Despite the heated rhetoric surrounding Bitcoin and its energy consumption, some concrete initiatives are refocusing the debate. More and more concrete projects are emerging, notably to transform certain highly polluting waste into a valuable asset. While some will see this as yet another capitalist venture, pragmatists and professionals will seize the opportunity (at all levels) that Bitcoin represents for the energy sector.
Lighting the fire
Gas flares are facilities found at mining sites that extract natural gas. Gas flaring is the direct burning of unwanted gas from the extraction process. For more than 100 years, the mining industry has not found a better way to dispose of this waste. If all this gas was released without combustion, the environmental and atmospheric impacts would be even more disastrous.
This technique has persisted ever since, because it is a relatively stable – albeit polluting – way of disposing of gases that are “unattractive” to the operator. To put it plainly, the operator has little interest in spending large sums of money to isolate, treat, transport, and sell these associated gases. He therefore releases them into the atmosphere after combustion. This technique is nevertheless useful because it allows the pressure of the installation to be evacuated. This is a crucial issue to avoid any incident on the site.
According to figures quoted by the World Bank, 142 million m3 of associated natural gas were burned in 2020. This is equivalent to 400 million tons of CO2 released in one year.
According to the World Bank, the cost of stopping flaring would be $100 billion. Indeed, operators would have to collect, process and distribute this natural gas. To borrow a phrase dear to the maximalists, it could be that “Bitcoin fixes this”.
Bitcoin: Arsonist or Fireman?
The Bitcoin network needs a lot of electricity for its security. A “massive argument” according to its detractors, but to stop on this simple fact, without further research, does not allow to judge its contribution. For the facts only begin here.
Among its virtues, Bitcoin has the ability not to discriminate between the electricity it uses. It can use them all. The “good” as well as the “bad” ones, as was the case for a long time in China with coal mines. The latest CoinShares report demonstrates this and reaffirms this principle inherent in Bitcoin and its design.
The network can be set up just about anywhere. A simple container with mining equipment is all that is needed. The whole thing connected to an off-shore station or a land-based site can thus turn a loss into a gain. Because the current loss is on all fronts: economic, environmental, sustainability. Bitcoin can have it both ways.
Using Bitcoin nodes to make what is still waste profitable will revolutionize the energy industry. And the first big players like Conoco Philipps are emerging. They are following the path initiated by the pioneers only a few years ago. Bitcoin may prove to be one of the missing links in financing the green transition.
Mining Bitcoin instead of burning money
As soon as money and economic incentives come into play, the most bitter opponents of x or y cause become immediately more nuanced. Indeed, in a market- and consumption-oriented society, the latter is market- and consumption-oriented. In view of the economic opportunities offered by bitcoin mining, it is a safe bet that professionals in the energy sector will enter the chain. Either by opening their own mining subsidiary to tap into their resources, or by hiring specialized companies.
Neither Brent Whitehead nor Matt Lohstroh would disagree. These two Texas A&M University students were among the pioneers of green mining in 2019. Whitehead is an engineer whose ancestors also worked in mining, while Lohstroh is a finance major who is “obsessed with Bitcoin” as reported by CNBC.
With a container full of thousands of miners powered by electricity from gas wells, Giga Energy Solutions is creating an economic incentive to turn waste into a valuable product. Mining waste that generated $4 million last year, thanks to this innovation:
- the operator resells a polluting and abundant raw material, which until now has been burned
- the miner obtains inexpensive electricity to power his machines
- the miner valorizes an energy that is difficult to access, that no one else could exploit “as easily” as him
- both parties benefit economically, as well as helping to reduce the air pollution associated with the industry
Bitcoin can become the spearhead of clean energy
If this sentence scares you at first, you’re in the right place. Perhaps even at the right time… Massively denounced for its undeniable energy consumption, the Bitcoin network can assume this defect and at the same time serve as a pivot towards green energy. Indeed, the energy transition wanted and proclaimed at each G8 or Davos forum requires money. A lot of money.
If gas flaring is an example of a concrete use of Bitcoin for the good of all, there are others, just as significant. The example of Sebastien Gouspillou (CEO of Big Block DC) in the Virunga Park is one of them. This entrepreneur from Nantes specializes in Bitcoin mining, find out more about his job in his interview with the Journal du Coin during Surfin’ Bitcoin 2021.
As a professional in the energy sector, he repeats to anyone who will listen that miners are largely uninterested in carbon-based energy. Thanks to the agility enabled by the Bitcoin network, they can adapt to the four corners of the world to harness the cheapest electricity possible. Yes, electricity is the lifeblood, the real raw material for these companies.
Installation of bitcoin miners powered by a hydroelectric plant in the Virunga Park in the Democratic Republic of Congo
Installation of bitcoin miners powered by a hydroelectric plant in the Virunga Park (Source: twitter @SebGouspillou)
And for Sebastien Gouspillou, the cheapest electricity is the one nobody wants or can use. His mining machines connected to a hydroelectric plant in the Virunga Park (Democratic Republic of Congo) are therefore powered by clean energy. Not enough to boil the oceans, then…
Bitcoin is meant to fund renewable energy, not hinder it
The intervention of Bitcoin miners is not only beneficial for those who get cheap energy, but it benefits the development of the entire region. The infrastructure to use all the electricity produced is not yet in place. This means that they are producing at a loss, as is the case with many facilities around the world. The miners provide the plant with a steady income to amortize the basic investment before a mature market is present.
Locally, domestic demand is not yet developed. The dam and power plant operators are surely happy to sell production that previously was not. Once the domestic electricity network is more complete, producers will have more customers and will theoretically increase their prices (cf. law of supply and demand). Electricity will become less cheap for the miner.
The consumption will then go back to the local population and the miner will go away, selfishly and with a capitalist purpose, to support other non-carbon projects. Green capitalism?
Access to electricity is a fundamental issue in the Democratic Republic of Congo and the infrastructure to distribute it must be developed. This is time-consuming and expensive. Bitcoin can help address this challenge.
Bitcoin can participate in and support both transition and energy development projects by providing an economic incentive to each stakeholder. The grid’s need for electricity is certainly considerable, but the ayatollahs of ecology don’t seem to care about the tens of thousands of liters of water needed to make a single pair of jeans, or the ecological balance sheet of the banking system. Yet these are also energy-intensive industries. But Bitcoin has the seeds of innovation in it, and its concrete uses are only just beginning to emerge.