Is Bitcoin Mining Bad for the Climate?

Three reasons why Bitcoin mining may in fact reduce CO2-emissions.

Bitcoin mining need not have higher energy consumption than alternatives

Bitcoin mining consumes energy to protect the purchasing power of the monetary network.

Purchasing power stored in the network today is purchasing power not spent on consumer goods, and these goods would have had to be produced by consuming energy.

At least some of the energy going into mining Bitcoin would thus have gone into the production of electronics, cars, and shoes instead.

How much energy would have been consumed in these alternative uses is anyone’s guess. But it is certainly not negligible.

Bitcoin mining consumes a much greener energy mix than alternatives

The power demand from Bitcoin mining is almost infinitely elastic, which means that its energy consumption responds very strongly to changes in the electricity price. Mining will only run in those hours or minutes where electricity is sufficiently abundant and therefore cheap.

Imagine a shoe factory that only runs when there is cheap, excess, otherwise-wasted energy in the grid and shuts down the second it becomes scarce. It would often have to shut down in midday peaks, run a lot during the night, and be ready to ramp up whenever the wind starts blowing.

Not very feasible.

A Bitcoin mining operation can function like this, running predominantly on green excess energy with near zero marginal cost. A shoe factory, on the other hand, runs when there is demand for shoes regardless of the energy mix at the time.

Bitcoin mining is thus capable of consuming much greener power than alternatives.

Bitcoin mining supports further expansion of renewable energy production

The most attractive location for a mining operation is in a grid with too much energy production, for example due to excessive expansion of wind or solar power.

The most attractive time to mine Bitcoin is when power prices collapse due to over-production — exactly when the power grid needs extra demand to remain stable.

Bitcoin mining thus stabilizes the power grid by transforming excess renewable energy into monetary energy.

Summary

Bitcoin mining could reduce CO2-emissions for three reasons:

  1. Bitcoin mining need not have higher energy consumption than alternatives.
  2. Bitcoin mining consumes a much greener energy mix than alternatives.
  3. Bitcoin mining supports further expansion of renewable energy production.

Rambling my way down the Bitcoin rabbit hole.