The Energy Consumption and Environmental Impact of Bitcoin (Bitcoin) mining were frowned upon and scrutinized by various international financial institutions. The International Monetary Fund (IMF) mentioned how bitcoin mining consumes “huge amounts of processing power and electricity.”
Bitcoin mining is an energy-consuming process because it is a Proof-of-Work (PoW) blockchain network, providing cryptographic proof to the network that a quantified amount of a given amount of computation has been used. The information used to verify this is stored in a block for inclusion by other participants in the network.
This was announced by Elon Musk, one of the richest men in the world and co-founder and CEO of Tesla, in February 2021 Automakers accept bitcoin as payment for its products and services.
But in May of the same year Tesla discontinued its support for accepting bitcoin payments, quote the company’s concerns about the “rapidly increasing use of fossil fuels for bitcoin mining and transactions, particularly coal.” This also prompted Musk to launch Dogecoin (DOGE) As a better means of payment than bitcoin due to the high environmental cost of BTC transactions.
— Elon Musk (@elonmusk) May 13, 2021
However, a new solution seems to be emerging that has the potential to address the narrative that has permeated the mainstream conscience.
Associated natural gas is a by-product of oil drilling, the volume of which is often outweighed by the cost of transporting it to a refinery, leaving it “stranded” at the well. Therefore, it is often simply flared off at the derrick, earning it the nickname “flare gas”.
On February 17, CNBC reported that oil giant ConocoPhillips is conducting a pilot program in Baken, North Dakota. Instead of burning associated gas, the company sells it as fuel to third-party bitcoin miners.
The idea of using associated gas to mine bitcoin is not new. Back in 2019, Brent Whitehead and Matt Lohstroh founded Giga Energy Solutions, which mines Bitcoin using electricity derived from such gas. The company delivers a shipping container full of bitcoin mining equipment to an oil well and then diverts the stranded natural gas into generators that convert the gas into electricity and use it to mine bitcoin.
Crusoe Energy is another company using the energy from flare gas to mine Bitcoin. The company has grown into one of the biggest players in this space, also receiving investments from one of the oldest cryptocurrency exchanges in the world, Coinbase, and Winklevoss Capital, a company founded by the Winklevoss twins, founders of the crypto exchange Gemini.
A report by Crusoe Energy Systems claimed that using this gas to mine Bitcoin reduces CO2-equivalent emissions by about 63% compared to continuing to flare the gas.
Cointelegraph spoke to Ethan Vera, Chief Financial Officer and Chief Operations Officer at Viridi Funds, a company that provides crypto investments for Bitcoin miners, about the impact of ConocoPhilip’s involvement in the innovation.
Ver said, “While ConocoPhillips is one of the big energy companies to publicly announce its entry into bitcoin mining, there are many other energy companies that have already started setting up mini-test sites. As the economics of bitcoin mining increase and total mining revenue grows on a USD basis, many of the big energy producers will look to get into the space on a larger scale.”
The energy impact of bitcoin mining could be overestimated
According to metrics from the Cambridge University of Cambridge Bitcoin Electricity Consumption Index, the estimated The electricity requirement for the Bitcoin network is 15.57 GW (GigaWatts), which adds up to 136.48 terawatt hours (TWh). Looking at historical data of the electricity demand for the grid shows that this demand continuously increases over the years as the grid grows.
Despite this increasing demand for electricity, the environmental impact could be overestimated. A report by CoinShares published in January this year tries to measure the CO2 emissions caused by bitcoin mining. Contrary to popular belief, the report’s findings suggest that bitcoin mining is only responsible for bitcoin 0.08% of global carbon dioxide, or CO2, production. The report revealed that in 2021 the network emitted 42 megatons (Mt) (1 Mt = 1 million tons) of CO2 out of the total global emissions of 49,360 Mt CO2.
Sam Tabar, chief security officer at Bit Digital, a publicly traded bitcoin mining company, told Cointelegraph:
“The environmental impact of bitcoin mining is being massively exaggerated by traditional financial authorities (IMF, etc.) because they know they can divide a new counterculture movement by using bogus environmental arguments. They’re trying to turn us against each other. They are igniting the world with bogus green arguments, and I understand why: They don’t want to lose leverage over the levers of power in a system that only works for the elite.”
In this context, Vera mentioned that measuring the environmental impact of Bitcoin is a very differentiated topic and cannot be explained simply by the metric of energy consumption. He said, “In many cases, Bitcoin mining encourages the development of renewable energy, which will have profound implications for long-term energy infrastructure and environmental impact.”
Oil giants could lead the change to make Bitcoin green
Noting that using stranded natural gas to mine Bitcoin could reduce net carbon emissions from mining, as well as emissions from flare gas, other big oil companies could soon seize the opportunity, especially since governments and regulators have cracked down on gas flaring.
In November 2020, Colorado regulators gave the first go-ahead to ban gas flaring to curb methane pollution.
Regulators in the state of New Mexico enacted a rule in March 2021 requiring oil operators to phase out gas flaring. The regulation states that by April 2022, 98% of the gas stranded in nature should be captured and not flared.
Such decisions, however, are very difficult to make in a country where both sides of government are heavily dependent on lobbying by big oil companies. In October 2021, Bloomberg reported that President Biden’s crackdown on methane emitters will come close to imposing a flaring ban.
A total ban on gas flaring would be good news for the bitcoin mining industry, as oil producers would have one of two options. First, to reduce oil production, which would be economically unsustainable. Or second, use excess stranded natural gas locally, where bitcoin miners could step in to create synergies with big oil companies like ExxonMobil, British Petroleum (BP), Chevron or Valero Energy.
Vera explained: “With oil prices so high, most of these producers are turning to using the stranded gas on-site, e.g. B. bitcoin mining instead of burning it. We expect this trend to continue in the future as more governments regulate the ability for oil companies to flare off excess gas.”
The World Bank also has its own initiative to reduce gas flaring around the world. The Global Gas Flaring Reduction Partnership (GGFR) is a multi-donor trust fund that includes governments, oil companies and multinationals committed to reducing gas flaring. Bitcoin mining pools and companies could enter into partnerships with this trust fund to further this initiative.
However, the oil companies could have a two-sided approach to the problem at hand, raising questions about their intentions. For example, in 2020, BP asked regulators in Texas to ban routine natural gas flaring. But in January 2021, the Texas Railroad Commission approved 121 of the company’s flaring applications.
As regulators and governments around the world crack down on gas flaring, the bitcoin mining industry has an opportunity to reduce carbon emissions and methane pollution in the atmosphere. Vera closed this synergy by saying, “Bitcoin miners are a natural partner for all energy producers, including renewable energy and oil and gas. Bitcoin mining improves the ability of these companies to manage and use their resources in the most profitable way.”
https://cointelegraph.com/news/stranded-no-more-bitcoin-miners-could-help-solve-big-oil-s-gas-problem Not stranded anymore? Bitcoin miners could help solve Big Oil’s gas problem