Renewable Energy Powers Crypto Mining: New York State Sees the Light
There continues to be a deep misunderstanding about the environmental impacts of mining cryptocurrencies like Bitcoin and Ether. And worse, this misunderstanding is driving premature and ill-informed action by governmental and business entities.
Domestically, for example, former President Trump called Bitcoin a “scam”; Senator Elizabeth Warren stated that Bitcoin “eats up more energy than entire countries” and that to fight climate change we need “to crack down on environmentally wasteful cryptocurrencies”; and notoriously fickle Elon Musk tweeted that Tesla would no longer accept Bitcoin because of environmental concerns—despite Tesla having most recently reported holding over $1.5 billion of Bitcoin. Internationally, citing environmental concerns, China’s Qinghai recently became the third province in the nation to place prohibitions on cryptocurrency mining operations. In short, it seems like there is a never-ending supply of public figures waiting in line to trash crypto for its environmental impacts.
Despite these recent criticisms and decisions, it appears that some governments and businesses are engaging in due diligence and learning about the significant benefits of cryptocurrencies, the endless applications of blockchain technology, and the true environmental impacts (or lack thereof) of the crypto-mining industry.
Consider the State of New York. Last month, New York State Senator Kevin Parker introduced Bill S6486B which, in its original form, would have imposed a three-year moratorium on all cryptocurrency mining operations in the State so that the Department of Environmental Conservation could complete a full generic environmental impact statement review under the State Environmental Quality Review Act.
Fortunately, Senator Parker and others appear to have seen the light, which is unsurprising considering the sunburst reality that 74% of power on the Bitcoin mining network comes from renewable energy sources. (Note: This makes complete sense from a business perspective given the low cost of electricity generated from renewable energy sources and the world’s increasing focus on ESG). As a result, Senator Parker’s originally proposed, broad-sweeping crypto-mining ban has been radically tailored to get at the only meaningful environmental impact of the industry, which comes from a small—and soon to be extinct—fragment of the North American industry not using renewable energy. Specifically, in the current version of the bill, the moratorium prevents fossil-fuel fired electric generating plants from providing behind-the-meter electric energy to crypto-mining facilities using the more energy intensive proof-of-work authentication method.
The cryptocurrency awakening is only beginning. Earlier this week, El Salvador became the first nation in the world to adopt Bitcoin as legal tender. Undoubtedly, more nations will follow.
In closing, it is worth noting that Senator Warren’s criticism of cryptocurrency may center solely on the magnitude of energy the industry uses and her seeming opinion that the asset has no meaningful purpose of value to society (I would disagree with her on the latter point). To be sure, proof-of-work authentication requires a significant amount of energy, but tellingly nobody is talking about the staggering energy impacts of other global industries like manufacturing, for example. Not to mention, Ethereum 2.0 will provide the path forward for proof-of-stake authentication, a much less energy intensive method.
To be clear, reasonable regulation of the cryptocurrency industry would not be a bad thing. No industry should receive a free pass. But regulating based on uninformed actors’ incorrect beliefs would unquestionably be a bad thing.
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