The Potential of Renewable Energy Sources in Cryptocurrency Mining
From the monetisation of art to scarcity-based collectibles and games, cryptocurrencies bring into play a new option for thought, as well as new risks and problems in the energy sector. Energy consumption has become the main contested issue of cryptocurrency mining today. The lion’s share of the energy used in this industry comes from the combustion of fossil reserves, many of which are imported. Nevertheless, if it were to make use of renewables, cryptomining could become an important part of the process of equilibrating the energy system.
Understanding the Energy Demand of Cryptocurrency Mining
Since cryptocurrency mining is also an incredibly power-hungry compute, miners running cutting-edge hardware to solve complex mathematical problems and validate transactions and maintain blockchains use massive amounts of electricity. Verifying transactions on blockchains that require all computers running on the network to agree on a single path, such as Bitcoin, are computationally intense and require huge amounts of power. Miners have historically been attracted to the cheapest electricity options, most of which come from fossil fuel-powered grids. This has led to waves of miners migrating to countries such as Kazakhstan, Pakistan, Iran or Nicaragua where surpluses of hydrocarbons make electricity costs very low. A small farm in Kazakhstan that mines Ethereum (4211 kWh / ETH) and Bitcoin (29,229kWh / BTC). Courtesy iStockWhere there are miners, there are expenses. Leasing a mining rig or investing in your own setup come with hefty price tags. Annual expenses to power and maintain a rig can cost between $20,000 and $50,000. One mining farm in upstate New York even used enough natural gas per year to heat ‘approximately 300 homes’. Environmental advocates have raised concerns for years about the impact of this graphics-processing compute on the fossil-fuel dependency of crypto, a nascent technology that promises to shift human commerce to a digital metabolism.
The Shift Towards Renewable Energy Sources
In response to calls to consider the environmental cost of crypto mining, we are seeing a move towards renewable energy, particularly solar, wind, hydroelectric power and geothermal. Assuming that this trend continues, it seems theoretically possible to mine at the scale we are talking about without damage to the environment from fossil fuels.
For instance, solar energy’s falling costs and rising efficiency make it particularly appealing for remote mining projects. Likewise, places with cheap, hydropower-fuelled electricity, such as parts of Canada and Scandinavia, are drawing miners to them.
Case Studies and Current Implementations
A number of experimental projects have shown that crypto mining can run on renewable energy. Some firms have set up mining operations in Sweden and Norway, where hydroelectric energy is very cheap and also, crucially, renewable. There are also signs that US crypto miners are using wind energy more in some states, such as Texas, where there’s a good deal of wind power generation.
In addition, some are looking to combine blockchain with smart grid technology to dynamically adapt the energy consumed by mining, seeking to help balance electricity supply and demand, so that too much renewable energy isn’t lost or too little used.
Challenges and Future Directions
Even if cryptocurrency mining could incorporate renewable energy sources faster and more smoothly, there are further hurdles to overcome. The variable nature of renewable energy, from solar generation to wind power, which depends on the weather, is problematic, as is the limited storage capacity of existing technologies. The power storage gaps to put it on the same level as the minimum and maximum energy usage of mining are yet to be bridged.
Moreover, the regulatory framework – and associated policy – needs to evolve to accommodate the sooner-than-expected shift to renewable energy in mining. Incentives to encourage the use of renewable energy would likely entice an increasing number of miners to place their miners in regions with relatively greener energy sources.
Conclusion
While this represents a promising future for renewable energy sources to be able to power a growing crypto-industry, it is also an increasingly necessary one. As technology continues to develop and as the world moves towards sustainability, linking renewables with crypto mining could see major carbon savings for digital currency. Embracing renewables in mining operations would not only keep up with global environmental targets, it would also allow the industry to flourish towards a more sustainable future.
Miners, investors and regulators will need to work together to tackle these issues, and the rewards will be great; our world will become both more economically and environmentally viable, and for the better.
