Top Five Energy & Bitcoin Mining Developments of 2022 So Far
Bitcoin Miners Shut Down to Support Texas’ Power Grid
In July 2022, most large-scale Bitcoin miners in Texas shut down so that the state’s power grid could handle the coming heat wave. In other states, this may not have been significant from an energy consumption perspective. Still, Texas is home to mining titans such as Riot Blockchain Inc., Argo Blockchain, and Core Scientific Inc.
President of Texas Blockchain, Lee Bratcher, summarized the situation: “There are over 1,000 megawatts worth of Bitcoin mining load that…[turned] off their machines to conserve energy for the grid…This represents nearly all industrial scale Bitcoin mining load in Texas and allows for over 1% of total grid capacity to be pushed back onto the grid for retail and commercial use.”
We are witnessing in real time the use case that Bitcoiners have been bragging about for years: Bitcoin miners’ flexibility can help power grids more efficiently adapt to consumers’ fluctuating demand.
New York’s Potential Carbon-Fueled Mining Moratorium
In late spring 2022, New York’s Senate passed a two-year moratorium on founding new Bitcoin mining facilities that use carbon fuels. It remains to be seen whether or not Governor Kathy Hochul will sign this bill into law.
During this potential freeze, Bitcoin miners are still free to operate, so long as their energy sources are green.
Not all New York politicians are on board with the temporary ban, as they realize that Bitcoin mining is an economic powerhouse. For example, Senator Jeremy Cooney is not happy with the bill, perhaps because the mining company Foundry is headquartered in his district. However, he suggested that the government study the industry rather than cripple it.
“We don’t want to send a message that we’re closed off,” he said.
Following China’s Bitcoin mining ban, it is clear that governments cannot stop the industry. On the contrary, any ban will only drive them to regions with more favorable laws.
The Great Sell-Off
2022 has witnessed rising energy prices and a crash in Bitcoin’s price. This has squeezed Bitcoin miners from both directions: they are experiencing lower revenues and higher costs. Consequently, many operations have had to liquidate.
Moreover, many miners are selling their Bitcoin to keep their heads above water. In May, Riot Blockchain sold 250 of the 466 Bitcoin it had mined. Marathon Digital, which has not considered selling its Bitcoin since late 2020, might do the same.
Sami Kassab, analyst at Messari Crypto, said that “Many miners took out high-interest loans to fund their mine-to-hold strategy during the bull market…Some of these companies will face liquidations and could potentially go under.”
The latest bear market may result in further consolidation and corporatization of Bitcoin mining. It is becoming ever more difficult for single individuals to run a profitable operation out of their home.
The Responsible Financial Innovation Act’s Impact on Bitcoin Mining’s Energy Consumption
Late last year, it was announced that the Republican Lummis was looking for a Democrat co-sponsor for a bill that would regulate crypto at the national level. Now, Lummis and New York Senator Kirsten Gillibrand have presented the Responsible Financial Innovation Act (RFIA) to the Senate.
Lummis’ office hopes that the bill provides “clear guidance to regulators about which assets belong to different asset classes, protects consumers through strong standards and mechanisms for policing bad actors, regulates stablecoins, and creates a new digital asset self-regulatory organization under the joint jurisdiction of the CFTC and SEC to oversee the digital asset markets.”
From an energy perspective, the bill urges the Federal Energy Regulatory Commission (FERC) to study the environmental impact of crypto mining.
If the FERC heeds this suggestion, they will learn that Bitcoin mining yields benefits to both the energy sector and the environment. For example, Bitcoin mining can push electricity prices lower, since miners can employ electricity that would have otherwise gone to waste during low-demand times.
Bitcoin Mining: Rebranding?
Many leaders in Bitcoin mining seem to have taken criticisms of the industry’s large energy consumption and contribution to global warming to heart. The five largest crypto mining companies are all either developing or already employing renewable-fueled power plants.
Bitcoin advocate Michael Saylor has founded the Bitcoin Mining Council, a network in which industry players exchange ideas about how to increase Bitcoin mining’s sustainability.
Paul Prager, CEO of TeraWulf, said, “Everyone I talk to now is talking about carbon neutrality…The language has changed.”
The wider cryptocurrency community holds that the less energy-intensive proof-of-stake must replace Bitcoin’s proof-of-work protocol. But such a change would rob Bitcoin of the very properties that will allow it to become a global reserve asset. Should the Bitcoin mining industry succeed in ‘greening’ its operations, this line of criticism will be neutralized.
As Bitcoin mining culture shifts, expect exciting developments at the intersection between renewable energy and Bitcoin mining during the second half of 2022.
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