A few weeks back I attended SF Climate Week Panel: How Bitcoin Mining Helps Build A Clean Energy Future.
Almost everyone has seen some headline or story on how bitcoin is bad for the environment with its power consumption in order to keep the network secure. Prior to attending the meetup, I had already been well versed in how bitcoin is actually beneficial for renewable energy, providing load balancing for the renewable grid and capturing stranded energy. (A good example of stranded energy is capturing the flared gas from oil rigs or burning methane from waste dumps.)
What I didn’t know is that power hog status has shifted to a newcomer on the scene. One that’s not only hungry for power, but is also offering huge financial rewards to energy providers–way more profitable and quicker than bitcoin mining offers on a short term basis. That power hog or, “locust” as one of the panelists referred to it, is AI. Why? Generating those fascinating answers or creative content from your preferred AI app requires power hungry AI servers in centralized data centers. This demanding new kid on the block is taking over power like a swarm of locusts on a Midwest wheat field.
Just today I read the headline: Bitcoin Miner Core Scientific Surges After AI Deal, Report of Over $1B Buyout Offer From CoreWeave. What they are buying is access to power and time to market. I believe we’ll see a lot of shakeup in the bitcoin mining space or integration that includes AI servers with bitcoin mining centers in North America. This is ultimately a good thing in my opinion which I will explain later.
First, let’s look at just one example of the power required of a typical Google search and how that compares to a ChatGPT response from zero hedge:
The economics are such that in order to be profitable, typically a bitcoin miner needs a power supply of .04 cents per kilowatt hour. Comparatively, AI data centers are buying contracts that pay $1.20 a kWh. This is highly disruptive on a number of fronts: notably bitcoin miners will be squeezed by AI data centers as competition for energy sources heats up.
As a result, the next two years will see a dramatically different mining space from what we see today. Bitcoin miners will be forced to seek out the cheapest possible energy or use available energy during AI downtimes. (Only If there’s ever a downtime for AI.)
How could this possibly be a good thing for bitcoin and renewable energy? Unlike AI, which demands near constant energy in a centralized location, bitcoin can be powered up and down at will in a decentralized manner. In other words, bitcoin miners can deploy renewable energy excesses in remote areas, such as hydro, wind, or solar, to reduce the cost of their energy needs. The excess or stranded energy generated by bitcoin mining could be multi-purposed for uses such as heat sources for industrial, personal, or farming needs. Ultimately the upside is that the network becomes much more decentralized and secure as well as acting as the “Dung Beetle’’ for renewable energy according to the same panel.
I don’t think anyone had this competition for energy on their bingo cards last year including yours truly. You can watch the entire panel discussion here including my question that led to the title of this blog post at the 1:05 mark. Also of interest on the subject is at the 37 and 39 minute marks.
All the best,
Jim
