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Bitcoin Mining Overview

Out of my intellectual curiosity, I began conducting research on bitcoin mining and how it relates to carbon footprint and energy specifically. Throughout my research, I learned that domestic bitcoin mining is growing in the utilization of renewable energy and stranded hydroelectric power. These energy sources are not only more sustainable for the environment but also cheap. Additionally, bitcoin miners are flocking to rural areas, especially where there has been a population exodus.

State Of Bitcoin


As the asset class matures, it’s necessary to review the landscape, provide material insights as well as evaluate who’s best positioned to gain from this technology.

Founded by Satoshi Nakamoto in 2009, bitcoin is the world’s first cryptocurrency. Bitcoin is stored and exchanged securely on the internet through a digital ledger called blockchain. A blockchain is a growing list of records, called blocks, that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. Bitcoin is divisible into smaller units known as satoshis with each satoshi worth 0.00000001 bitcoin.

Originally invented to be “electronic cash,” bitcoin has become a popular investment and store of value often compared to gold as “digital gold.” Owning bitcoin is advantageous for many reasons, including its decentralization and lower fees than other traditional online payment methods. Bitcoin also has the world’s largest market cap compared to other cryptocurrencies and stock-to-flow ratio. Bitcoin has a market cap of $168.3 billion, a volume of $27.2 billion, and a circulating supply of 18 million.

People can own bitcoin by buying it with fiat currency, trading it on an exchange like Coinbase, earning it by creating content, rewarded for playing video games, or you can mine it. The Bitcoin network innately incentivizes stakeholders to contribute computing power to verify transactions by awarding bitcoin to a miner who verifies a block. Mining, as Vox’s Umair Irfan describes, is extremely competitive:

“With the price of a bitcoin right now at roughly $9,000, that’s an award of more than $112,000. This is how bitcoins are “mined,” and with the right hardware and cost inputs, it can be quite lucrative. Blocks are added to the blockchain roughly every 10 minutes.

But mining is competitive, with only one miner winning the award per block. Over time, the calculations needed to verify a block get more difficult and the bitcoin award shrinks. The price is also unstable. Bitcoin’s price peaked at more than $19,500 in December 2017. These factors have created an arms race to develop better computer hardware to more rapidly verify transactions and a push to devote ever-increasing amounts of electricity to the task.” — Vox’s Umair Irfan, Bitcoin is an energy hog. Where is all that electricity coming from?

Bitcoin Mining

Bitcoin Mining Process

Bitcoin mining involves solving proof-of-work consensus algorithms or mathematical equations that secure the network in exchange for new bitcoin. Solving these complex puzzles requires a GPU (graphics processing unit) miner or an application-specific integrated circuit (ASIC) miner — which equates to using a lot of energy.

A hash is the output of a hash function, and, as it relates to bitcoin, the hash rate is the speed at which a computer is completing an operation in the code. A higher hash rate is better as it increases the opportunity of finding the next block and receiving the reward. Often, miners group together into “mining pools” to share block rewards in proportion to their contributed mining hash power.

The Bitcoin network came into existence with Satoshi Nakamoto mining the genesis block of bitcoin (block number 0), which had a reward of 50 bitcoin (Wikipedia). There will only ever be 21 million bitcoin in existence. As Moe Adham stated, “This, by definition, makes it a deflationary asset, as opposed to an inflationary one.” Every 10 minutes, a block of bitcoin transactions is solved by miners and added to the Bitcoin blockchain. There are more than 55,000 nodes, basically computers, running the Bitcoin software to record and validate transactions. This level of decentralization adds to the Bitcoin network’s security and strength. Halvings happen at intervals of 210,000 blocks, which is roughly once every four years. Bitcoin miners currently receive 12.5 bitcoin each time they successfully mine a block. By the end of May 2020 (the next halving), they will instead earn just 6.25 bitcoin. The reward halves again in 2024, in 2028, and every four years after that.

Bitcoin Mining Landscape

An estimation of hash rate distribution amongst the largest mining pools

The majority of mining pools are located in China; Bitmain is one of them. Founded in 2013 by Jihan Wu and Micree Zhan, Bitmain has become the world’s largest designer of ASIC chips. The company also operates and Antpool, historically two of the largest mining pools for bitcoin (shown above.) Bitmain had revenues of $2.8 billion in the first half of 2018 and just filed for IPO. Among the largest mining companies with operations stateside are F2Pool, Bitfury, and Blockstream. Blockstream, which is working with customers including Fidelity Center for Applied Technology and LinkedIn co-founder Reid Hoffman, just announced new bitcoin mining data centers in Quebec, Canada, and Adel, Georgia.

Inside Blockstream’s Bitcoin mining facility in Quebec, Canada.

It’s speculated that more mining will be coming stateside when domestic institutions finally move into bitcoin and for cheaper, more sustainable sources of energy as well as a hedge against Chinese regulations.

Layer1 just raised $50M from Peter Thiel for renewable bitcoin mining which includes running its own power sub-station and purchasing solar and wind energy produced “literally in the middle of nowhere,” Texas. In Washington state, the bitcoin invasion is underway and next door in Oregon, too. Virginia Beach’s new $65 million bitcoin mining facility is among the largest data centers in North America. But some mining operations have been met with friction.

In 2018, in the face of an onslaught of bitcoin mining mania sprouting across the U.S., moratoriums were placed on new commercial cryptocurrency mining operations. In the city of Plattsburgh’s case, the moratorium was established to protect “the City’s natural, historic, cultural, and electrical resources.” Miners are drawn to Plattsburgh, near the Canadian border, for its cheap industrial power, 2.7 cents per kilowatt, from hydroelectric dams on the nearby St. Lawrence River that originally powered industries like aluminum smelting, which have drastically declined. Residents’ heating bills went up 50%, noise from the cooling fans, and there was a concern for the vast amounts of heat sent into the atmosphere. However, in under a year, the moratorium was lifted, allowing miners back into town under new mandates. Colin Read, the mayor of Plattsburgh, New York, said, “A novel aspect of the new local law mandates they have to recycle a certain share of the power or heat generated.” New York state regulators have since made mining operators responsible for paying overage costs.

Environmental Impact

Bitcoin Energy Consumption Index

Key network statistics, according to Digiconomist, include annualized global mining revenues of $6,676,617,261, annualized estimated global mining costs of $3,656,073,069, and current estimated annual electricity consumption of 73.12 (TWh.)

It requires 627 kilowatt-hours of electricity to run the servers needed to verify the ledger on each bitcoin transaction. This emits 0.44 metric tons of carbon dioxide, which requires $5.32 in carbon credits to offset. More than 60% of the processing power used to mine bitcoin is in China. Coal, a significant contributor to human-made climate change, is the largest generator for mining abroad.

The table features a breakdown of the energy consumption of the mining facilities surveyed by Hileman and Rauchs.

There’s conjecture bitcoin’s energy consumption will continue to rise as it grows in popularity and reliant on fossil fuels. Glen Brand, director of a Sierra Club chapter in Maine, said in an interview that the growth of virtual currencies such as bitcoin “threatens progress we are making toward moving toward a low energy, low carbon economy.” However, if the price of bitcoins stabilizes, the Bitcoin network’s energy consumption will steadily fall over the coming decades. The Bitcoin network could easily be upgraded to handle more transactions — potentially a lot more — without significantly changing miner revenues or energy consumption. So it’s not necessarily the case that a growing Bitcoin network will lead to a growing environmental disaster.

A recent Coinshares study indicates that 78% of bitcoin miners utilize renewable energy sources. Furthermore, miners are running a business to maximize profits while maintaining corporate social responsibility.

One method to drive profitable returns is through differentiation. In 2017, PRTI and Standard American Mining built the world’s first waste-to-energy cryptocurrency mine on top of a persistent, renewable energy source that is completely independent of the utility grid — tires. Tire-derived fuels can be burned instead of coal reducing their notoriously-high carbon emissions by 18–24 percent. This is all being done in Franklinton, North Carolina (population size: 2,023). Jason Williams, CEO of PRTI explained, “Many people have tried to create and maintain waste-to-energy processes over the years. Not only have we proven an uncommon track record of driving results, but we have continued to innovate by capitalizing on a new, more profitable monetization strategy than our peers.” Williams and partner, Anthony Pompliano, believe their defensible advantage is in vertically integrating mines with non-traditional, near-zero cost energy sources. Anthony Pompliano, CEO of Standard American Mining, told Vice:

“As we build more and more of these, we’re building computing facilities — cryptocurrency is the most profitable application of this computing power today, but over time there will probably be more profitable applications. We’re less concerned with what label we have and more concerned with building out a distributed computing network at a lower cost than the big guys.”

There are all kinds of methods to harness renewable energy to mine bitcoin. Solar energy is not being used by major mining operations as the dominant renewables powering facilities remain to be hydro and geothermal.

Entrepreneurial blockchain mining project that can generate its own power using green hybrid technologies.

Emerging Ecosystem

In spite of bitcoin’s eco-unfriendly reputation, some organizations, large and small, are using blockchain to power a regenerative agricultural revolution. Mostly, to reverse the flow of carbon dioxide into the atmosphere.

Nori is on a mission to reverse climate change. This startup is building a marketplace on top of a blockchain that pays entrepreneurs to remove carbon dioxide from the atmosphere and store it. Nori is just one of a growing trend in new carbontech startups launching in recent years. A reputable accelerator, Y Combinator, is investing heavily in the carbon removal sector. XPrize recently surveyed carbontech companies, primarily in North America and Europe. They found that more than 250 firms have raised $2 billion in combined investments to capture and use carbon, or permanently store it underground. According to Grist’s Maria Gallucci, “While governments and deep-pocketed energy companies still contribute the most, the funding pool also includes philanthropies and wealthy people looking to accelerate the low-carbon economy.”

Established nonprofit organizations are positioned to benefit most from bitcoin, blockchain, and mining. According to the Urban Institute, the share of noncash asset donations is increasing significantly. The growth is likely connected to the increased use of donor-advised funds, in which the reported value of contributions to donor-advised funds grew by $1 billion between 2016 and 2017. Shena Ashley continues:

“Noncash donations, which include appreciated assets like publicly traded securities, restricted stock, real estate, private equity, collectibles and artwork, and cryptocurrency, has sharply increased as a share of itemized contributions. The latest available IRS data from 2016 shows that noncash contributions totaled $79.5 billion, or 34 percent of all itemized charitable contributions, an increase from $49 billion in tax year 2014.”

Some notable nonprofit organizations have already adopted the technology.

Conservation International, an American nonprofit environmental organization, launched a new option for donations to be received in bitcoin. The website displays, “The technology behind cryptocurrencies will transform conservation. That transformative power can start today: Donate your Bitcoin to help CI protect the nature we all rely on for food, freshwater, and livelihoods.” Conservation International uses BitPay to process donations of bitcoin, which only works with wallets compatible with Payment Protocol, like Mycelium,, and others.

Conservation International Bitcoin Donation

Similarly, the United Nations Children’s Fund (UNICEF) announced the launch of a cryptocurrency-backed fund. UNICEF aims at supporting the development of open-source technology that benefits young people around the world. The Cryptocurrency Fund will “hold and make transactions in cryptocurrency,” specifically bitcoin and ether. UNICEF collaborated across the organization of different teams, including finance, legal, and other technical teams. They also partnered with the Ethereum Foundation. UNICEF has found critical benefits from the technology, such as expanding its network to receive contributions, tracking the flow of resources and transactions more transparently, and improving systems that deliver programs.


Bitcoin mining has high-potential for being a champion for rural communities. Due to their land, proximity to natural resources, and bodies of water, rural areas have been termed “bitcoin mining epicenters” with up to 12 mining centers located in some cities.

In 2017, Fortune reported on a Crescent Electric study about mining costs based on the wattage used by the three most popular mining rigs at the time (the AntMiner S9, the AntMinerS7 and the Avalon 6) and the days each takes to mine a coin (which range from 452 to over 1,800 depending on the machine), then multiplied by the average electricity rate in each state. Below are the five least expensive (rural) states:

  1. Louisiana
  2. Idaho
  3. Washington
  4. Tennessee
  5. Arkansas

Domestic bitcoin mining can be a boon not only for entrepreneurs and investors but also for the mostly rural town areas and its citizens that are cut off from technological development and emerging markets in more urban areas. The surge in mining presents a considerable opportunity for public/private partnerships and organizations that address environmental challenges like climate change and habitat loss. For example, The Conservation Fund could be an excellent partner to these mining companies.

The Conservation Fund is an American environmental nonprofit with a dual charter to pursue environmental preservation and economic development. Since its founding in 1985, the organization has protected more than 7 million acres of land and water in all 50 states, including parks, historic battlefields, and wild areas. The Fund works with community and government leaders, businesses, landowners, conservation nonprofits, and other partners to create innovative solutions that integrate economic and environmental objectives. The Fund also works with communities to strategically plan development and green space and offer training in conservation and the sustainable use of natural resources. The Fund’s services include land acquisition, conservation finance, small green business financing, community and economic development, environmental mitigation services, green infrastructure planning, and conservation training. The Fund works primarily with partners who have identified conservation priorities and request assistance in achieving their goals.

The Domtar Paper Mill nestled next to the Clarion River in Johnsonburg, Pennsylvania. Photo by EcoPhotography.

One example of business intersecting with the environment is the Fund’s partnership with Domtar’s Johnsonburg Paper Mill. Together, they are showcasing how industry can promote environmental protection and create economic vitality for rural communities across the country. The Fund states:

“The Domtar Paper Mill in Johnsonburg, PA is one of the most technologically advanced and efficient paper mills in North America, having transitioned from coal-fired boilers to natural gas. The mill is located near Pennsylvania’s Allegheny National Forest at the headwaters of the Clarion River. In 2018, the Fund acquired nearly 32,600 acres of forestland in the mill’s sourcing district, and we are currently managing this land as a sustainable working forest.”

The wood processed in the plant comes from forests that are sustainably managed, protecting clean air, clean water, and wildlife habitat in the process of harvesting trees.

Bitcoin miners could potentially partner with the Fund and other similar organizations to sustainably manage the land, changing the narrative from bitcoin fueling climate change to fueling the economy. Other services could be used to fund community efforts from a percentage of crypto mined, offset carbon emissions, utilize the Fund’s extensive community partnerships, easements, or more. Bitcoin is a volatile macro asset, but it’s only going to gain more strength, and with that, more need for mining.

Bitcoin mining centers share a similar design as the commercial data centers that we are all familiar with today. Bitcoin mining requires sophisticated hardware and cooling mechanisms to achieve economies of scale. The positives for bitcoin mining data centers compared to commercial or enterprise data centers is that the mining centers are designed only to do one thing. There is no requirement for customers to be located within a two-hour drive to their data center as most traditional data centers require. Bitcoin mining is decentralized, and its customers are distributed across the world. Two servers are equivalent to one furnace in a home.

MiningStore Mobile Mining Container

One company innovating the bitcoin mining space is MiningStore. MiningStore offers hosting, hardware and even mobile mining containers that can be deployed to a customer’s site. The container is available in 20ft and 40ft models and works with natural gas, solar, wind, hydro, and electric. They are currently deployed across the country with Iowa Grundy County Partnership, Biostar Solar Farm Bitcave, Raleigh 6,000 sq ft. Data Center Project and the NBA’s Sacramento Kings where they are mining ethereum for a multi-year scholarship fund.

Bitcoin mining centers might require more power and cooling capacity; however, with bitcoin halving every four years, the energy consumption should fall proportionately.

Bitcoin Energy Consumption Index

While more companies are utilizing renewable energy, the use of bitcoin still produces electronic waste generation the size of Luxembourg, the power consumption of Austria, and a carbon footprint comparable to the carbon footprint of Denmark. This could be a driver to mitigate their footprint or impact on the environment through the Fund.

Investment & Regulation

With every new legitimate cryptocurrency that’s introduced, the Bitcoin network will strengthen. The density will drive production and value up. Through algorithmic technologies, like Project Libra and Coinmine, consumers are gaining unprecedented access to new financial products like never before. Massive exposure to the masses gives bitcoin attention, adoption, and “much needed political momentum.” Regulators and politicians even acknowledge the innovation can’t be killed. According to mainstream media, bitcoin has died over 377 times.

This year alone, Wyoming passed 13 new blockchain laws making it the “Delaware of digital asset law.” More than a dozen other U.S. states and Congress are now following Wyoming’s lead by enacting bills.

Acknowledgment from political figures has taken some time to catch, dragging on regulations, but entrepreneurs will continue to build and facilitate new fundraising mechanisms. In December 2017, the price of Bitcoin peaked at roughly $20,000 on the rise of initial coin offerings (ICOs.) Blockchain startups had tremendous access to capital from non-traditional investors to venture capitalists (VCs) and corporates. ICOs took a significant hit in 2018 and even been declared dead only to see it evolve in 2019 with Blockstack’s token sale becoming the first SEC-qualified offering in U.S. history.

Blockchain Trends In Review

Still, even if ICOs are dead, traditional equity financing has outstripped ICOs in every quarter since Q3 2018. CB Insights stated in a recent report:

“However, given the recent spike in coin market capitalization, it seems unlikely that the space is dead. Traditional venture capital is now seen as a signal of quality, especially coming from smart money investors. And in the world of tokens and cryptocurrencies, confidence is rebuilding and more money is entering the asset class.” — CB Insights

Since 2013, bitcoin has outperformed the S&P 500. According to a Coinbase study conducted with Qriously, investors aged 18–34 are more likely to hold crypto than precious metals in their financial portfolios, 1 in 4 investors with an MBA or PhD hold crypto as part of their financial portfolio, and 77% of investors with higher incomes ($200k+/year) who have cryptocurrency in their portfolio own bitcoin.

Bakkt, a bitcoin futures exchange and digital assets platform founded in 2018 by the Intercontinental Exchange (ICE), set a new daily record of 1,179 bitcoin futures contracts last week. Bakkt will test a consumer app with Starbucks in the first half of 2020. For an extensive overview of the digital asset landscape for family offices and institutional investors, read David Nage’s Market Overview of Digital Assets.

Amidst the U.S.-China trade war, mining companies are diversifying to the United States. CryptoSlate reports, “Squire Mining (SQRMF), a publicly-traded Canadian blockchain company — and one of the largest miners in the world — signed a letter of intent to move over 41,000 ASICs to the United States. The move is part of a deal with Core Scientific, a stealthy A.I., and blockchain firm helmed by former Microsoft COO Kevin Turner. Squire committed $6.37 million to the agreement in hosting prepayments, and Core Scientific intends to spend, at minimum, $12 million on infrastructure to accommodate the relocated equipment.”


Bitcoin, other cryptocurrencies and their underlying technology are likely to become increasingly efficient as they continue to evolve and develop in unison with more government regulation. We are witnessing the installation period of bitcoin, where both financial and production capital is beginning to play crucial roles. Entrepreneurial activity is increasing, and investment is flowing into new areas, creating a turning point, and regulatory changes will be made to facilitate the deployment period. Barry Silbert, Founder & CEO of the Digital Currency Group, believes we are one step closer to bitcoin mining being deemed by the U.S. government as critical infrastructure stating, “Government will then try to bring mining to the U.S. through financial incentives and, perhaps, might get into mining itself. Other governments will, of course, respond by doing the same.”

Coinbase said, “Bitcoin is the world’s first global currency that harnesses the power of computers — and humankind’s innate need to innovate.” Established organizations and carbontech upstarts are transforming conservation through bitcoin adoption. Where most technology occurs in highly-concentrated urban areas, those that may benefit the most from distributed ledger technology could be large environmental organizations, partners, the rural land they conserve, and human society.




Stories and lessons about startups, innovation, diverse founders and those building solutions for diverse audiences.

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Harry Alford

Harry Alford

Institutional Sales, Coinbase Cloud

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