[Bithumb Easyconomy] Companies Plan to Use Renewable Energy to Mine Bitcoin

After inauguration of US president Joe Biden, environmental issues such as climate change, carbon neutrality and renewable energy have gained global attention. ESG, or environmental, social and governance, which insists that corporate management and investments must take environmental factors into account, has been a hot topic of discussions. Meanwhile, the Bitcoin price soared, giving rise to criticisms of Bitcoin by many based on the “Bitcoin=eco-unfriendly” frame. Under such circumstances, the use of renewable energy for Bitcoin mining has been growing.

“Bitcoin uses more electricity per transaction than any other method known to mankind. The more popular digital assets like Bitcoin become, the larger carbon footprint (greenhouse gas generated through activities and processes of production and consumption by individuals and companies) they will leave behind.”

This is what the Microsoft founder Bill Gates said in an interview with a US media outlet. Gates also pointed out that Bitcoin will worsen the climate change issue which has become more crucial than ever before.

Since every Bitcoin transaction is recorded on the public ledger for transparency, mining requires Proof of Work (PoW). Here lies the problem of the need for huge amounts of electricity. Many Bitcoin mining companies are based in China, and most of them are using fossil fuel for electricity.

For these reasons, the Bloomberg columnist Noah Smith and others are insisting that Bitcoin and blockchain must switch to a less energy-intensive security mechanism such as Proof of Stake (PoS). Ethereum 2.0 is in the process of switching to PoS, and many blockchain companies like Tezos and Cosmos have successfully adopted the PoS model. However, while this mechanism is a mid to long-term possibility, its implementation is not easy.

But contemplating more eco-friendly mechanisms is inevitable for major corporations and financial firms to mass-adopt Bitcoin and other cryptocurrencies. The billionaire investor and TV host Kevin O’Leary said in a recent interview that about 10% of institutional investors who were planning to invest in Bitcoin gave up because they were concerned about ESG. This clearly suggests that the negative image of Bitcoin as to its effects on the environment must be changed for more institutions and corporations to invest in it.

But good news is that the industry is already seeing some actions to seek “eco-friendly Bitcoin.” In fact, the use of renewable energy for mining Bitcoin is on the rise outside of China. Hydroelectric power is often used in Canada and the US, and geothermal power in Norway. For example, in Massena, New York where aluminum smelters using hydroelectric power used to be concentrated, companies like Bitmain and Riot Blockchain have settled into old plant sites to start mining Bitcoin using renewable energy.

Also, MintGreen, which has received its first investment from CoinShares last March, is showing efforts to maximize mining efficiency to reduce its energy use. This company is also seeing some by-effects such as being able to mature whiskey and evaporate water from salt field using heat generated from the mining process.

Meanwhile, Argo and DMG agreed late last month on development of a Bitcoin mining pool run solely on renewable energy. They launched the mining project named “Terra Pool,” disclosing that the pool will be run on hydroelectric power only. They also promised as the first companies to produce “green Bitcoin” to present a clear roadmap for minimizing the effects of Bitcoin mining on the environment.

Also, the US investment company Seetee recently announced its plan to utilize its renewable energy assets, meaning their investments in wind power, hydrogen power and photovoltaic power generation, in mining Bitcoin. Jack Dorsey, a co-founder of Twitter and CEO of Square, has also promised to invest 10 million dollars in development of clean Bitcoin mining technology without carbon emission.

Still, a large portion of mining companies are based in China and are relying on coal-fired power, which means the Bitcoin’s environmental harm is far from being overcome. However, the current proactive efforts by the digital assets industry itself will gradually improve the negative perception on the environmental effects of Bitcoin and digital assets.

With such efforts, it is also necessary to promote the carbon emission reduction effect produced by more active market penetration of Bitcoin and digital assets. Bitcoin can replace the large payment networks run independently such as Visa, Mastercard, PayPal, Venmo, ACH, Swift, Fedwire, Western Union and MoneyGram, which can lead to a substantial reduction of electricity consumption and carbon emission.

*This research and analysis material was produced for the purpose of providing reference information based on reliable data and information. However, its accuracy or quality is not guaranteed.

*This material reflects personal opinions which may not be consistent with the company’s official views.