A Profitable and Eco-friendlier Future for Bitcoin/Crypto Mining
The significant rise in Bitcoin (BTC) over the past 12 months has once again re-ignited discussion about the energy usage and carbon emissions associated with BTC mining and its network operations.
It currently accounts for an estimated 115.36 TWh of energy per year, translating to 0.55% of overall electricity consumption worldwide. These energy demands have led to a general push for cleaner energy (derived from multiple sources), coupled with ongoing technological efficiencies to help compensate for the carbon emissions associated with Bitcoin’s energy demands.
A detailed and recent synopsis of Bitcoin’s energy consumption, its carbon emissions and how this compares with other industries is outlined in this analysis by Harvard Business Review.
Despite various eco-friendly types of energy used in Bitcoin mining, such as the crypto-friendly El Salvador opting for geothermal energy, I will instead focus on the promising aspects of an increasing array of cleaner technologies. These include small-to-medium scale options to help simultaneously offset Bitcoin’s mining emissions and offer greater energy self-sufficiency.
Local energy solutions
For those residing in sunny areas who have off-grid setups, such as a home battery or being part of a microgrid, a well-functioning, durable high-capacity system to store PV solar, could be enticing for anyone running several kWh of ASIC-mining equipment or for general household usage. The financial benefits of these systems generally favour long-term residents, particularly once these systems become profitable after several years.
A hydrogen-based solution such as the LAVO Hydrogen Battery System, despite being in its early stages, could offer an alternative to aforementioned residential choices. Whilst still expensive and not as well-developed as lithium-ion batteries, technological advancements and (potential) mass-scale manufacturing will most likely lead to substantially lower prices in the future.
Besides all of this, the nascent industry of peer-to-peer (P2P) energy trading is gaining traction, involving the use of trading energy directly between a buyer and seller, without the costs of a middleman and expensive network infrastructure to maintain. The opportunity is ripe for blockchain (and other forms of distributed ledger) technology to play an integral role in the growth of this P2P space in the energy sector and otherwise.
Waste-to-heat conversion
Running ASIC miners (at a residential or commercial level) in colder climates could provide a source of indirect heating, at least within a room or nearby area. A classic example of converting a ‘waste product’ into something useful.
Moreover, with an ingenious setup of distributing this excess heat across a larger area such as a house, warehouse space, or basement. Tech enthusiast Thomas Smith documented his experience in utilising the heat generated from a mining rig for home heating.
There is a Polish start-up called Green Heat that aims to reconcile the benefits of GPU/ASIC mining and heating, with an innovative all-in-one device. It is still early days to ascertain how well this works compared to the above-mentioned heat-distribution option. Notwithstanding this, this additional choice (or a related product) might be suitable for particular crypto miners.
Future of Bitcoin/crypto mining profitability
Returning to Bitcoin, a 2.5–3 times (minimum) increase in its price every four years will render the entire mining process feasible. I have used these figures as a conservative estimate to account for the Bitcoin block-reward halving every 210,000 blocks (roughly every four years), fiat inflation, opportunity costs, mining overheads and any other related expenses. A highly-plausible scenario, especially when factoring in Bitcoin stock-to-flow modelling, coupled with the increasing demand by both retail and institutional investors.
Even if Bitcoin mining were to no longer be available, there will be other mineable crypto assets that utilise Proof-of-Work (PoW), such as Litecoin, Ethereum (until it fully migrates to Proof-of-Stake) and Monero. Several others can still be mined on a home setup using a computer’s GPU. These small amounts can be converted into BTC, let alone several digital assets, and (possibly) appreciate in value over time.
Bitcoin is often referred to as ‘digital gold’ and has a market cap of approximately $1.22 trillion dollars (as of 11 November 2021), compared to the current (estimated) market value of gold between $8 trillion and $9.4 trillion.
Hence, many would argue that there is still plenty of room for growth for Bitcoin to not only match, but overtake the precious metal in the future. It is an impressive achievement when considering that the foundation cryptocurrency launched in 2009, propelling itself into the list of top-10 currencies worldwide. How much longer before it hits #1?
Disclaimer: Nothing in this article is financial advice and I am not a financial advisor. Moreover, none of this is paid advertising and I receive no incentives for mentioning any brands or products listed here.
I acknowledge that I hold Bitcoin and Power Ledger (POWR) tokens as part of my portfolio, albeit a tiny percentage of my overall holdings for the latter.
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References and additional resources:
https://ccaf.io/cbeci/index
https://hbr.org/2021/05/how-much-energy-does-bitcoin-actually-consume
https://www.statista.com/statistics/1125923/global-market-value-of-gold/
https://www.perthmintbullion.com/au/blog/blog/20-07 02/How_big_is_the_global_gold_market.aspx
https://lavo.com.au/lavo-hydrogen-battery/
https://dailyhodl.com/2021/10/04/el-salvador-begins-bitcoin-mining-operation-using-geothermal-energy-from-volcanoes/
https://howmuch.net/articles/how-much-currencies-are-worth
https://www.getmonero.org/get-started/mining/
https://ethereum.org/en/developers/docs/consensus-mechanisms/pow/mining/
https://stats.buybitcoinworldwide.com/stock-to-flow/