissions will go up. If you embrace it, its aggregate emissions will go down
  • If you ban it, you empower your enemies, like Russia, Iran, Venezuela, and North Korea. If you embrace it, you directly hurt them, and give their citizens tools to free themselves from those oppressive regimes.
  • It represents tens of billions of equity value and offers a massive tax windfall to states that can sell their otherwise unsold energy to the producers of this product

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Partner, Castle Island Ventures. Cofounder, Coinmetrics.io

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Nic Carter

Nic Carter

Partner, Castle Island Ventures. Cofounder, Coinmetrics.io