A virtuous circle: Bitcoin & energy
Much has been said and written recently about the energy used for operating Bitcoin. Many articles were published in mainstream media channels accusing Bitcoin of consuming too much energy, as if it were something bad or harmful, without paying too much attention to why Bitcoin needs the energy to operate just as any other industry requires it. Nobody ever criticized the aluminum industry for using vast amounts of electrical power in its production, although that alone consumes several orders of magnitude more than Bitcoin does.
The new global monetary network has been built in a very difficult way to counter since it is open and decentralized, so no single point of control can be attacked. The network operates with nodes distributed worldwide in different physical and virtual locations, making an actual attack very complicated. So the enemies of Bitcoin opt for social attacks, trying to convince the general public that Bitcoin is, among other things, bad for the environment and should not be used. They take advantage of the discourse of environmentalism, which is very popular these days, to make people see the network as harmful to the climate and try to undermine its use with that excuse. These attempts are repeated year after year, but the only thing they achieve is more attention paid to Bitcoin and more dimension taken of all the benefits that the new global monetary network brings to societies around the world.
Economists, engineers, mathematicians, and even philosophers today have a thesis on Bitcoin in their work area because the subject can no longer be alien to them. It is, for better or worse, on everyone’s lips every day, making each person take a position on the matter when consulted. This requires studying the subject in more depth to be able to issue an informed opinion. It is in that process that the truth finally emerges.
Bitcoin makes perfect use of the energy it consumes.
When people start studying Bitcoin to understand its implications, what they discover leaves them amazed and wanting to continue investigating because the benefits and the diversity of possibilities that Bitcoin opens up fascinate any curious mind.
It is then that the issue of energy consumption is seriously addressed, and it is discovered that the use of resources by the network is not only NO different from that of any other industry but is comparatively negligible compared to the services that Bitcoin offers to humanity. Not only this but also Bitcoin mining provides an exciting way of balancing electrical power distribution networks, making them more secure, efficient, and stable. Furthermore, the kind of incentives proposed by the Bitcoin network is aligned with energy savings and with the use of renewable resources.
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Those who are dedicated to Bitcoin mining, that is, the process of confirming transactions in new blocks, are the ones that consume energy because the consensus protocol forces them to carry out a proof of work (PoW) to gain the right to write a new block of transactions to the Bitcoin database.
Why would anyone incur the economic cost of paying for the energy needed to do this?
Basically, because what they receive in compensation for the work done (new units of Bitcoin) have more value than the money invested in energy and infrastructure. If the results of this economic equation were not positive, the miners would lose and go bankrupt. Therefore it is clear that many people in the world place a value on Bitcoin that is so important that other people are willing to invest a lot of money in equipment and energy to obtain it.
Nobody dictates the price of Bitcoin, it emerges from the purest supply and demand market.
Now, the less the miner pays for energy, the higher the profit. This means that miners are always looking for the cheapest possible energy sources. And what are the most affordable energy sources? Those that do NOT require permanent use of fuels that are difficult to extract from nature — renewable sources: hydraulic, solar, wind, geothermal, tidal, etc.
Bitcoin incentivizes renewable energy sources.
Incorporating more renewable energy generation facilities into distribution circuits poses severe stability problems in electricity networks since these sources are unstable by definition (the sun does not shine all the time; the wind is not constantly blowing), added to the fact that demand is not stable either (domestic and industrial consumption increases or decreases depending on various factors) makes network stabilization a tremendous challenge for distributors.
Large-scale Bitcoin mining facilities help with the solution.
The unique property of Bitcoin mining equipment, being turned on or off entirely or in sections almost instantaneously, makes it an ideal equalizer for power distribution networks fed from different sources.
When generation is at its peak and dramatically exceeds demand, miners bring more rigs online instantly, absorbing excess generation. And conversely, when the demand is higher than the generated energy, miners can shut down entire sections of their operations, immediately balancing the system. This service is vital for distribution companies, so they are willing to pay for it. Although they do not actually pay the miners, they offer them energy packages for longer periods at a competitive price in exchange for the service of “balancing” the network. This cooperation is brand new and is currently in full development, mainly in the state of Texas, United States.
It is to be expected that electricity distribution companies will end up installing their own mining operations or that Bitcoin mining companies will end up having their own renewable power generation plants and selling their surplus to the grid, as is already being observed in some cases.
Another very cheap energy source is the unused one. There are cases where the energy source is wasted because it is a by-product of another energy resource, and this is the case for natural gas wasted in remote oil wells. Any oil extraction operation is associated with the natural gas accumulated in the same field. In most cases, this gas ends up wasted and vented, as it is not economically viable to bottle and/or transport this gas (methane) because of the inaccessible location. Then, it is released into the atmosphere with terrible environmental impact. Over time, with an understanding that burning methane into carbon dioxide (CO2) is less harmful than releasing it, they started to “flair” the gas, which continues to be done today.
Oil producers burn down an energy source!
Seeing this situation, Bitcoin miners immediately concluded that they should take advantage of this resource in-situ since this gas is practically a free energy source! And this is how today, there are more and more Bitcoin miners at the foot of each oil well, taking advantage of wasted natural gas, converting it into electrical energy, and, at the same time, contributing to improving the quality of the air we inhale.
These processes are also very recently implemented, and they are currently under development. It is expected that oil exploration and extraction companies will end up installing their Bitcoin mining equipment to take advantage of the new emerging business.
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As we can see in the development of events, Bitcoin is far from being harmful to the environment, and the evolution of the new research being carried out these days to expand the frontiers of this technology further give us new hopes for the future of Bitcoin and the environment.
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