“Bitcoin mining is already an industry at the forefront of utilising sources like solar and wind. (…) I strongly encourage the European Union, the European Commission and ESMA to support the development and expansion of Bitcoin and Bitcoin mining in Europe and across the globe.”
Bob Burnett
“In a recent report, the European Central Bank characterised Bitcoin as an unproductive, energy-intensive technology that lacks social value and presents an obstacle to the EU’s climate goals. Regrettably, the EU has demonstrated similar hostility in its evaluation of Bitcoin and its impact on society. But the EU and ECB’s estimation of Bitcoin neglects new research from organizations in academia, finance, and human rights that paints a starkly different picture of the world’s most successful cryptocurrency.”
Pierre Rochard
“As the European Union continues to develop sustainability indicators for crypto-assets, it is essential to consider emerging technologies that can mitigate the negative externalities associated with Bitcoin mining.”
Marin Baksa
Introduction
The Regulation on Markets in Crypto-Assets (MiCA) was published in the Official Journal of the EU on 9 June 2023. Under MiCA, the European Securities and Markets Authority (ESMA) has been tasked with developing draft regulatory technical standards for the crypto-asset sector. These standards aim to detail the content, methodologies, and presentation of information regarding sustainability indicators, particularly those focusing on adverse impacts on climate and other environment-related adverse impacts, while also outlining key energy use indicators. The mandate requires ESMA to ensure coherence in the disclosures provided by issuers of crypto-assets and crypto-asset service providers. Crucially, in developing these standards, ESMA must evaluate the various types of consensus mechanisms used to validate transactions in crypto-assets. This evaluation should consider their unique characteristics and their potential environmental impacts.
In June 2024, the European Securities and Markets Authority (ESMA), which regulates and supervises the EU’s financial markets, will present a draft report to the European Commission (EC) on sustainability indicators and inside information disclosure under Markets in Crypto-Assets (MiCA) Regulation. In preparation for this report, ESMA conducted a public consultation (“second public consultation”) pursuant to its “Technical Standards specifying certain requirements of the Markets in Crypto Assets Regulation (MiCA).” ESMA’s second public consultation was focused, inter alia, on the climate and other environment‐related adverse impacts of crypto-assets, taking into consideration the various types of consensus mechanisms and their incentive structures. Comparing Proof of Work (PoW) and Proof of Stake (PoS) mechanisms, ESMA states that “Proof of Work consensus mechanisms […] can be deemed more impactful from a sustainability point of view.”
This submission (the “Submission”) is prepared as a follow-up to the first submission made to ESMA by the Building True Change Coalition (BTC Coalition) in December 2023, as a part of the second public consultation. In the first submission, we outlined how Bitcoin mining serves as an energy buyer of last resort, how it facilitates adoption of renewable energy, and helps support human rights and delivery of humanitarian aid worldwide.
This Submission provides a number of new case studies in the form of testimonials by industry experts in an effort to debunk anti-Bitcoin/proof-of-work blockchain misconceptions and further highlight Bitcoin mining’s vital social impact, focusing on the renewable energy sector and environmental issues. The testimonials also explain how Bitcoin mining can participate in grid stabilisation, and refute misguided allegations of an adverse impact of Bitcoin mining on water availability.
Recent discussions in the EU and in the member states of the Council of Europe have highlighted concerns about the energy consumption of Bitcoin’s PoW mechanism, notably critiqued in a United Nations study [1], [2]. This study, often referenced by EU institutions, has been discredited for its misleading and biased analysis that overlooks advancements in sustainable mining practices and fails to account for Bitcoin mining’s role in driving renewable energy innovations. To ensure a well-rounded policy approach, it is crucial to open dialogue with Bitcoin miners and representatives of the renewable energy sector, who can provide current, on-the-ground insights into the environmental impacts and improvements within the Bitcoin mining sector.
Our initiative, composed of both civil society activists and industry experts, responds to the public calls for collaboration issued by the European Commission (EC), which aims to collaborate internationally “with various standardisation bodies to develop an energy-efficiency label” [page 17 of the Digitalising the energy system – EU action plan] for consensus mechanisms. We feel obliged to make our submissions on the matter and correct false presumptions leading to the development of a rating system for cryptocurrencies according to environmental impact. As referenced in our December 2023 submission, EC announced a tender to develop a methodology and sustainability standards to calculate and mitigate the environmental impact of crypto-assets and their consensus mechanisms, where it targets Bitcoin mining and PoW, stating that “there is evidence that crypto-assets can cause significant harm on the climate and environment and generate negative economic and social externalities, depending on the consensus mechanism used to validate transactions.” The EC asserts that Bitcoin mining “could undermine EU’s efforts to achieve its climate and sustainability goals, in line with the Paris Agreement.” We are concerned that ESMA has adopted the same position while developing sustainability indicators under its MiCA mandate.
In our view, the EC’s perceived bias does not hold up under scrutiny and should be countered with evidence, which we intend to present here. The success of the EU’s energy transition requires the investment of substantial funds not only into renewable energy production, but also into grids, related distribution infrastructure, distributed energy resource technologies, and etc. Thus, in implementing its policies, the EU should consider overall business efficiency, profits from proof-of-work-based Bitcoin mining, and related innovations. Therefore, all relevant policy indicators and goals should promote and incentivise these aspects. We believe that Bitcoin and its mining process not only do not undermine the EU’s climate efforts but can also significantly contribute to their improvement and help establish the EU as a leader in global renewable energy and the circular economy, fostering vital innovations.
Renewable Energy and the Bitcoin Solution to the EU Grid Problem
The insufficient capacity of the existing electricity grids remains a fundamental challenge in the development of renewable energy within the European Union. Consequently, the dynamic expansion of renewables, primarily wind and solar energy sources, is not adequately supported by the current infrastructure’s ability to absorb and distribute all the energy produced. Bitcoin mining can help to solve this challenge and contribute to meeting the EU’s strategic policy goals, as outlined in “Grids, the Missing Link – An EU Action Plan for Grids (GAP)” by the European Commission in November 2023.
The plan to modernise the EU’s electricity grid and prepare for the renewables-based electrification of the energy system requires an estimated €584 billion in new investments by 2030 to upgrade Europe’s grids. According to the plan, electricity demand is expected to grow by 60% by the end of the decade.
This Submission endeavours to demonstrate that Bitcoin mining effectively allows for the utilisation of energy surpluses, reducing wasted and curtailed energy, and thereby providing an additional economic incentive to develop renewable energy sources. This approach addresses two critical challenges currently recognised by the EC: (a) lengthy grid connection queues for renewable projects, and (b) the overproduction of renewable energy.
As the planned grid modernisation and expansion process will take several years to accommodate the increasing supply of renewable energy, Bitcoin mining presents a ready, intelligent, and profitable solution to balance the demands of energy production and consumption. Specifically, it can also serve as an effective tool for mitigating supply bottlenecks and addressing the natural fluctuations in energy availability caused by variable weather conditions.
As noted by Drew Armstrong, President and CEO of the Cathedra Bitcoin, a Canadian Bitcoin mining company: “(…) proof-of-work mining can help transform the energy sector for the better, by ensuring no energy goes to waste, thereby potentially reducing the cost of energy for citizens.”
Edouard Dubrana, CEO of Eddu Energy (France) states that: “[t]his industry, although energy-intensive, can adjust its consumption in real time, using surplus energy that would otherwise be wasted. This not only helps stabilise the network by absorbing production peaks but also provides an economic advantage by generating additional revenue for network operators and energy producers. Thus, Bitcoin mining can play a pivotal role in the transition towards a greener and more flexible energy grid, while fostering a circular energy economy.”
Kent Halliburton, the CEO and co-founder of Sazmining Inc., explains how their mining operations optimise surplus hydroelectric energy in Latin America: “Our facilities in Paraguay utilise surplus energy from the Itaipu Dam, one of the largest hydroelectric plants in the world. This energy, which would otherwise potentially go to waste or be sold at lower values to Brazil due to market oversupply, is efficiently used in our Bitcoin mining operations at 4.3 cents per kWh. Our business’s ability to absorb this surplus energy during off-peak times is crucial in preventing energy waste and supporting the economic sustainability of the hydroelectric plant.”
This application of Bitcoin mining is already underway in various parts of the world. Beyond its contributions to industry development, the significant business and economic implications of this activity, including tax revenue generation, job creation, and benefits to local communities—often those economically disadvantaged or undergoing deindustrialisation—should not be overlooked.
Also, the transformational potential of Bitcoin mining for local communities is exemplified in the testimonial by Sebastien Gouspillou, CEO of Big Block Data Center. His account, titled “How Bitcoin Mining is Supporting Conservation Efforts at Virunga National Park (Congo),” illustrates how the financial challenges of this UNESCO World Heritage site were addressed by leveraging existing hydroelectric infrastructure for mining purposes.
Development of New Off-Grid Energy Sources and Facilitation of Renewable Energy Adoption
Even without electricity grid connection, Bitcoin mining is directly employing new and reactivated renewable energy sources. As stated by Bob Burnett, CEO of Barefoot Mining (USA): “Bitcoin mining is demonstrating its capability to utilise and even develop new renewable energy sources independently of traditional electricity grids.”
Bob Burnett highlights this innovation within the industry: “Another key factor is that Bitcoin mining is spawning the development of new sources of electricity that are not considered or known to those projecting global electricity. Many in the mining business, including myself, prefer to develop our own energy resources and not be tied to a grid.” He terms these ventures “wild sites,” which represent a significant and expanding portion of the Bitcoin mining sector. “These sites produce energy at sites that are unappealing or not economically feasible for the grid. This includes things such as utilising methane from dump sites and agricultural waste, combusting previously flared gas at oil wells, developing new hydroelectric generation in remote areas, and the restoration of hydroelectric sites in disadvantaged areas.” Thus, Bitcoin mining actively facilitates adoption of renewables by providing a critical source of financing for energy producers. By creating stable and predictable demand for power, Bitcoin mining operations offer renewable energy projects the financial stability needed to expand and innovate. This mutually beneficial relationship accelerates the development of renewable energy infrastructure, as miners seek out and fund green energy solutions that in turn support their operations. Such partnerships ensure that Bitcoin mining contributes positively to the broader energy transition towards sustainable sources.
Bob Burnett’s Barefoot Mining revived a disused early 20th-century hydroelectric plant in rural South Carolina, USA. This plant, originally built for a textile mill and closed in 2000, now operates sustainably under Barefoot Mining’s management, contributing positively to the environment without impacting the grid and “without any carbon footprint.” The Barefoot Mining case demonstrates that, contrary to popular belief in the EU, Bitcoin mining is generally environmentally friendly and supports the overall development of green energy. Powering mining operations with fossil fuels is becoming economically unviable due to the higher cost of electricity produced that way, compared to renewables. Additionally, although these sites currently function as off-grid facilities, connecting them to the grid in the future may be possible.
Can Bitcoin mining solve environmental problems?
Given the prevalent myth of Bitcoin’s high carbon footprint, one more factor should be taken into account to a provide more objective assessment of its environmental impact: technological progress. As Bob Burnett states: “One factor is the servers which provide the hash power, or entropy, have been rapidly getting more power efficient. The new machines being deployed now are about six times more efficient than those in produced in 2019. Additionally, the machines produced in 2019 and earlier are now largely inactive as they are economically unviable, this means that the network is able to produce significantly more computing power using the same or less energy. Improvements in chip design as well in the chip fabrication process will continue to aggressively drive efficiency gains.”
The case of Stronghold Digital Mining (USA) described by Thomas Pacchia, its Board of Directors Member, illustrates how Bitcoin mining can be a solution in an industrially polluted area. The company’s two power plants in Pennsylvania turn a hazardous waste product from coal mining (coal refuse or gob) into energy for Bitcoin mining. “[R]ather wasting away and polluting people and the environment, coal refuse is instead collected and transported to be sorted, processed, and broken apart. After that, gob reaches a boiler to be burned down, producing electricity which powers Bitcoin mining.” The uniqueness and value of this application lies in solving the problem of cleaning up this dangerous waste, which is normally most often piled up due to otherwise very low commercial viability. The value of this application lies in its ability to address the problem of coal refuse, which is typically accumulated due to its low economic viability. By utilising coal refuse, these plants generate electricity that powers Bitcoin mining operations. The facilities of the Stronghold Digital Mining are “examples of the Bitcoin mining operation which could help the EU member states and other countries in cleaning up and remediating after an ecological disaster. In 2016, there were 324 coal plants in Europe. Each of them produced coal ash, the byproduct left over from burning coal to produce electricity, which can leach into groundwater, pollute waterways, and contains heavy metals considered to be carcinogens,” – notes Thomas Pacchia.
Water Availability Impact and Cooling Innovations
Pierre Rochard, Vice President of Research, Riot Platforms, Inc. notes that:“Bitcoin’s critics have removed context from the conversation surrounding Bitcoin and water consumption.” The expert provides expertise regarding the countries in the Middle East suffering from water scarcity and “utilising energy-intensive desalination process, which are using heat from Bitcoin miners to increase the efficiency of desalination. Two companies—Zero Two and Marathon Digital—for example, have built technology to recycle heat from Bitcoin mining rigs to facilitate the desalination process, allowing them to desalinate more water for the same net cost.”
One common objection to the process of Bitcoin mining is its alleged use of water cooling, which is believed to negatively impact global water availability. This misconception is based on comparing Bitcoin mining infrastructure to traditional data centres. As Bob Burnett explains: “The disconnect here is that Bitcoin mining centers are designed nothing like traditional data centers, most notably they almost never deploy cooling systems in their operations. The facilities and the systems they run are designed to simply leverage airflow as the means of maintaining proper operating temperatures. In very rare cases, some facilities do utilise “swamp cooling” which is effectively a misting system but this only on the hottest days of the year. The effective water utilisation for these purposes is essentially zero.” Furthermore, new technologies, such as immersion cooling, offer significant advantages in line with the EU’s sustainability goals.
As described by Marin Baksa,CEO of Barrage Nordx (Sweden), immersion cooling is “a method that involves submerging servers, including Bitcoin mining servers, in a non-conductive liquid, which greatly enhances energy efficiency and reduces the environmental impact of these operations. (..) Unlike air-cooled systems that expel waste heat into the environment, immersion cooling captures and recycles this heat through a liquid medium. This not only improves thermal management but also contributes to a quieter and more environmentally friendly data centre environment. (…) Additionally, this method facilitates more effective heat recovery, as the heat transferred to the cooling liquid can reach higher temperatures and be reused more efficiently than air, making it particularly suitable for district [urban] heating.” Practical analysis of this technique was the subject of two reports (2022 and 2023) by RISE Research Institutes of Sweden AB.
Converting Residual Heat: District Heating Networks
There is a great potential for synergy between Bitcoin mining and decarbonisation of district heating systems in the EU. As bitcoin mining operations scale up to industrial levels and adopt advanced immersion cooling technologies, they also produce significant amounts of waste heat. This waste heat can be repurposed, offering a sustainable heating solution for district energy systems, which are traditionally powered by combustion of fossil fuels, biomass, or garbage. Most of these systems are shifting to electricity, primarily through heat pump technology, in alignment with the EU’s decarbonisation goals.
Co-locating Bitcoin mining facilities with district heating plants creates a mutually beneficial relationship. The waste heat from Bitcoin mining can directly supply the heating needs of these systems, effectively aiding in their transition to cleaner energy sources. This integration can provide an independent source for financing the conversion to electric-based heating systems and significantly reduce the need for financial subsidies.
Examples of such initiatives include companies like Mintgreen in Canada with the North Vancouver district energy system, and Hashlabs in Finland, which offering the system that captures the heat generated by Bitcoin mining operations to warm water in a central heating system. In in New York, USA, Bitcoin mining is used to heat pools in bathhouses.
In Finland, technological companies like Eddu Energy are forming partnerships with national grid operators.
“Bitcoin mining in Europe is economically viable only for miners who exploit surplus renewable energies, thus serving as active players in balancing the energy network. With an increasingly competitive market, the reuse of heat proves to be a crucial pillar for Bitcoin mining in Europe, offering a significant advantage over international competitors where this practice remains underdeveloped.
The logic of Bitcoin mining requires the use of the most affordable and competitive energy, primarily from renewable sources, with additional revenues as a priority to maintain competitiveness,” – points out Edouard Dubrana. These examples demonstrate the potential for Bitcoin mining to contribute positively to the EU decarbonisation efforts.
Summary
This Submission underscores the various positive externalities of the PoW consensus mechanism across social, energy, and environmental, advocating for the integration of these benefits into the EU’s policy framework. Detailed examples of each case are provided in the Annexes section of this Submission.
Considering the insights from the previous submission by the BTC Coalition, coupled with the evidence presented herein, we strongly argue that Bitcoin mining should not be dismissed as an “energy-wasting mechanism.” Instead, its extensive positive impacts warrant thorough analysis and should be reflected in the EU’s sustainability indicators and policy objectives.
We believe that Bitcoin mining can aid the EU’s energy transition goals through several important aspects discussed in our both Submissions:
- Grid independence: Bitcoin mining is location agnostic, so it can function anywhere, serving as early customers for new renewable projects, providing essential revenue and bridge financing during lengthy grid connection processes.
- Grid stability: as large, controllable loads, Bitcoin miners can help balance the power grid by adjusting their energy consumption based on grid demands, aiding in overall stability.
- Utilisation of excess renewable energy: Bitcoin mining can absorb surplus renewable energy that might otherwise be wasted, enhancing the economic feasibility of renewable sources like wind and solar.
- Methane management: Bitcoin mining can monetise methane management by utilising methane from landfills for electricity generation, reducing the global warming potential of these emissions significantly.
- Heating decarbonisation: waste heat from Bitcoin mining can convert heating systems from fossil fuels to electric, supporting EU decarbonisation efforts.
Acknowledging these positive effects of Bitcoin mining would help to attract investments, which are essential for upgrading Europe’s grids and ultimately achieving the EU’s long-term carbon neutrality goals.
As Kent Halliburton suggests: “The EU’s plan underscores the need for €584 billion in new investments to upgrade the electricity grids by 2030. With their requirement for robust grid connections, Bitcoin mining facilities can catalyse such infrastructure investments. By strategically establishing mining operations, the EU can stimulate private investment in grid enhancement, aligning with long-term goals for energy system decarbonisation and fostering job creation and economic growth within the energy sector.” In the words of Edouard Dubrana (whose Proposed Regulations for the Integration of Bitcoin Mining into the EU Energy Strategy are part of his testimonial): “Europe must position itself at the forefront by using surplus energies, becoming a key player in network balancing, and efficiently reusing the heat produced by mining. These innovations not only help reduce operational costs but also transform Bitcoin mining into an activity that supports the continent’s sustainability goals. By exploiting surplus energy and contributing to network balancing, Bitcoin mining can become an integral component of the European energy transition, while valorising the heat generated for other applications, thereby increasing its acceptability and ecological efficiency.”
As concluded by Pierre Rochard, whose testimonial debunks the most prevalent misconceptions about Bitcoin: “Not only is the world’s leading cryptocurrency a revolution in finance; it is an instrument for social change. Whether it’s stabilising power grids, monetising stranded energy, reducing greenhouse gas emissions, or expanding financial inclusion, BTC is an ESG asset that will only find more use cases in the years to come.”
The BTC Coalition firmly believes that the positive effects of Bitcoin and Bitcoin mining on society and economy, as demonstrated through numerous case studies, should be duly considered by ESMA, the EC, the European Central Bank (ECB), the European Parliament, and other relevant regulatory and legislative bodies within the EU. The evidence presented above, further detailed in the accompanying testimonials, provides a robust foundation to challenge the guidelines outlined in the EC’s Digitalising the Energy System Action Plan, which calls for states to implement measures to reduce—and potentially cease—the electricity consumption of crypto-asset miners in response to the emergency intervention addressing high energy prices.
Given that a similar stance has been adopted in the ECB’s report, and by certain political groups within the European Parliament—particularly the Committee on Economic and Monetary Affairs—we urge these entities to reconsider their current positions. The BTC Coalition seeks to highlight the actual environmental impact of Bitcoin mining, challenging misconceptions and the prevalent anti-Proof-of-Work bias.
To ensure informed policymaking, this Submission, along with the December 2023 submission, will be presented to the newly elected members of the European Parliament, the European Commission, and all other pertinent EU bodies. We advocate for a balanced, evidence-based approach in the formulation of regulations that recognise the substantial potential benefits of Bitcoin mining. This approach will not only support the EU’s sustainability goals but also foster innovation and economic growth within the Union.
Testimonial of Bob Burnett, Barefoot Mining
Bob Burnett is a technologist and entrepreneur with over 40 years of experience in technology related companies in the US. Bob Burnett was an engineer who served on the development team for the world’s first laptop computer in the 1980s and developing the world’s most powerful decentralized computing platform in 2003.
He is the founder and CEO of three companies Bitcoin mining in the US: Barefoot Mining, Bit Flow and Divvy Systems. He also served as the Chief Technical Officer for Gateway, Inc., formerly one of the world’s largest personal computer companies and a Fortune 200 company.
Since 2017, Bob Burnett has extensively studied Bitcoin’s architecture. After having concluded this innovation will positively impact civilization at a level on par with the personal computer and the internet, he has dedicated the remainder of his career to help further develop and strengthen Bitcoin’s ecosystem. Right now his primarily role is now as the founder and CEO of Barefoot Mining, which specializes in the development of small to medium-sized entropy generation sites.
Bitcoin – a New Monetary System for the Oppressed
Bitcoin has been designed with amazing depth and creativity, yet this is not typically apparent to those making their initial examination of it. As a result, many underestimate it or entirely dismiss it well before they have fully grasped its inner workings and true nature. Even people like me, with extensive technical backgrounds, have had this experience. There are several reasons for this. Satoshi Nakamoto, Bitcoin’s creator, approached the design of this monetary system with a unique and unusual set of trade-offs. However, for those that keep their minds open and persevere in their exploration, its beauty and impact eventually reveal themselves.
Those that have not yet explored Bitcoin deeply tend to believe that the purpose of Bitcoin is to act as something analogous to digital gold and, therefore, should be thought of as a speculative asset. This misses the primary purposes for Bitcoin’s existence which are to:
- Create a monetary system in which activity is transparent and auditable by anyone.
- Establish a money supply which cannot be mismanaged, manipulated, or debased by any person or group.
- Enable cash-like transactions in the digital world, meaning transactions are permissionless and don’t require third-party approval; the receiver and sender can both have complete confidence in the transaction’s integrity.
- Grant the ability to have self-sovereignty over one’s money.
Those living in countries with first-world economies, with governments not riddled with corruption, and/or unreliable banking systems, may not perceive Bitcoin’s objectives as particularly pressing. However, to those that have experienced an economy in hyperinflation, political persecution, asset seizure, or having no access to a banking system, Bitcoin’s objectives take on paramount importance. Even those currently living with limited money and monetary system concerns have apprehensions about the possibility of their monetary system being used as a means of societal control, as a weapon, or contributing to a dystopian future. In the decades and centuries to come, governments, borders, laws, political parties, and leaders are certain to change dramatically. The end results are impossible to predict, but history tells us that the existing geo-political structure and the global reserve currency are almost certain to change dramatically in the coming century. There is a real possibility some of our descendants will be forced to live in authoritarian and tyrannical regions. It is almost certain that at all points in time there will be someone in the world suffering from this type of oppression, Bitcoin was designed to provide a safe haven monetary system for them.
Proof of Work as a Core of Decentralization
Understanding this perspective is crucial to grasping the design choices made in the Bitcoin architecture. At its core is the use of a permissionless decentralized Proof of Work (PoW) consensus mechanism. It is important to note that PoW applications are not unique to cryptocurrency or Bitcoin. Their origins can be traced back to 1993. PoW can be (and is) utilized to prevent denial-of-service attacks, greatly imped spam on networks and in email systems, and generate auditable and verifiable random numbers or entropy. New uses of this technology continue to emerge. The same equipment used in Bitcoin mining can be utilized for these new use cases.
Analyzing Bitcoin Transactions
In Bitcoin’s case, the PoW mechanism is used as part of the mining process. There is a common misconception that Bitcoin mining is the procedure by which transactions are processed. This is a gross misrepresentation and attempts to measure Bitcoin’s transaction throughput or attach an energy usage per transaction are wholly flawed. There are several reasons for this.
One is that a Bitcoin transaction, or, as I prefer to call it, a Bitcoin resolution, can have several inputs and several outputs. Case in point, the illustration below shows a single Bitcoin base layer resolution with eleven inputs and fifteen outputs. This means the sum of the Bitcoin in the eleven input addresses was distributed to fifteen different Bitcoin addresses via one base layer resolution. This would be analogous to simultaneously using money from eleven different checking accounts and paying fifteen different bills with it; therefore, it is not accurate to characterize this as one transaction. Nothing similar to this exists in the traditional financial system and it is another example of Bitcoin’s innovation.
MULTI-INPUT and MULTI-OUTPUT BITCOIN RESOLUTION
Additionally, the Bitcoin ecosystem is built in a layered manner. The type of resolutions shown in the above chart are part of Bitcoin’s base layer, but Bitcoin activity exists on other layers too. There can be numerous other layers sitting above the base layer and these layers can be simultaneously processing millions of transactions without involving Bitcoin’s base layer. These transactions don’t contribute any additional energy strain on the base layer. Bitcoin has several “layer 2” solutions already implemented and several others that are far along in the development process.
To date, Lightning is the most widely used of these layer 2 solutions. According to Glassnode.com, the leading provider of blockchain analysis data, as of January 1, 2024, there were 67,186 Lightning channels. These channels provide a means to connect users all over the world on a peer-to-peer basis, transacting almost instantaneously for nearly free. It is only in times when channels open, close, or there is a dispute that the base layer of Bitcoin steps in for resolution. By design, there is no way to measure how many transactions occur on the Lightning layer, but it is already capable of hundreds of millions per day.
MAP OF LIGHTNING CHANNELS
It is worth noting that Bitcoin and Lightning have had direct, positive impacts on some of the most economically disadvantaged places in the world, and its momentum continues to grow. Regions like El Zonte (aka Bitcoin Beach) in El Salvador, Panajachel (aka Bitcoin Lake) in Guatemala, and Boracay (aka Bitcoin Island) in The Philippines all have had heavy adoption by local merchants and each has experienced a massive rise in business and a transformation of their communities. In these instances, merchants could not afford the fees or the technology associated with credit cards. Therefore, they had limitations in their ability to transact with tourists, especially from foreign countries. Bitcoin and Lightning have opened them up to transact with virtually anyone in a safe and efficient manner.
Bitcoin Energy Consumption vs Bitcoin Transactions
It should be evident that there is no way to correlate Bitcoin’s base layer activities to a specific number of transactions and, as a result, there can be no validity to tying any of Bitcoin mining’s energy consumption to its transaction count. In fact, given Bitcoin’s construction, transaction volume has no bearing on energy usage. Additionally, and more importantly, it is inappropriate to compare Bitcoin’s energy usage to any activity in the establishment financial system (e.g. banks, credit card networks), as nothing remotely similar takes place within those systems.
The European Commission has described Bitcoin as an “energy wasting mechanism;” other detractors around the world that have echoed similarly. However, there are legions of others, including myself, that would describe the energy used by Bitcoin as directed at the most noble cause possible: a transparent monetary system open to all, without the fear of debasement or illegal seizure. It is impossible to achieve this with any other architecture including with CDBCs or other cryptocurrencies (including those utilizing Proof of Stake (PoS) as a consensus mechanism).
Proof of Work
To understand this clearly, it is helpful to start with a general overview of Bitcoin’s architecture. At the core of Bitcoin’s architecture is the use of a Proof of Work (POW) consensus mechanism in the mining process. Mining is the mechanism by which the Bitcoin ledger, also known as the blockchain or timechain, is created. The process controls the release of new Bitcoin into circulation and maintains the integrity of the network. It is also the mechanism via which protocol changes are signaled. Stated in terms more analogous to something familiar to most people, imagine a world in which all money was backed by a gold standard. Bitcoin mining would be handling all the following:
- The prospecting and extraction of all gold.
- The minting of all coins and issuance of all gold-back notes.
- The guarantee that all coins and notes are fully reserved.
- The method by which all transfers from one party or account to another are validated.
- The voting process regarding rule/law changes.
- The defense of the system against thieves and manipulators.
To provide a visual of most of the key elements of the mining process please refer to the illustration below.
Exploring this system with technical depth is more than would be appropriate here, but the “Block Creation” portion of the diagram illustrates the balance of the system between Wallets (users), Nodes (similar to regulators and auditors), and Miners (similar to bankers). They work in a manner which each keeps the others honest via a “don’t trust, verify” philosophy. The system is entirely auditable and bad actors in any portion of the system are easily and quickly identified and rejected. Additionally, anyone can act as a user, node, or miner. No permission is required and the financial barrier, even to be a miner, is only a few hundred Euros. For the same price one can own a node. With that node, they have direct access to the entire Bitcoin ledger, allowing them to audit and verify 100% of the activity in the Bitcoin network since its creation in 2009.
The section of the diagram on “Monetary Issuance” is the formula representing the Bitcoin Core code and it describes the manner by which new Bitcoin will be issued. The chart below shows this issuance and the resulting circulation schedule. This is unalterable, and it is continually monitored and enforced via the Block Creation process. The result is a final issuance of 21 million Bitcoin.
The use of energy by the Bitcoin Mining process is undeniable. It is, in fact, part of the design because it is use of this energy, in conjunction with computing (or hash) power, that makes it decentralized, secure, and incorruptible. This is not replicable with Proof of Stake or any other known consensus mechanism.
Blockchain Trilemma
When any blockchain and the associated ecosystem are being developed, the creators are quickly faced with a classic problem, the Blockchain Trilemma. There are three key main attributes of the trilemma, when designing the ecosystem: decentralization, security, and scalability/throughput. The Blockchain Trilemma is that it is never possible to optimize for all three. To some degree, one of them will be suboptimal.
In fact, this trilemma exists in the creation of any network or monetary system. For instance, in the case of the European Union monetary system, it has excellent scalability and security, but it is highly centralized. This would be the case for a credit card company like Visa or American Express, as well. Beyond monetary networks, things like cell phone networks follow the same path, highly centralized, but very scalable and secure. Email is something that is fairly decentralized and highly scalable, but not very secure.
A close examination of networks of all sorts including monetary systems and blockchain ecosystems, will show that almost all follow the path of prioritizing scalability and security over decentralization. It is rare to find those that prioritize decentralization, but when they do, they have always paired it in priority with scalability not security. Bitcoin appears to standalone as a network having chosen decentralization and security over scalability. It did so for good reason. Nobody in their right mind would design a monetary system without security. Had Bitcoin been architected to pair it in priority with scalability, it would ultimately mean that Bitcoin was simply a digital replicate of the establishment system. To give the world something new meant it must be created with decentralization and security as its priority and ultimately forgoing scalability at the base layer. The scalability in Bitcoin is designed to be available through the higher layers (as described above). This mimics the way scalability is achieved on the internet.
The difficulty for Satoshi Nakamoto was achieving decentralization. Like scalability and security, decentralization is not a binary attribute. They all exist on a continuum, but scalability and security are easier to measure, while decentralization tends to be more abstract. It is easy to claim something is decentralized but it is extremely difficult to achieve in practice. Most blockchains, including those using Proof of Stake (PoS), have made claims of being decentralized and still being extremely secure and highly scalable. This is unfortunately a hollow declaration. Since the latter two attributes don’t directly impact the purpose of this testimonial, I will forego commentary on them. However, I will state for the record that PoS blockchains do not achieve a level of decentralization that even remotely approaches that of Bitcoin.
In simple terms, PoW systems work by forcing all participants to compete to win their coins by expending energy to create blocks – just as gold miners must expend their energy and resources to find gold. And, they must take risk because there is always a chance that they will come up empty-handed. In PoS systems, the participants must possess a material amount of the asset in question to participate in the block creation process. They create blocks by staking some of their assets as a pledge that they will abide in an honest manner. They risk losing their staked assets if they are dishonest but earn more if they are honest.
Bitcoin creator Satoshi Nakamoto never granted himself ownership of a single coin. It is believed that Satoshi Nakamoto ultimately gained possession of approximately 1M Bitcoin; however, he earned them in a fair and competitive manner, via the mining process. This contrasts with projects like Ethereum in which the founders granted themselves a massive amount of the coins via a pre-mine. Some estimates like those reported in an article in the Bitcoinist estimate as much of 70% of the entire supply. Because the creators of the project granted these to themselves, they did not compete for them. This is certainly their prerogative, but it does not lend itself to the creation of a decentralized system.
Additionally, a PoS system must start with some sort of pre-mine or prior allocation of coins otherwise, there would be no one to provide the staking function to the network. The second order effect of this is that those who were granted the pre-mined coins have an advantageous position in acquiring more coins, leading to further centralization of the money supply. By having more coins with which to stake, one can create more blocks and earn more coins as a reward. This puts them in an extremely powerful position to censor or manipulate the system in their favor. In Ethereum’s short history, staking has already become dominated by a small contingent. Ethereum Foundation’s Danny Ryan has admitted to “corporatization, a centralization, and systemic threat.” As previously mentioned, in Bitcoin’s PoW system, even someone without any Bitcoin can buy a mining system and begin earning Bitcoin immediately. They will earn in direct proportion to the percentage of the computing power they contribute to the network. In other words, Bitcoin allows anyone, big or small, rich or poor, to participate in all aspects of the ecosystem.
Outside of mining/staking, most blockchains, including Bitcoin and Ethereum, utilize nodes as validators or regulators of the miners/stakers. The role of being a node is crucial to the integrity of any blockchain because it enforces honesty, and it provides transparency. In Bitcoin, this can be performed with a basic personal computer at a cost of less than €300. Once setup and connected to the network, a Bitcoin node will contain a lifetime history of all Bitcoin activity including all base layer resolutions, coin issuances, and fees. Plus, that node will see every future block presented by the miners and have the choice of accepting it into its ledger. Bitcoin’s architecture means that even in future decades, even individuals of modest means and technical ability will be able to act as nodes and have representation on the network. This is fundamental to Bitcoin’s decentralization.
In contrast PoS archival nodes are much more expensive and difficult to configure. A full archival Ethereum node will cost well over €1000 and likely much more, and the architecture leads to a blockchain size that grows faster and will push the cost of these nodes much higher in the future. Additionally, the technical complexity of managing a node is very high and outside the capability of all but a few elite technologists. For these reasons, there is a strong trend for PoS nodes to migrate into data centers. As shown in the chart below as of April 3, 2024, over 50% of Ethereum nodes are hosted by Amazon, Microsoft, Google.
Clearly, the PoS architecture lends itself to highly centralized node hosting, and if a blockchain’s node are centralized it is not a decentralized blockchain.
There are several other areas in which PoS falls painfully short of Bitcoin’s PoW as a decentralized consensus mechanism. These include the manner in which decisions on protocol changes and updates occur, the way fork disputes are settled, and the ease with the blockchain can be reorganized. In summary, PoS does not achieve a level of decentralization even remotely similar to Bitcoin’s PoW. Whether PoS ultimately proves to have use cases is still up for debate, but it definitively lacks the attributes to be the consensus mechanism of a hard money-based monetary system.
While I put my professional reputation on the line in making these statements, there are others who will certainly take issue with my positions. Some of my critics will even present impressive credentials. This sort of difference of opinion is almost always the case when dealing in matters where soft science and a certain degree of subjectiveness are involved.
What can be said from a completely objective standpoint is that Ethereum introduced PoS only on September 15, 2022, and this is a very small window of time in which to evaluate its stability and integrity. It is a highly complex and intricate system, and it has not yet even come close to be being utilized to its fullest extent. It is outright foolish and premature to declare that it is ready to be compared to Bitcoin’s PoW ecosystem, or to be utilized in any mission critical application. With 15 years of flawless performance, even Bitcoin has only recently crossed that threshold. Any statement that PoS is in a position to replace PoW as a consensus mechanism for Bitcoin is utter nonsense.
Bitcoin’s Energy Use
There have been a number of misconceptions about Bitcoin’s energy use. Wildly inaccurate predictions in the past, especially those promoted by the website Digiconomist, have instilled fears of runaway energy usage contributing to massive increases in carbon production and environmental disasters. These predictions are wrong on all counts.
An examination of Bitcoin’s future energy usage boundaries can be explored through a few different techniques. The first is by examining how much energy the industry can afford over time. This can be established by examining the maximum revenue attainable by the industry and then assuming that the industry would be willing to operate without profit to establish a maximum budget for energy expenses. A business model without profit is obviously not sustainable, but it does create a very reasonable upper bound. So, if we examine a scenario where the revenue for the entire Bitcoin mining industry is consumed by its expenses (no profit) and furthermore, we take the extreme example of 70% of total expenses being applied to electricity, we then reach an upper boundary for electricity consumption by the Bitcoin mining network.
Estimating the revenue potential for the Bitcoin network requires only looking at two variables, the price of Bitcoin and the total amount of fees paid to the miners. Collectively, the miners are paid a reward with every block. The block reward is the sum of a block subsidy and fees associated with each base layer resolution. The subsidy is a known amount and depends only on the current block height (see early chart of Bitcoin’s Circulation schedule). Since Bitcoin’s inception, the average fees per block is 0.35 Bitcoin and in 2023 it migrated up slightly to 0.43 Bitcoin. The average block time for 2023 was 9.735 minutes and this is very close to the all-time average of 9.573 minutes. Using the 2023 average, this means that annually the network generates 53,991 blocks and if we apply the 2023 average fees per block, we can then we can estimate the total miner revenue as measured in Bitcoin. This simply leaves an examination of the resulting revenue in USD based on various Bitcoin prices to determine the potential energy consumption of the network. The following chart illustrates these numbers for the remainder of the decade. In this case the cost of $0.05 per kilowatt-hour is used to again illustrate the upper reaches of the network’s energy consumption.
RANGE OF BITCOIN MINING ELECTRICITY CONSUMPTION WITH ’23 FEES
As the above chart shows, the 2024 maximum energy usage for the network based on energy purchasing power would be 348 terawatt-hours; however, this is well beyond the practical upper limit of network energy usage because there is not enough available mining equipment to consume that amount. The present power consumption of the network can be projected as approximately 159 terawatt-hours on an annual basis (see chart below). This is pointed out to establish that beyond the financial constraints there are some practical limits to power consumption based on the available equipment.
Even if the price of Bitcoin were to spike to $100K or higher in 2025, and the potential energy purchasing budget of the industry were to follow suit, the network growth and potential actual usage would be severely limited. Speaking as someone whose business is building out this type of infrastructure, it would be virtually impossible to grow the network’s energy usage by more than 50% before the end of 2025. This sets the peak power consumption at about 230 terawatt-hours for 2025, a highly improbable usage level but it demonstrates that Bitcoin will not recreate run-away energy demand. As will be touched on later in more detail, even this extreme example would represent only about 0.8% of global electricity production.
As the time horizon stretches though, some of the practical matters of server availability, transformer available, energy sources, etc. do become less of a barrier and an examination of the potential power consumption of the network becomes more of a financial exercise. To explore, for instance, what the maximum power consumption for end of the decade might look like, a slight change in the table is required. There is a possibility of the fee market in Bitcoin moving significantly higher as adoption and usage increases. There have been brief periods in Bitcoin’s history were fees rose to the level of the block subsidy in the reward issued to miners. Should that level of reward become the norm, instead of using the 0.45 BTC in average fees from 2023, the scenario reflected in the chart below reflects fees reaching parity with the subsidy by 2028 to present an alternative upper bound for the total energy budget of the Bitcoin mining industry.
RANGE OF BITCOIN MINING ELECTRICITY CONSUMPTION WITH FEE PARITY
This analysis shows that in the year 2030 the upper limit of global electricity consumption by the network is about 945 terawatt-hours. This is an extreme upper limit with a low probably of occurring as it would simultaneously require a 5.7x increase in the Bitcoin price as measured in USD, a 3.63x in fees as measured in Bitcoin, no increase in the average cost of cost used by the industry, and the mining industry operating collectively without profit.
The point of this exercise is to show that fearmongering about the Bitcoin mining network consuming all the world’s power is unfounded. At present, annual global electricity production is estimated at about 29,000 terawatt-hours according to Statistica.com meaning Bitcoin is utilizing about 0.54% of current electricity production. They project this total to rise to 31,750 terawatt-hours in 2030 (see chart below). Therefore, even in the extreme case Bitcoin would be utilizing 2.98% of global electricity production.
Additionally, there are several other factors that will limit the total amount of the world’s electricity utilized by Bitcoin. One factor is the servers which provide the hash power, or entropy, have been rapidly getting more power efficient. The new machines being deployed now are about six times more efficient than those in produced in 2019. Additionally, the machines produced in 2019 and earlier are now largely inactive as they are economically unviable, this means that the network is able to produce significantly more computing power using the same or less energy. Improvements in chip design as well in the chip fabrication process will continue to aggressively drive efficiency gains.
New electricity sources: Barefoot Mining Case
Another key factor is that Bitcoin mining is spawning the development of new sources of electricity that are not considered or known to those projecting global electricity. Many in the mining business, including myself, prefer to develop our own energy resources and not be tied to a grid. I call these wild sites and they will be a material and growing segment of the Bitcoin mining industry. These sites produce energy at sites that are unappealing or not economically feasible for the grid. This includes things such as utilizing methane from dump sites and agricultural waste, combusting previously flared gas at oil wells, developing new hydroelectric generation in remote areas, and the restoration of hydroelectric sites in disadvantaged areas. As an example, my company Barefoot Mining, has restored a small hydroelectric facility in rural South Carolina of the the United States. The hydroelectric facility was originally developed to support the needs of a textile mill early in the 20th century. The facility shutdown in 2000 as textile manufacturing in the United States dwindled to essentially zero.
The facility lay dormant for two decades until I discovered it and developed a plan to bring it back to life in 2021. Over the course of 18 months and with approximately $3M of capital, my team at Barefoot Mining, in conjunction with an engineer experienced in traditional/historical hydroelectric facilities, rehabilitated the entire infrastructure from the head gates at top of the dam to the generator. The facility tops out at about 1MW of capacity. The electricity from this facility is of little interest to the local grid as proven by the fact that the facility lay rotting for twenty years before our arrival. Barefoot Mining now operates this facility without any strain on the grid and without any carbon footprint.
As mentioned earlier, my company is focused on the development of entropy development sites in the small to medium size. This means operations in the range of about 300 kilowatts to 2 megawatts. It is our belief that focusing on this size gives us the best ability to locate in places where energy is stranded, or where production typically exceeds energy demand. In the case of the former, like our operation in South Carolina we are in direct control of the energy production and the associated cost. In the case of the latter, utilizing energy locally saves us money and prevents the local energy provider from having to push the energy to far away locations with little to no profit and high loss of energy in transmission. For most of our on-grid sites, our power partner is MidAmerican Energy which serves Iowa and parts of a few surrounding states. They are rich in energy generation capability having made large investments in wind over the past decade. They are committed to driving their use of fossil fuels lower and are now at two-thirds of their generation being green. They typically have no issues serving their overall customer base and Barefoot Mining’s operation contribute to them being able to have a consistent baseload from their local community, and reducing their need to export energy to distant regions. This reduces the cost to everyone in the system.
Bitcoin Mining and Water Use
Recently, researcher Alex de Vries of the Digiconomist raised a false red flag about the potential for Bitcoin to materially impact global water availability. Yet, his paper, “Bitcoin’s growing water footprint” has no basis in reality. The crux of his argument comes from a study by Lei and Masanet on the water usage of data centers in various climate zones in the United States. Mr. de Vries uses the conclusions of that study to infer that large scale Bitcoin miners have water usage similar to traditional data centers, he then extrapolates an estimated water usage for Bitcoin mining. The disconnect here is that Bitcoin mining centers are designed nothing like traditional data centers, most notably they almost never deploy cooling systems in their operations. The facilities and the systems they run are designed to simply leverage airflow as the means of maintaining proper operating temperatures. In very rare cases, some facilities do utilize “swamp cooling” which is effectively a misting system but this only on the hottest days of the year. The effective water utilization for these purposes is essentially zero. Furthermore, Mr. de Vries attempts to extend his flawed analysis of large-scale mining to all miners. This is additionally misleading as smaller scale miners are even less likely than large scale miners to use cooling systems or misting solutions. They are also more likely to be off-grid and generate their own power (as explained above.)
Mr. de Vries also expresses concern about a water crisis in the United States and does correctly identify the Western portion of the country as the most impacted. This water concern is however very specific to that region of the country. Most regions of the United States do not have a water supply issue. It just so happens that the areas most impacted by water shortages have very little Bitcoin mining in their region, and of course, even if they did it would have no material negative impact on the local water supply (also as explained above.)
Mr. de Vries does state that his concerns alleviate the more that Bitcoin mining moves in the direction of utilizing power generated from solar and wind and the more that it uses immersion as a cooling method. Bitcoin mining is already an industry at the forefront of utilizing sources like solar and wind which he believes reduce water utilization. This direction occurs naturally as the variable nature of their power generation matches well with Bitcoin’s capability. Additionally, the industry is rapidly increasing its use of immersion technology because it matches well with mining in the most extreme environmental conditions, and it provides Bitcoin mining operators a mechanism to increase their computing density. As a result, Mr. de Vries should rest easy that his concerns about Bitcoin mining contributing to water availability will never come to fruition.
Conclusion
In summary, as a sixty-year-old man who has been blessed to be part of the technological renaissance of the past forty years and for whom financial renumeration has been more than fair, I have the choice to dedicate my remaining professional years to whichever purpose I choose. I have chosen Bitcoin not because of whatever additional wealth it may bring me, but because I believe that a world without a monetary system like Bitcoin is one in which poverty, oppression, and tyranny will perpetuate on a massive scale. I have concluded that the road to break the world of these evils can only be built on the foundation of a truly sound, permissionless money operating in a fair and transparent monetary system. Only Bitcoin and its decentralized proof of work consensus mechanism can achieve this. It is my resounding belief that this will happen regardless of any political action or regulation; however, it would be best if the major political forces in the world worked with me and the Bitcoin community in this noble and critical cause. I strongly encourage the European Union, the European Commission and ESMA to support the development and expansion of Bitcoin and Bitcoin mining in Europe and across the globe.
Testimonial by Edouard Dubrana, EDDU Energy
EDDU ENERGY:BITCOIN MINING AS A STRATEGIC SOLUTION FOR EU’S EFFECTIVELY UTILISING SURPLUS ENERGY WHILE STABILISING THE NETWORK
Also includes: EXHIBIT: Proposed Regulations for the Integration of Bitcoin Mining into the EU Energy Strategy
Edouard Dubrana, is a founder and CEO of EDDU Energy (France). EDDU Energy’s mission is to transform wasted energy into useful power through the use of computing technology. EDDU Energy harnesses a variety of often overlooked energy sources, such as excess renewable energy, flare gas from oil facilities, and landfill gas. EDDU Energy’s solution, a scalable and mobile containerised data center, allows for easy integration in various settings and represents a last chance to capitalise on energy that would otherwise be wasted. By utilising these resources, EDDU Energy not only provides a cost-effective valorisation of lost energy but also generates additional revenue for energy producers. Additionally, the use of these energies contributes to the decarbonisation of our operations, marking a significant step towards increased energy efficiency and supporting sustainable development initiatives.
The world unanimously recognises the urgency of reducing greenhouse gas emissions, which has spurred a rapid expansion of renewable energies to decrease emissions associated with electricity production. However, integrating them into the grid poses significant challenges. Not only can the intermittency of renewable energies disrupt the balance of the electrical grid, but it also leads to economic issues such as energy price fluctuations and the costs associated with managing overproduction, which can undermine the profitability of producers. At EDDU Energy, we identify Bitcoin mining as a strategic solution for effectively utilising surplus energy while stabilising the network, thus merging innovation and sustainability in an economically viable model.
What is the challenge posed by renewable energies today?
Managing a stable electrical grid requires that energy production be constantly aligned with consumption to maintain a stable operating frequency of 50 hertz, a crucial standard for the integrity of the European electrical grid. However, the integration of renewable energies, by their intermittent nature, presents a significant challenge due to their dependence on variable weather conditions, which can hinder this delicate balance.
Europe, committed to an energy transition, has set a goal to integrate at least 42.5% renewable energy by 2030. This ambitious threshold necessitates the deployment of innovative and flexible solutions to efficiently integrate these capacities without compromising network stability, especially during periods of overproduction or underproduction of energy.
The widespread adoption of renewable energies within the European network also has notable economic repercussions. For example, over the past fifteen years in Europe, the volatility of electricity prices, often influenced by seasonal overproduction, can lead to negative prices, particularly during the summer months with solar and winter months with wind. This situation can negate or even reverse the economic benefits for producers, sometimes forcing them to pay to insert their electricity onto the network.
In the context of valorising lost energies, flexibility is essential. Bitcoin mining emerges as a viable and suitable solution. This industry, although energy-intensive, can adjust its consumption in real time, using surplus energy that would otherwise be wasted. This not only helps stabilise the network by absorbing production peaks but also provides an economic advantage by generating additional revenue for network operators and energy producers. Thus, Bitcoin mining can play a pivotal role in the transition towards a greener and more flexible energy grid, while fostering a circular energy economy.
What is the challenge for Bitcoin mining?
The economic model of Bitcoin mining is primarily influenced by production costs, and electricity represents the most significant expense. Globally, the average acquisition price for a megawatt-hour for mining is about $50/MWh. However, in Europe, the situation is considerably different. Energy costs are significantly higher, with an average exceeding $100/MWh for several years, making mining practically unfeasible at such prices. For Bitcoin mining to be viable and grow in Europe, which accounts for 6% of the world’s hashrate, strong innovation is essential.
Europe must position itself at the forefront by using surplus energies, becoming a key player in network balancing, and efficiently reusing the heat produced by mining. These innovations not only help reduce operational costs but also transform Bitcoin mining into an activity that supports the continent’s sustainability goals. By exploiting surplus energy and contributing to network balancing, Bitcoin mining can become an integral component of the European energy transition, while valorising the heat generated for other applications, thereby increasing its acceptability and ecological efficiency.
Why might Bitcoin mining have a place in Europe?
As Europe continues to increase its renewable energy capacity, the need for flexible loads becomes crucial. Currently, the European grid is not equipped to absorb the rapid development of renewable energy. This creates queues for sites awaiting connection, which are currently experiencing significant losses. Bitcoin mining presents itself as an ideal solution to transform the surplus energy from these waiting sites into tangible value. This conversion not only allows for the efficient use of excess energy but also provides additional revenue to energy producers that would otherwise be lost during periods of overproduction/waiting for connection.
Furthermore, Bitcoin mining’s ability to quickly adjust to network needs makes it particularly suited for participation in the Frequency Containment Reserve (FCR). This flexibility is essential for the European network, which needs to double its capacity to meet the 2030 objectives. Unlike conventional data centres, which require near-constant availability, Bitcoin mining installations can adjust their electricity consumption in real time, reducing or increasing the load according to network fluctuations.
By integrating Bitcoin mining into its energy strategy, Europe can not only enhance the stability of its electrical grid but also encourage more judicious use of renewable resources. This contributes to a dual objective: optimising the management of renewable energy while generating additional economic benefits for market players.
What about the carbon emissions of Bitcoin mining in Europe?
Due to economic pressure to minimise operational costs, Bitcoin miners in Europe are incentivised to use renewable energies, which offer a competitive levelised cost of electricity (LCOE). This dynamic promotes a natural “greenification” of the industry, essential for maintaining its competitiveness in the market. Regions like Norway and Sweden, with their segmented energy markets and an abundance of renewable energy, as well as Iceland, rich in geothermal resources, become ideal hubs for Bitcoin mining due to their energy surplus.
Moreover, faced with the challenge of heat dissipation, common to all data centres, the Bitcoin mining industry in Europe has begun to adopt innovative solutions such as oil or hydro cooling systems. These technologies not only improve the energy efficiency of mining operations but also allow for the recovery and reuse of nearly 95% of the heat generated. This recovered heat can be used for various applications such as indoor farming, building heating, urban heat networks, as well as for heating pools and spas or even desalination.
These innovations contribute to a significant reduction in the carbon emissions associated with Bitcoin mining and show how the industry can not only adapt to environmental constraints but also play a proactive role in the European energy transition. By transforming a once problematic by-product into a useful resource, Bitcoin mining in Europe aligns with the continent’s sustainable development goals.
EDDU Energy Projects in Europe
At EDDU Energy, we strongly believe in the potential of Bitcoin mining as a crucial and promising alternative for a sustainable energy future. We have established several strategic partnerships to strengthen our commitment to the energy transition. One such partnership with a Finnish company specialising in the energy transition of buildings aims to target energy losses of their clients and propose solutions to correct them. This partnership frequently highlights the efficiency of building heating systems, which can be outdated and underperforming. Currently, we are working in tandem with this company to integrate our heat solution into projects, including ongoing discussions for a shopping center and an open space building that would be heated exclusively by our machines.
In France, we are also collaborating with a company specialised in network balancing optimisation and an expert in wholesale market trading. Together, we are exploring the integration of Bitcoin mining for specific cases of isolated renewable producers who need a local consumer.
Finland stands out for its commitment to a circular economy. We contribute to this effort by integrating the heat generated by our servers into the country’s urban heating network, thus supporting Finnish goals to achieve zero carbon emissions by 2035.
According to the IEA, district heating is an extremely efficient way to provide large-scale, cost-effective decarbonised heat. Finland, which has an advanced district heating network, is among the leading producers of heat for urban networks in the Nordic countries. Since the 1970s, demand for district heating services has grown steadily, stimulating a rapid transition to renewable sources. In 2005, only 15% of primary energy for heat production came from renewable sources, whereas by 2024, this figure has reached 60%.
The country is also increasingly adopting non-combustible technologies such as heat pumps, waste heat and geothermal energy, in line with Finnish NCES guidelines to accelerate the decarbonisation of urban heating by 2035. Moreover, leveraging its experience in reusing heat from data centres, Finland recently formed a partnership with Microsoft in Espoo for Fortum, the country’s main energy provider, to adjust and redistribute residual heat into the city’s urban network.
EDDU Energy has chosen Finland for its projects for several strategic reasons: its electricity grid, powered by 90% fossil-free sources, naturally reduces the carbon footprint of our Bitcoin mining operations. This choice also facilitates our collaboration with Fingrid to help balance the national FCR network. Additionally, our ability to continuously provide stable temperature heat at a competitive cost creates additional revenue, strengthening our position in the market while helping Finland to simplify and efficiently decarbonise its national heating network.
Conclusion
Bitcoin mining in Europe is economically viable only for miners who exploit surplus renewable energies, thus serving as active players in balancing the energy network. With an increasingly competitive market, the reuse of heat proves to be a crucial pillar for Bitcoin mining in Europe, offering a significant advantage over international competitors where this practice remains underdeveloped.
The logic of Bitcoin mining requires the use of the most affordable and competitive energy, primarily from renewable sources, with additional revenues as a priority to maintain competitiveness.
I am convinced that Europe reaps substantial benefits by hosting Bitcoin mining: it represents a flexible consumer that supports the adoption of renewable energies, contributes to the decarbonisation of various industries and nations through the valorisation of the heat produced, thus aiding in achieving the goal of zero carbon emissions. I would like to suggest some Proposed Regulations for the Integration of Bitcoin Mining into the EU Energy Strategy (attached as an exhibit hereto). Additionally, this activity generates highly skilled jobs, such as electrical engineers and specialised technicians. Adaptable and flexible legislation is essential to fully integrate Bitcoin mining as a technology conducive to achieving European carbon neutrality goals. Conversely, a ban or excessively restrictive measures would be counterproductive to these ambitions.
Thank you sincerely for taking the time to read this information. I hope to have illuminated the perspectives and innovations that shape Bitcoin mining in Europe as well as our company’s commitment to a sustainable energy future. I am at your full disposal for any additional information or to answer your questions. Do not hesitate to contact me to explore collaboration opportunities or for any other inquiries.
EXHIBIT to the testimonial by Eduard Dubrana, EDDU Energy
Proposed Regulations for the Integration of Bitcoin Mining into the EU Energy Strategy
We see an opportunity to judiciously regulate Bitcoin mining in Europe in a way that supports this industry while advancing towards the EU’s energy objectives. In my opinion, it is essential to facilitate partnerships between Bitcoin miners and renewable energy providers and to promote tax incentives for innovation in energy efficiency.
However, I believe it is important not to impose overly strict restrictions on energy consumption or specific taxes that could unnecessarily constrain the potential of Bitcoin mining. Such measures could indeed restrict innovation and reduce the efficiency of this industry.
Proposals:
Minimum Low-Carbon Energy Threshold with Exemptions: Impose a minimum threshold of 50% use of low-carbon energy for bitcoin mining centres connected to the European electricity grid, including renewable energy sources as well as other low-carbon sources such as nuclear, etc. Proof will have to be provided via analysis of the national grid or proof provided by the energy provider of the origin of the energy used in the case of a predominantly non-low-carbon grid, or by independent audit. This requirement does not apply to off-grid operations, giving them greater flexibility in the use of local and potentially intermittent energy sources.
Frequency Regulation Obligation: Mandate the participation of Bitcoin mining centres in the local frequency containment reserve (FCR) mechanism, to contribute to the balancing of the electrical grid. This participation is required to help adjust energy consumption in real time in response to network fluctuations, unless these centres are involved in validated heat resale activities.
Energy Performance Requirements (PUE): Impose a minimum Power Usage Effectiveness (PUE) for Bitcoin mining operations to ensure efficient energy use. The PUE must be regularly audited to ensure compliance and encourage continuous improvements in energy efficiency.
These regulations aim to ensure that Bitcoin mining proactively contributes to the European energy transition towards a sustainable and low-carbon model, by responsibly exploiting energy resources and actively participating in the management and stabilisation of the energy grid.
On the other hand, some regulatory proposals could negatively impact the Bitcoin mining industry, an industry that nevertheless holds significant potential to support our energy transition goals.
Avoid Ban on Bitcoin Mining and Discriminatory Treatment of Proof of Work: Banning Bitcoin mining within European territory, as well as any discriminatory treatment of Proof of Work using arbitrary sustainability indicators, would constitute discrimination against a specific industry, preventing Europe from benefiting from a flexible tool for managing renewable energies. Mining can play a key role in stabilising the grid by using excess energy that cannot be efficiently stored or immediately used. A total ban would not only overlook the potential benefits of this industry in terms of absorbing energy surpluses but also its capacity to stimulate technological innovation and energy efficiency. Any discriminatory treatment of Proof of Work with the use of arbitrary sustainability indicators
Avoiding Strict Limitations on Energy Consumption: Imposing fixed restrictions on the energy consumption of mining facilities or limiting mining activity to specific times could hinder the natural role this industry plays in balancing the electrical grid. Bitcoin mining dynamically adjusts its energy consumption based on market conditions and the availability of energy resources, thus contributing to the natural balance of the network. Arbitrary limits could prevent the sector from fully realising its potential as a flexible and responsive energy management tool.
Specific Electricity Taxation: Applying a specific tax on the electricity used for Bitcoin mining could severely compromise the competitiveness of this industry in Europe. Given that the business model of mining heavily relies on the cost of electricity, an additional tax would make mining operations significantly less viable, potentially pushing activity out of Europe to regions where electricity is cheaper but also where environmental standards may be less stringent, which goes against the EU’s sustainability goals.
Testimonial by Pierre Rochard, Riot Platforms
THE POSITIVE EXTERNALITIES OF BITCOIN MINING — A CLOSER LOOK AT THE CONVERGENCE OF BTC AND ESG
Pierre Rochard is Vice President of Research, Riot Platforms, Inc. Pierre has been associated with Riot since July 2019, initially as a member of the Advisory Board prior to officially joining the Company in July 2022 as Vice President, Research. Pierre brings a significant amount of Bitcoin-related knowledge to Riot and is a widely respected advocate for Bitcoin’s decentralised governance and value. He has researched and written about Bitcoin since early 2013 and co-founded the Satoshi Nakamoto Institute in 2014 to curate best-in-class primary source literature about Bitcoin.Prior to Riot, Pierre was a Product Manager at Kraken Digital Asset Exchange, where he led the product direction for Bitcoin and launched the Lightning product. He currently also co-hosts the Noded Bitcoin Podcast and the Bitcoin for Advisors Podcast. Pierre holds both a Masters degree in Accounting and a Bachelors of Business Administration in Accounting from the University of Texas at Austin.
Introduction: In a recent report, the European Central Bank characterised Bitcoin as an unproductive, energy-intensive technology that lacks social value and presents an obstacle to the EU’s climate goals. Regrettably, the EU has demonstrated similar hostility in its evaluation of Bitcoin and its impact on society. But the EU and ECB’s estimation of Bitcoin neglects new research from organizations in academia, finance, and human rights that paints a starkly different picture of the world’s most successful cryptocurrency.
As a result of this research, there is an emerging consensus among mainstream financial institutions that, in fact, “Bitcoin appears to provide a number of benefits across an ESG framework.” To that end, this memo seeks to correct the record by highlighting the positive externalities of Bitcoin mining, including both the environmental, humanitarian, and social benefits of the world’s most successful cryptocurrency. The goal of this memo is to equip the European Securities and Markets Authority (ESMA) with the most accurate information on Bitcoin and its many use cases.
Creating a Multibillion-Dollar Market for Renewables: Among Bitcoin’s primary use cases is creating a market for stranded energy from renewable sources.
- Bitcoin is able to capture the power generated from solar, wind, and geothermal sources, when it would otherwise go to waste through curtailment, and monetise that energy, converting it into a valuable digital commodity.
- That’s because the Bitcoin network operates 24/7/365, allowing miners to make use of renewable energy at all hours of the day and during any season of the year. This is critical because sources like wind and solar are highly intermittent, and often the least generative when demand is typically the highest on most power grids, i.e., in the mornings and evenings.
- Already, Bitcoin is bootstrapping renewable energy projects in rural Africa, with miners stepping in as buyers of last resort for utility providers trying to reach the 600m people who don’t have access to the grid.
- Bitcoin mining revolutionises the green power business model by creating a 24/7 market for energy that would otherwise go to waste. It creates a unique mix of economic incentives that could electrify the most remote regions of the world.
- Thanks to Bitcoin’s flexible demand load, it also plays a critical role in stabilising the grid. Bitcoin miners can act as an energy sponge, soaking up excess power when necessary to keep it from overloading the grid. But they can also shut down operations instantaneously when demand spikes. These unique features increase demand for renewables while also helping to lower electricity costs for consumers.
- Because Bitcoin miners can set up anywhere, including co-locating around renewable energy sources, the World Economic Forum posited that “crypto mining could retire fossil fuels for good.” It highlighted the positive externalities from crypto mining activity, considering it “a catalyst or market driver for renewable energy projects.”
- Consider that renewable energy powers 58.9% of all Bitcoin mining globally, with the highest concentration of green Bitcoin mining taking place in the United States.
- For example, in the US, Texas has become one of the most popular destinations for Bitcoin miners due to its abundant affordable energy, and the most diverse-sourced energy grid in the nation. As of February 2024, solar, wind, hydro, and nuclear energy sources powered about 56% of the state’s supply of electricity, and Bitcoin miners enhance the demand and proportional use of clean energy [Comptroller of the State of Texas. “Texas’ Energy Profile.” September 2022].
- What’s more, KPMG reported that the Bitcoin mining industry is “focused on driving toward Net Zero emissions” in the coming years.
Significant Revisions to Bitcoin’s Energy Usage: With access to more accurate information on crypto mining activity, past reports on Bitcoin’s energy usage have undergone significant revisions in recent years, revealing much less power consumption than previously thought. New data from Cambridge University reveal that the Bitcoin network comprises only a tiny fraction of global energy usage, especially when compared to other sectors of the economy.
- According to the Cambridge Center for Alternative Finance, Bitcoin is only indirectly accountable for 0.12% of carbon emissions. This amount is miniscule compared to industries like tourism, agriculture, and fashion—and it’s expected to fall even further as miners move toward Net Zero emissions.
- In 2017, Newsweek speculated that Bitcoin could consume all the world’s energy by the year 2020. But such apocalyptic predictions have been wholly debunked. Today, Bitcoin accounts for only 0.18% of global energy consumption — less than gold mining and comparable to the consumption of refrigerators, just in the U.S., not globally [see also, BMC Q4 2022 Presentation (bitcoinminingcouncil.com)].
- Bitcoin mining rigs run on 100% electricity—so it should be noted that they themselves don’t emit any carbon. There are, of course, emissions from some of the regulated utilities that generate this electricity. But even on this front, Bitcoin miners are leading the way, drawing from the cleanest power mix of almost any industry.
Misinformation Regarding Bitcoin’s Water Consumption: Another critique of Bitcoin is that the network consumes too much water to process transactions. This critique was levied by Alex de Vries, an anti-Bitcoin central bank employee and graduate student in the Netherlands. De Vries claims that every Bitcoin “transaction” uses a swimming pool of water.
- One key problem with this framing is that the critic’s conflicts of interest were not adequately disclosed, and his article was cited as a “study” instead of a “commentary.” Another problem is it shows an inaccurate understanding of how the Bitcoin network functions. As Cambridge University found in 2018, the energy cost per transaction is meaningless because a single blockchain transaction can include hundreds of individual payments and “represent potentially billions of timestamped data points.”
- Additionally, Bitcoin’s water use must be put in context. For example, de Vries’ likely overestimate of Bitcoin’s global water use in 2021 is about half of the amount of water used for irrigation at American golf courses and less than a single percentage point of the amount of water used by power plants in the United States.
- In 2021, 73% of the utility-scale electricity generated in the United States came from plants that require water cooling. Following de Vries’ logic, nearly any device consuming electricity—including electric vehicles—consumes too much water.
- It’s also worth noting that large-scale Bitcoin miners are becoming more efficient in their water usage thanks to new advancements in technology. Riot Platforms, for example, has created a retention pond at its facility, allowing it to use recycled water to cool its operations.
- Riot and other companies are deploying immersion cooling systems, which will make water demand for Bitcoin miners only a small fraction of a typical data center. Unlike traditional data centres, these state-of-the-art mining facilities do not rely on air-cooling and chillers to keep their machines operable. Instead, they rely on immersion cooling technology, which is virtually silent. These cooling systems all but eliminate noise pollution by emitting no more sound than a home air-conditioning system.
Reducing Water Scarcity in Water-Scarce Nations: Bitcoin’s critics have removed context from the conversation surrounding Bitcoin and water consumption. Also missing from this conversation: the critical role the network plays in reducing water scarcity in water-scarce nations.
- Countries in the Middle East that suffer from water scarcity rely on desalination to produce potable water. But the desalination process requires large amounts of electricity. And it’s harder still to power desalination with renewable energy. This is where Bitcoin can help.
- As explained in a recent study from researchers at Cornell University, Bitcoin mining has the unique ability to bootstrap clean energy projects by serving as a customer of last resort. This is especially critical for solar, wind, and hydro projects, which often produce energy during periods of low demand. Without Bitcoin miners, this energy would go to waste. But with Bitcoin miners, utility providers always have a customer.
- That’s why Bitcoin miners are expected to play an important role in the buildout of large-scale solar farms in countries like the United Arab Emirates. Bitcoin miners will use energy that would otherwise go to waste, reducing overall energy costs and making these kinds of renewable projects economically viable. This will be critical for generating the overall power needed for desalination in these water-scare countries.
- Already, the UAE is using heat from Bitcoin miners to increase the efficiency of desalination. Two companies — Zero Two and Marathon Digital — for example, have built technology to recycle heat from Bitcoin mining rigs to facilitate the desalination process, allowing them to desalinate more water for the same net cost.
Correcting the Record on Bitcoin and Money Laundering: Just as technological development is turning Bitcoin into a boon for ESG, it is also making Bitcoin an ideal tool to counter money laundering and illicit crime. That’s because the Bitcoin blockchain is a public ledger that logs all transactions permanently and immutably, making it possible for law enforcement officers to easily track and even retroactively prosecute financial crimes in a way they could never do with cash.
- That’s why money laundering via Bitcoin is now considered “a classically dumb crime.” Any transaction on the blockchain can now be tracked and traced like never before, thanks to the development of cutting-edge tools from blockchain analytics firms like Chainalysis and Cyphertrace. These companies have partnered with U.S. Federal agencies to help stamp out illicit financial activity on the Bitcoin blockchain.
- The public nature of the blockchain combined with new developments in tracking tools make Bitcoin the least ideal cryptocurrency for laundering money. Far more preferable for criminals is regular currency.
- Consider that $33 billion in cryptocurrency was used for money laundering between 2017 and 2022. Now compare that to traditional currency: the UN estimates that between $800 billion and $2 trillion in fiat is laundered each year.
- These findings are consistent with the US Treasury Department’s recent discovery that “the use of virtual assets for money laundering remains far below that of fiat currency and more traditional methods”
- To the extent Bitcoin is used for illicit purposes, it’s simply because other countries don’t have the robust AML restrictions for crypto on-ramps and off-ramps that the United States has. Bad actors take advantage of this jurisdictional arbitrage in the same way they do with precious metals and other assets. But there’s nothing unique about Bitcoin that allows this to happen.
From Trash to Treasure — Turning Toxic Gas into Digital Gold: Scientific studies have reported that landfills are “super emitters” of methane, and that at least 25% of today’s global warming is driven by methane resulting from human behaviour. According to the EPA, landfills are already the third-largest sources of methane emissions in the US generated by human activity. In the years to come, landfills could even overtake agriculture as the world’s largest methane emission source. Thankfully, Bitcoin offers a way to reduce the harmful effects of landfill gas. How? By mining Bitcoin with methane.
- Because Bitcoin mining rigs can operate anywhere, they can monetise excess energy more efficiently than any industry in the world—including methane from landfills. Riot, one of the world’s leading Bitcoin miners, recently partnered with Reformed Energy in this endeavour.
- The companies use patented technology to convert solid and liquid waste streams into electricity to mine Bitcoin. This process mitigates pollution from methane and reduces the physical volume of waste by 90%.
- Other companies like Vespene Energy and Nodal Power are using similar processes to capture landfill gas to power the Bitcoin network, turning other people’s trash into digital treasure [1], [2], [3].
- To mine Bitcoin with methane, these companies are sending perforated tubes into a landfill’s depths. These tubes capture methane from decomposing trash. They then funnel the methane to a central location, where the methane powers a micro-turbine that generates electricity. That electricity is then used to mine Bitcoin onsite in a process that monetizes stranded energy and significantly reduces carbon emissions.
- This energy conversion process reduces the global warming potential of the methane being used by 99%. If properly scaled, landfill gas could power the entire Bitcoin network. This would make it the first monetary system in the world to achieve net zero emissions while also reducing greenhouse gas emissions by 5,882,500 metric tons of CO2 equivalents each year.
- According to the EPA, these kinds of projects mitigate the impact of climate change by eliminating pollutants that lead to smog and acid rain while also decreasing dependence on coal and oil.
Curbing Carbon Emissions by Mining Bitcoin with Stranded Natural Gas: In addition to landfills, petroleum extraction is another significant driver of methane pollution. Energy producers need to burn excess natural gas as part of the oil extraction process. This practice, known as gas flaring, emits 42 million tons of methane into the atmosphere each year, in addition to 315 tons of carbon dioxide equivalents. But just as companies can capture methane on landfills, they can also capture flared gas on oil sites to mine bitcoin and monetise energy that would have otherwise polluted the atmosphere.
- Bitcoin miners are already curbing the effects of harmful greenhouse gases by converting stranded natural gas into electricity.
- According to a report in the Harvard Business Review, capturing the potential energy of stranded natural gas in the US and Canada could not only reduce carbon emissions by millions of tons; it could also power the entire Bitcoin blockchain.
- Innovative companies based here in the US are building modular data centres powered by stranded natural gas. Crusoe Energy, for example, is partnering with Exxon [Sigalos, MacKenzie, ”Exxon is mining bitcoin in North Dakota as part of its plan to slash emissions.” CNBC. March 26, 2022] and ConocoPhillips [Sigalos, MacKenzie. ”ConocoPhillips is selling extra gas to bitcoin miners in North Dakota.” CNBC. February 15, 2022] to convert natural gas (that would otherwise be flared) into electricity used for Bitcoin mining near oil wells.
- By eliminating the need for gas flaring, this process of converting natural gas into electricity to mine Bitcoin turns a negative externality into a positive one. It reduces waste while also powering a monetary work that acts as a lifeboat to families in inflation-ravaged countries across the globe.
- Bitcoin’s most underrated use case is its ability to capture the value of stranded energy and transport that value anywhere in the world at the speed of light. This is why Bitcoin is often referred to as “digital energy.” Digitising the world’s stranded energy can create new economic opportunities in developing countries while also reducing waste and accelerating the transition to renewables.
Financial Inclusion for Minorities, Refugees, and the Unbanked: Bitcoin has emerged as a revolutionary force in the global financial landscape, presenting social benefits for marginalised communities—including minorities, refugees, and the unbanked. While some critics continue to argue that Bitcoin is not “useful,” the facts paint a different picture entirely.
- Case in point: Bitcoin has experienced significant adoption among minority populations in the US who have historically been shut out of the traditional financial system or who have less access to credit. A recent survey from Pew, for example, found that 18% of Black adults have used cryptocurrency compared to just 13% of white adults.
- According to the Federal Reserve, Black Americans are also more likely to own cryptocurrency as opposed to stocks and mutual funds. This owes, in large part, to a lack of trust in financial institutions that have historically discriminated against Black populations.
- Bitcoin is also revitalising the Rust Belt and rural America. That’s because bitcoin mining concentrates in areas of low-cost electricity while simultaneously driving investment in renewables like wind and solar.
- Bitcoin’s ESG use cases provide additional income for farmers and ranchers in rural areas of America while development around mining is creating hundreds of jobs in places like Wyoming and Texas.
- Looking to other countries, Bitcoin has been a lifeboat for many citizens in developing nations, protecting millions from the catastrophic effects of currency collapse in inflation-ravaged countries like Venezuela, Turkey, and Argentina.
- The cryptocurrency has also been critical to refugees and victims of war who have no other way to secure and transmit capital. And it is a boon to families overseas who depend on remittances. Consider that crypto exchange Bitso processed more than $1 billion in remittances from the US to Mexico in the first half of 2022 alone, marking a year-over-year growth rate of 400%.
Conclusion: Not only is the world’s leading cryptocurrency a revolution in finance; it is an instrument for social change. Whether it’s stabilising power grids, monetising stranded energy, reducing greenhouse gas emissions, or expanding financial inclusion, BTC is an ESG asset that will only find more use cases in the years to come.
Testimonial by Sebastien Gouspillou, Big Block Data Center
HOW BITCOIN MINING IS SUPPORTING CONSERVATION EFFORTS AT VIRUNGA NATIONAL PARK, CONGO
Sébastien Gouspillou is the Co-Founder and CEO of Big Block Data Center, a company based in France that specialises in mining Bitcoin and brokering Application-Specific Integrated Circuits (ASICs) for Bitcoin mining on an international scale. Big Block Data Center operates a mining farm in the Democratic Republic of the Congo. The company has experience operating mining farms in Ukraine, Russia, Kazakhstan, Finland, Oman, and Paraguay. In 2018, Sébastien was invited to speak for the Cryptocurrencies Information Commission of the National Assembly in France.
Virunga National Park, located in the eastern Democratic Republic of Congo (DRC), is Africa’s oldest national park and a UNESCO World Heritage site. Known for its rich biodiversity, including the endangered mountain gorillas, the park spans over 7,800 square kilometres, bordering Uganda and Rwanda.
Despite its significance, the park faces numerous challenges. Political instability and conflict with rebel groups have made conservation efforts dangerous. Over 200 rangers have been killed since 1996. Local communities rely heavily on the park’s resources due to widespread poverty, often resulting in illegal activities like logging and poaching. Around 5 million people live just outside the park; most lack electricity to cook, light, or heat their homes. In addition, 80 thousand people live in the park. From 2001 to 2020, Virunga lost nearly 10% of its tree cover, and it is estimated that USD170 million worth of timber and ivory are lost annually. However, the alternative for the local population is either to go hungry or struggle to pay off local warlords.
The decision of Virunga’s management to engage in Bitcoin mining emerged from a series of crises that severely impacted its primary revenue source — tourism. Before the disruptions, tourism accounted for 40% of the park’s income. However, by 2020, there was no longer any tourists due to various factors, including: kidnappings by local rebel groups forced the suspension of tourism in 2018, the 2019 Ebola outbreak further discouraged international visitors, and the global COVID-19 pandemic shut down tourism entirely.
The park has nearly 700 rangers for its protection. Unfortunately, the Congolese government could provide only around 1% of the park’s operating budget, which made any conservation efforts impossible. Virunga desperately needs money, and the region needs job and business opportunities.
The park has been seeking funds from various donors, both governmental and private, from the EU to private family donations. In parallel, the park’s management has considered alternative sources of income, given the loss of tourism. Emmanuel de Merode, the park’s director, tried to find unconventional ways to solve the park’s money problem. We met in 2020, and I told him about Bitcoin mining as a solution to leverage Virunga’s existing hydroelectric infrastructure.
In Virunga operates three hydroelectric power plants in Matebe (August 2013), Mutwanga (December 2015), and Luviro (September 2020), and one more is under construction. The plants generate power using the river’s constant flow rather than dams and reservoirs, which has a low environmental impact. The park had surplus energy capacity but no sufficient number of local buyers, so the energy was going to waste. Bitcoin mining presented a way to monetise this wasted energy and generate revenue to sustain conservation efforts and support local communities.
Mining operations began in September 2020, coinciding with a significant rise in Bitcoin prices. Bitcoin mining, powered by the park’s hydroelectric capacity, presented an innovative and immediate source of revenue that could operate independently of external factors like tourism.
The park operates 10 shipping containers filled with 250 to 500 Bitcoin mining rigs each. Three containers are owned by Virunga, directly generating revenue for the park, while seven are operated by us, as an external investor, who became a buyer of electricity of the last resort in Virunga. In 2021, the mining operation of Virunga generated approximately $500,000 for the park, providing crucial funds when tourism was unavailable. Even as the value of Bitcoin fluctuates, it is still an incredibly good investment for the park. The park does not use Bitcoin for speculation purposes; it generates it. The park mines Bitcoin using surplus energy that would otherwise be wasted, monetising something that otherwise has no value. Even if Bitcoin dropped to 1% of its value, the 10 containers would remain profitable.
When I first visited Virunga, I was struck by the challenges faced by the park and the surrounding community. The lack of reliable funding due to the collapse of tourism made it clear that a new solution was needed. By harnessing the park’s clean, hydroelectric energy for Bitcoin mining, we have managed to create a sustainable source of revenue that directly benefits the park and the local population. The park can finally pay salaries for its employees. The Bitcoin mining generates revenues to supports the park’s conservation activities, which are vital for maintaining biodiversity and attracting future tourism. The park’s management now can fund various community-oriented projects like road construction and water pumping stations.
Mining provides jobs for locals, including roles as technicians overseeing and maintaining the mining equipment. Local university graduates have been hired, gaining valuable skills and experience in a high-tech industry. These jobs offer stable income and professional growth in a region where formal employment opportunities are scarce.
The park’s hydroelectric plants not only power the mining operation but also provide electricity to local businesses and households. This reliable electricity has enabled small and medium-sized enterprises to grow. For example, local maize factories and chia seeds production have benefited from affordable and reliable power, reducing operational costs and increasing employment opportunities. Yet, the local business are still not sufficient to utilise all of energy generated by the plants. Bitcoin mining created a win-win situation for everyone.
Given the challenges faced by the region, including political instability, economic constraints, and the collapse of tourism due to global crises, traditional funding mechanisms were no longer reliable. Bitcoin mining, powered by the park’s hydroelectric capacity, presented an innovative and immediate source of revenue that could operate independently of external factors like tourism while also capitalising on the park’s existing resources.
However, our Bitcoin mining operation is not just about generating revenue; it’s about providing hope and stability in a region that desperately needs it. While it safes Virunga National Park, it brings economic and social benefits to the local population, it also highlights the challenges of implementing high-tech solutions in regions fraught with political and economic instability. The project stands as a significant example of innovative approaches to funding conservation and community development. Bitcoin can be a force of development even in such places as Congolese rainforests.
Testimonial of Thomas Pacchia, Stronghold Digital Mining
PROTECTING ENVIROMENT: STRONGHOLD DIGITAL MINING IS USING WASTE COAL TO MINE BITCOIN
Thomas Pacchia sits on the Board of Directors of Stronghold Digital Mining, a public company based in the United States that reutilizes coal refuse to generate sustainable power for Bitcoin mining. Thomas is a specialist in Bitcoin and cryptocurrency assets. In 2017, Thomas founded HODL Capital, a digital asset hedge fund focused on the crypto and hash rate markets, on top of working with Fidelity Digital Asset Services and Digital Asset Holdings. Before a career in Bitcoin and cryptocurrencies, Thomas worked as swap and derivative lawyer at Cadwalader Wickersham & Taft LLP.
Sections in this document:
- Coal refuse – waste product of coal mining
- Turning a waste product from coal mining into energy for Bitcoin mining
1. Coal refuse – waste product of coal mining
Coal refuse, also called slag, culm, or gob, refers to the waste product resulting from coal mining which takes the form of piles of black rock. Gob has highly hazardous properties that cause a range of consequences: for the environment, it pollutes land, water, and air, and even comes with the risk of spontaneous combustion; for health, it comes with particles that contribute to cancer.
With coal and steel industries gradually loosing relevance and closing after the Second World War, coal refuse started to pile up and to cause pollution. At the same time, cleaning up gob constitutes a challenge, both logistically, technologically, and even financially because of very limited viability.
2. Turning a waste product from coal mining into energy for Bitcoin mining
Nevertheless, with one plant located in Western Pennsylvania, called Scrubgrass, and one located in Eastern Pennsylvania, called Panther Creek, Stronghold Digital Mining aims to solve coal refuse thanks to Bitcoin mining.
Namely, rather wasting away and polluting people and the environment, coal refuse is instead collected and transported to be sorted, processed, and broken apart. After that, gob reaches a boiler to be burned down, producing electricity which powers Bitcoin mining. Bitcoin mining consists in computers competing all over the planet to solve the same puzzle, and the computers that reaches the correct result first, earns a Bitcoin, which corresponds to just over $60.000. This process, however, requires a lot of electricity.
With the process taking place at Scrubgrass and Panther Creek, a hazardous by-product, rather than causing harm and wasting away, is gathered and utilised to feed computing power for mining Bitcoin. Moreover, “When the grid needs it, the data center comes offline, and all that power that was going to the data center switches to the grid. And when the grid doesn’t need it, it switches again and comes back to the data center”. As a result, more coal refuse is burnt, more electricity is produced, and more Bitcoin is mined, and this greatly helps the efficiency of the power plant. The fact that there is always demand for the electricity and allows the power plant to run a full capacity means over the long run there will be fewer disruptions and a far more reliable flow of electricity.
Scrubgrass and Panther Creek in Pennsylvania organised by Stronghold Digital Mining are examples of the Bitcoin mining operation which could help the EU member states and other countries in cleaning up and remediating after an ecological disaster. In 2016, there were 324 coal plants in Europe. Each of them produced coal ash, the byproduct left over from burning coal to produce electricity, can leach into groundwater and pollute waterways, and contains heavy metals considered to be carcinogens. The EU should be committed to and create a supportive regulatory climate for the use of Bitcoin mining new technologies both in eliminating the ecological implications of operating coal plants and in boosting alternative energy sources.
Testimonial of Tim James, Rock Mafia
Tim James is an American singer, songwriter, record producer and entrepreneur. He is a co-founder of Rock Mafia, a successful and internationally known record production company, and Rock Mafia AI. Rock Mafia has written and produced 38 top ten singles and have sold over 50 million records worldwide. Tim is a Bitcoin mining investor.
I have been in the Bitcoin mining business since 2017. This journey has been humbling, as I’ve observed a digital network and digital asset evolve from being utilized by a small group of cypherpunks to becoming the eighth or ninth (depending on what day this is read) largest asset in the world.
My experience as a Bitcoin miner has been a constant educational process. Deeply concerned about climate change, I actively ensure that all our businesses adopt a path toward carbon-neutrality. Despite this, my experience as a small-scale Bitcoin miner, with fewer than 400 machines, has been challenging. In my quest to use primarily stranded or renewable energy, I invested a data center in rural upstate New York that was entirely powered via hydro. However, due to a lack of real understanding, the data center was shut down, and my miners forced to move to fossil-fueled data center in South Carolina. The irony here is that climate-conscious policymakers in progressive states in the USA have made decisions that inadvertently drive environmentally responsible miners to less conscientious states—a classic case of the unintended consequences of ill-informed policy. Also, as an aside, at the first opportunity, I moved those miners in South Carolina at my own expense to a hydro energy center in Colorado, again only to reiterate, I practice what I preach.
This firsthand experience of operating multiple machines in New York, powered sustainably by hydroelectric energy, only to be halted by local policymakers, underscores the importance of supporting renewable and sustainable energy centers. I share this experience to emphasize that the right actions can empower these vital initiatives. Currently, my mining fleet operates with approximately 68% renewable energy. My aim is to achieve 100% renewable energy by 2028 and to become carbon-negative by joining data centers which use landfill and flared gas as energy.
I am compelled to write this letter to the EU because I believe the world is at an impasse akin to that of the late 19th century when animal oils were used for street lighting. The swift transition from oil lamps to electricity was unforgiving to those who resisted change. Similarly, computing power is poised to become the foundation of the world’s monetary network. Whether it involves the EU, or not, the change is inevitable because it represents progress. Furthermore, computing power will be the main driver of productivity, regardless of individual preferences. It is crucial for climate-conscious legislatures to not just stymie progress but to examine the sustainability of their local energy sources. Data centers can only be as eco-friendly as the public grid allows. This was a tough lesson for me to learn. Initially, my idealism blinded me to certain realities. Without forward-thinking policies that incentivize data centers to utilize renewable and clean stranded energy, we inadvertently push them to locations that disregard climate concerns.
Like many emergent technologies, existing interests are compelled to discredit them through fear and political influence. Forcing a horse and horse rider carrying a white flag in front of an automobile while traveling through the streets of New York City for “safety” reasons is a perfect example of these types of initiatives by incumbent powers to resist or slow the adoption of the progressive, emergent technologies. A case in point is the fearful and technically unsound claim that Bitcoin Mining wastes water. While I am no scientist, I point anyone who is interested in reading why this claim is unfounded to read Daniel Batten’s article about the Bitcoin water usage and significant factual inaccuracies based on the claims of Alex de Vries. Additionally, Cambridge University as early as 2018 debunked the methodology of measuring Bitcoin resource consumption “per transaction” as fundamentally flawed, following de Vries’s initial claim that Bitcoin energy consumption could be measured per transaction.
There are numerous brilliant minds striving to make Bitcoin mining a carbon-negative endeavor, and I am certain this report highlights many initiatives passionate about this goal. As a small business owner, I embrace not only a digital asset network but also the potential of Large Language Models (LLMs) and stacked computing power to advance creative and productive endeavors.
Now is not the time for protectionism or restriction, but for embracing change with clear guidelines. This will allow progressive and environmentally minded individuals to help shape the future. The EU stands out in many respects. I hope this statement informs policymakers to embrace inevitable changes and steer them towards the most sustainable outcomes. Properly regulated data centers, and the Bitcoin mining network in particular, can enhance the grid’s capacity to deliver energy to citizens during peak times. This has been demonstrated impressively in Texas, although I believe Texas still has a significant journey ahead in ensuring that clean energy underpins these data center projects.
Given the potential for Bitcoin mining to contribute positively to environmental sustainability and energy efficiency, I urge EU regulators to carefully consider these positive externalities when formulating their crypto-asset and sustainability policies. Recognizing the role of Bitcoin mining in promoting the use of renewable energy sources and enhancing grid stability can lead to more informed, effective, and forward-thinking regulatory frameworks. This approach will not only support environmental goals but also encourage technological innovation and economic growth within the EU and globally, aligning with its commitment to both sustainability and technological advancement.
Testimonial by Drew Armstrong, Cathedra Bitcoin
Drew Armstrong is the President and Chief Operating Officer of Cathedra Bitcoin, a publicly traded Bitcoin mining company on the Toronto Stock Exchange Venture Board. Drew Armstrong joins Cathedra from Galaxy Digital. He was a founding member of Galaxy’s Bitcoin mining team and helped build out Galaxy’s mining equipment finance (“MiFi”) product. Drew also worked in the firm’s investment banking and principal investments divisions. Prior to joining Galaxy, Drew began his career at Barclays’ investment bank, where he focused on the origination of esoteric securitised products, such as data center securitisations and collateralised fund obligations. Drew holds BAs in Economics and Philosophy from the University of Chicago.
Bitcoin was built with a proof-of-work consensus mechanism. Proof-of-work is the mechanism by which new batches of transactions (blocks) are added to the ledger, and the nodes on the network treat the chain of blocks with the most cumulative proof-of-work as the true blockchain. Consequently, proof-of-work is what gives Bitcoin holders settlement assurances: to “undo” a transaction on the blockchain, an attacker would need to redo all of the subsequent work done on the honest chain and do so faster than the honest miners.
But what is this “proof-of-work”? It is the proof that costly computation was performed. In Bitcoin’s case, a mathematical function called SHA-256 (Secure Hash Algorithm 256-bit) that takes an input (or “message”) and produces a fixed-size string of bytes, typically in the form of a 64-digit hexadecimal number. Importantly, the input cannot be derived from the output, but an output can quickly be verified given the inputs. With such functions, the only way to achieve a desired output is by systematically guessing-and-checking inputs until the desired output is found. Although the exact number of guesses required cannot be predicted, it can be estimated probabilistically.
But also importantly, these computations all require energy. In fact, the standard unit for energy (the joule) refers to a given amount of work, making proof-of-work a form of as proof-of-energy-spend. This requirement is advantageous because proof-of-work imposes a cost on producing new Bitcoin and a cost on any attempt to attack the chain. It also provides a simple, fair governance mechanism and is the most fair and egalitarian consensus mechanism in that anyone, anywhere in the world can participate; proof-of-work does not discriminate by race, gender, or nationality. In the words of Vaclav Smil, “energy is the only universal currency,” and a joule is a joule. In exchange for using this energy, miners are rewarded with Bitcoin.
In response to Bitcoin’s price appreciation over the last 15 years, an entire industry has emerged to take advantage of this energy arbitrage. Given the transportation costs for energy, there is a wide range of energy prices around the world. Bitcoin miners naturally seek energy that might otherwise be wasted, because such resources are typically the cheapest. One such example would be at oil wells and landfills, where miners repurpose flare gas to reduce methane emissions.
Another important feature of Bitcoin mining is that a miner can shut off their machine at any point, with no costs except for forgone revenue; this enables miners to participate in demand response around the world, stabilising grids as an inverse battery. This has resulted in a massive decentralisation of miners around the world, improving the network’s robustness.
However, computations require hardware as well, and at time of writing, most of the computation is done with application-specific chips designed for Bitcoin mining. This investment in hardware and energy infrastructure also makes Bitcoin more resilient to negative price action, as there are transaction costs associated with a miner shutting down operations. Despite these merits, many have decried proof-of-work as wasteful. They claim that it is possible to achieve the same merits without consuming energy. The alternative most-often proposed is “proof-of-stake,” a mechanism where large holders of a cryptocurrency can “stake” their holdings and become validators. Once they’ve staked assets, these validators select the transactions that should appear in the next block, receiving a yield in return.
There are numerous drawbacks to this system:
- Proof-of-stake is inherently centralising. In such systems, wealth begets wealth as large holders of a token are best positioned to become validators, earning yield to further increase their holdings. This centralising force undermines the key point of decentralised technologies like cryptocurrencies.
- This centralisation of power also leads to governance issues, as the largest holders’ incentives may run counter to the remainder of the holders. They may choose to unwind or censor certain transactions, defeating the purpose in the first place.
- Under a proof-of-stake model, the security of a network can change nearly instantly with asset price. If there is a sudden drop in the price of a token, the network becomes much cheaper to attack. This is in direct contrast to proof-of-work which requires capital-intensive investments in infrastructure, and delayed cash flow cycles, both of which make the network more robust to “flash crashes.”
- Lastly, I believe the staking mechanism means that many proof-of-stake based tokens are actually securities.
So, in short, proof-of-stake cannot replace proof-of-work because it is qualitatively different. If one wants a censorship-resistant money that can be used by human rights activists in despotic regimes or by people excluded from the banking sector, there is no alternative. Proof-of-stake is just a centralised alternative that is far less secure.
And while proof-of-work uses energy, this is a positive thing. Energy is life, and proof-of-work mining can help transform the energy sector for the better, by ensuring no energy goes to waste, thereby potentially reducing the cost of energy for citizens. That is why I am proud to be a Bitcoin miner. I have no doubt Bitcoin and proof-of-work both benefit humanity in ways we are only beginning to see.
Testimonial of Kent Halliburton, Sazmining Inc
Championing Renewable Energy through Bitcoin Mining: Case of Sazmining
Kent Halliburton is the CEO and co-founder of Sazmining Inc., and an experienced professional in the renewable energy sector. Before co-founding Sazmining, Kent led sales and business development at a publicly traded solar energy company, where he managed a team of over 100 people and was responsible for achieving a nine-figure sales target. As a Portuguese citizen with deep involvement in the Bitcoin mining industry, Kent is uniquely positioned at the intersection of cryptocurrency and renewable energy. He is a staunch advocate for combining Bitcoin mining with renewable energy sources.
Trends Toward Sustainability in the Mining Sector
Proof of Work (PoW) is fundamental to the Bitcoin network as it ensures security and integrity. Requiring miners to solve complex mathematical problems, PoW makes altering any aspect of the blockchain computationally expensive, thereby deterring fraud and malicious attacks. This process is crucial for maintaining trust and stability within the Bitcoin ecosystem.
PoW incentivises the use of renewable energy in the following ways: first, it drives demand for the lowest-cost power available, which increasingly comes from renewable sources due to their declining costs and scalability; and, second, Bitcoin mining can provide a stable revenue stream for renewable energy projects, improving their economic viability. This is particularly beneficial for renewable sources like wind and solar, which might produce energy at times when demand is low. Miners can absorb this surplus energy, preventing waste and supporting the financial health of renewable projects.
Nowadays, the Bitcoin mining industry is witnessing a significant shift towards sustainability, with over 54% of its energy now derived from renewable sources. This evolution marks a crucial step in reducing the sector’s carbon footprint and aligns with global environmental goals. As the industry grows, Bitcoin mining could become increasingly pivotal in shaping the renewable energy landscape. This forward-looking approach promises to lessen environmental impact and foster innovation and economic growth within the energy sector.
Incentivising Renewable Energy through Samining’s Use of Hydroelectric Power
Sazmining is a company that provides Bitcoin mining as a service. Customers can purchase their mining rigs directly through our platform. Once purchased, these rigs are shipped to one of our facilities where the company takes care of maintenance and optimisation. This allows customers to mine Bitcoin without needing to manage the physical hardware or worry about the technical complexities of mining operations.
Over the years, our company pioneered the integration of renewable energy in Bitcoin mining. We use hydroelectric power for our Bitcoin mining. We have built strategic partnerships with hydroelectric operators in Wisconsin, USA, and Paraguay, enabling energy producers to sell surplus power. In parallel, we educate the Bitcoin mining community and ensure the resilience and security of the Bitcoin network.
We create demand for low-cost, renewable energy, specifically harnessing otherwise wasted power:
- Demand for Low-Cost Hydroelectric Power: In Wisconsin, we capitalise on the local availability of hydroelectric power, among the lowest-cost renewable energy sources due to its established infrastructure and scalability. The price of the hydroelectric energy we purchase in Wisconsin at 7.5 cents per kWh reflects these cost efficiencies, making it an economically viable option for our intensive mining operations.
- Optimising Surplus Hydroelectric Energy in Paraguay: Our facilities in Paraguay utilise surplus energy from the Itaipu Dam, one of the largest hydroelectric plants in the world. This energy, which would otherwise potentially go to waste or be sold at lower values to Brazil due to market oversupply, is efficiently used in our Bitcoin mining operations at 4.3 cents per kWh. Our business’s ability to absorb this surplus energy during off-peak times is crucial in preventing energy waste and supporting the economic sustainability of the hydroelectric plant.
Sazmining is making a notable impact on Paraguay’s economy by using the excess hydroelectric power from the Itaipu Dam for Bitcoin mining. By using this extra hydroelectric power, Sazmining helps improve local infrastructure, such as power grid upgrades and creating jobs in technology and maintenance related to the mining operations. By leveraging hydroelectric power, we ensure a steady and sustainable demand for renewable energy, helping to stabilise the local grid and reduce environmental impact. Sazmining’s operations in Paraguay have brought significant economic benefits to the area. By introducing a high-tech sector to a local economy that has mainly relied on agriculture and hydroelectric power, Sazmining is helping to strengthen and diversify the economic landscape. This diversification creates new opportunities for growth and development, contributing positively to the region’s future.
Our operations serve as an example of how Bitcoin mining can be compatible with environmental objectives by using renewable energy sources that might otherwise go to waste when production exceeds demand. Bitcoin mining can have global benefits, especially when combined with renewable energy. Unused clean energy can be turned into something valuable, helping to grow renewable energy infrastructure and reduce carbon emissions worldwide. Bitcoin mining also supports financial inclusion by providing economic opportunities in areas with limited banking services, contributing to wider social advantages.
Call to EU Regulators
I believe that there should be a reformed regulatory approach that better aligns with Bitcoin mining’s technological realities and environmental goals. Our experience in Paraguay, where we’ve turned excess hydroelectric power into a boon for the local economy, illustrates what could be possible in Europe. The EU’s approach to Bitcoin mining regulations needs to be more nuanced, considering not just the energy usage but the source of that energy and its broader economic impact.
The EU has a significant opportunity to leverage Bitcoin mining as a driver for renewable energy and economic growth. By recognising Bitcoin mining’s potential to stimulate demand for renewable energy, the EU can take a substantial step towards its emissions reduction targets.
As the EU looks to modernise Europe’s electricity grid and prepare for renewables-based electrification of the energy system, supporting Bitcoin mining can significantly contribute to these objectives.
Here are three specific reasons why the EU should integrate Bitcoin mining into their energy strategies:
- Enhanced Grid Management and Demand Response: Bitcoin mining operations can be a flexible load option, providing demand response services crucial for integrating intermittent renewable sources like wind and solar. By adjusting their energy usage in real-time, Bitcoin miners can help balance the grid, reducing the strain during periods of low production or excessive supply.
- Utilisation of Excess Renewable Energy: As highlighted in the EU’s recent action plan, there is an urgent need to manage connection queues and efficiently utilise available grid capacity. Bitcoin mining can consume excess electricity that might otherwise require costly storage solutions or go to waste. This ability to absorb surplus power, especially during off-peak hours, supports the financial viability of renewable projects and reduces the wastage of generated energy.
- Stimulation of Infrastructure Investmentand Job Creation: The EU’s plan underscores the need for €584 billion in new investments to upgrade the electricity grids by 2030. With their requirement for robust grid connections, Bitcoin mining facilities can catalyse such infrastructure investments. By strategically establishing mining operations, the EU can stimulate private investment in grid enhancement, aligning with long-term goals for energy system decarbonisation and fostering job creation and economic growth within the energy sector.
Incorporating Bitcoin mining into the EU’s energy strategy can help manage the renewable energy supply more efficiently and promote technological advancements and economic growth within the energy sector. We urge EU policymakers to recognise these potential benefits and incorporate supportive measures for Bitcoin mining into their regulatory frameworks.
Bibliography:
- Why Hydropower Owners Need to Talk with Bitcoin Miners – https://www.hydro.org/powerhouse/article/why-hydropower-owners-need-to-talk-with-bitcoin-miners/
- Report: Bitcoin Mining Sustainable Energy Usage Reaches 54.5% – https://news.bitcoin.com/report-bitcoin-mining-sustainable-energy-usage-reaches-54-5/
- Bitcoin Miner Using Paraguay Itaipu Dam to Power Its New Facility – Decrypt – https://decrypt.co/201963/bitcoin-miner-sazmining-paraguay-itaipu-dam
- Bitcoin Spurs Major Renewable Projects From Ocean Thermal To Hydro – https://www.forbes.com/sites/digital-assets/2024/04/18/bitcoin-spurs-major-renewable-projects-from-ocean-thermal-to-hydro/?sh=256da85a7d5f
- Paraguay’s proposed Bitcoin mining ban could cost $200M a year – https://cointelegraph.com/news/paraguays-proposed-bitcoin-mining-ban-cost-200-million-per-year
- Itaipu Hydroelectric Dam – https://www.gihub.org/connectivity-across-borders/case-studies/itaipu-hydroelectric-dam/
- The primary energy source for Bitcoin mining is hydropower – https://www.hydroreview.com/business-finance/business/the-major-energy-source-for-bitcoin-mining-is-hydropower/#gref
- Paraguayan Congressman Would Make Bitcoin Legal Tender If Elected President – https://bitcoinmagazine.com/business/paraguayan-congressman-bitcoin-legal-tender-elected-president
- Paraguayan Senate Supports Selling Power to Crypto Mining Companies, Criticizes Subpar Energy Agreements With Brazil – https://news.bitcoin.com/paraguayan-senate-supports-selling-power-to-crypto-mining-companies-criticizes-subpar-energy-agreements-with-brazil/
- Paraguay to reconsider Bitcoin mining ban, mulls selling energy to miners – https://cointelegraph.com/news/paraguay-pauses-progress-bitcoin-mining-ban-bill
Testimonial of Marin Baksa, Barrage Nordx AB
BARRAGE NORDX AB:
BITCOIN MINING SERVERS’ LIQUID COOLING TECHNOLOGY AS A SOLUTION FOR THE DATA CENTER BUSINESS IN SWEDEN AND NORWAY
Marin Baksa is CEO of Barrage Nordx AB, engineering company that builds and maintain Data center (DC). With total of 400 MW DC built across four continents and developed more than a few solutions how to reduce environmental impact and increase efficiency, Marins focus is on energy consumed and waste produced and its way to give back to community. With focus on Scandinavia, with renewable energy and location with stranded energy, Frequency Containment Reserve (FCR) program came to life in Sweden and right now catching a drift in Norway also. Bringing together DC owners with tailored solution to communities that needs fresh food, heating, and different utilization of enormous heat potential, became Marins primary obsession. Barrage wants to be a role model in the field of mining, showing other actors in the same area the positive effects of using immersion cooling and by this pushing the data centre industry in an even greener direction creating the 4th generation of data centres.
An upcoming trend in the data center business is liquid cooling, where the waste heat is generated as liquid instead of air, as in traditional cooling. This creates a greater potential of utilizing the excess heat.
Immersion cooling, which involves submerging computer hardware in a non-conductive liquid, is becoming an increasing popular method for cooling high-performance computing equipment, including cryptocurrency mining servers.
The primary advantage of immersion cooling is that it can dissipate heat much more efficiently than traditional air-cooled systems, allowing for higher density computing equipment to be packed into smaller spaces. This results in lower operation costs, as less energy is required to cool the equipment, and potentially higher hash rates, as the hardware can operate at lower temperatures.
Immersion cooling can also enable more efficient heat recovery for district heating compared to air cooling as the cooling liquid used in immersion cooling can reach higher temperatures than air and can transfer heat more efficiently.
In traditional air-cooled systems, the hot air generated by the mining hardware is expelled into the environment and capturing this heat for reuse can be difficult and ineffective. However, with immersion cooling, the heat generated by the mining hardware is transferred directly to the cooling liquid, which can then be circulated to a heat exchanger for recovery.
There is a large business potential in using immersion cooling for crypto mining servers where more computes can potentially be done for the same amount of power, due to overclocking and power reduced by removing the fans. Another aspect is the work environment, where a quieter data centre will be achieved when removing the fans. Furthermore, by using immersion cooling excess heat will be created as liquid which has a higher potential for utilization compared with air.
As a part of my submission, I would like to enclose two reports of RISE Research Institutes of Sweden AB about the project with an aim to investigate immersion cooling for crypto mining servers to develop knowledge how the servers and immersion system behave published in 2022 and 2023. In the project, a liquid cooling testbed at RISE ICE data center in Luleå has been used for the performance tests. I encourage the EU policymakers, including ESMA, to take in the regulatory approach this positive externalities of Bitcoin mining and PoW as consensus mechanism.
