Bitcoin mining has received its fair share of criticism over the past 18-24 months. Some commentators provide energy comparisons, such as Bitcoin mining using the total annual energy of a country like Finland or producing a carbon footprint equivalent to a country the size of New Zealand.
Is it really fair to compare the energy used in Bitcoin mining – a global industry – with that of a relatively small country? What is actually uncertain is the agenda of some of the groups targeting Bitcoin or Bitcoin mining as a ‘nasty industry.’
“There were a lot of entities that don’t want Bitcoin to be successful, and don’t appear to do the work and educate themselves enough to understand really how the industry works,” said Jaime Leverton, CEO of Hut 8 (HUT), at the recent AIM Summit in London. “The energy used in Bitcoin is its feature, and that it is paramount to enable Bitcoin to do what Bitcoin does, which is completely different from all types of cryptocurrencies.”
In part one of this article pair, we provide a brief recap of past “Fear, uncertainty and doubt” (FUD) that has been applied to Bitcoin and the industry's responses to date.
Bitcoin’s energy consumption is a mainstream media staple at this point. No conversation about mining would be complete without it.
The most well-known takes against Bitcoin mining’s energy usage come from a few key sources: the Digiconomist blog run by a Dutch Central Bank employee, Alex de Vries, and the infamous ‘Mora et al’ academic paper.
Digiconomist is well known for its anti-Bitcoin takes, including extrapolating current Bitcoin consumption levels into grandiose claims.
‘Mora et al’ is perhaps the most well-known (and most-cited) paper on the subject of Bitcoin’s energy consumption. The paper concludes that Bitcoin mining could push global temperatures upward by as much as two degrees Celsius.
The paper was actually written by undergraduate students, as Nathaniel Harmon explained on the Compass Podcast.
Kevin O’Leary, a serial entrepreneur and business reality TV series panelist on ‘Shark Tank,’ was extremely skeptical of and negative about Bitcoin and crypto as recently as 2019, but he has turned 180 degrees in the last 12 months. He now allocates 20% of his portfolio to crypto.
However, in recent months, he has moved his focus to criticizing Bitcoin mining, inferring that companies should adopt 100% clean, green energy. He's also become critical of miners who purchase carbon credits to greenwash mining footprints.
Elon Musk, the billionaire CEO of Tesla (TSLA), purchased $1.5 billion of Bitcoin in February 2022. Musk said Tesla would start accepting Bitcoin as a payment method for its products. After just a few months the company reversed the decision amid concerns about the cryptocurrency’s impact on the environment, specifically concerning the uses of fossil fuels in mining Bitcoin.
Tesla wanted a little more due diligence to confirm that the percentage of renewable energy is most likely at or above 50%, and that there is a trend toward increasing that number. If this were found to be the case, Tesla would then resume accepting Bitcoin.
The Bitcoin Mining Council (BMC)
In response to the comments by Elon Musk and other misleading or misunderstood comments, Michael Saylor, CEO of Microstrategy (MSTR), and CEOs of some of the larger North American Bitcoin miners, including Argo Blockchain (ARBK), Core Scientific, (CORZ), Galaxy Digital (GLXY), Hive Blockchain, Hut 8, Marathon Digital (MARA) and Riot Blockchain (RIOT), formed the Bitcoin Mining Council in May 2021.
The BMC operates as a voluntary open forum of Bitcoin miners committed to the network and its core principles, such as promoting transparency, sharing best practices and educating the public on the benefits of Bitcoin and Bitcoin mining. The BMC has provided much-needed guidance at state, congressional and senate-level hearings.
Data transparency remains a key issue with Bitcoin mining, particularly among interested investors. To that end, the BMC began collecting data from its members for reasons of public transparency.
Representing 50% of the global Bitcoin mining network at 100.9 exahash (EH) as of March 2022, the organization estimated that Bitcoin mining’s sustainable electricity mix is now 58.4%. The value increased approximately 59% year-on-year, from Q1 2021 to Q1 2022.
That percentage would make Bitcoin mining one of the most sustainable industries globally. Indeed, many of publicly listed miners such as Hive Blockchain, Bitfarms (BITF), Canadian Computational Unlimited (SATO), DMG Blockchain (DMGI), and Iris Energy (IREN) already use in excess of 98% of renewable green energy in their current mining operations.
To date, Bitcoin mining has received a large share of criticism, oftentimes from those who have failed to grapple deeply with the importance of a financial innovation like Bitcoin. Celebrity and retail investors alike have qualms about Bitcoin’s energy usage, leading to decreased interest in investing in the nascent sector. Luckily, groups such as the BMC and other miners are standing firm behind data and education initiatives.