Bitcoin (BTC) has been universally panned for its unreasonable energy consumption and carbon emissions. However, it might be changing in the aftermath of China’s crackdown on crypto miners, who are fleeing in large numbers to North America. As per new data from Cambridge University, the distribution of mining activities across the world has dramatically changed in the last six months. And experts believe this change could likely reduce Bitcoin’s carbon footprint in foreseeable future.
China’s Crypto Mining Ban Could End Up Reducing Bitcoin’s Carbon Footprint
China’s clampdown on crypto miners in May set off a ripple effect for Bitcoin mining. First, it pushed half of the world’s BTC miners offline, which meant fewer people were mining the currency and a reduced number of machines were deployed to the operations. This led to a significant decline in Bitcoin’s power consumption and also cut down its environmental impact.
Additionally, the restrictions rendered many older and comparatively inefficient mining rigs useless, since they couldn’t be used for mining anymore.
And finally, Beijing compelled mining operations to look elsewhere for cheap electricity, which is leading them to locations that boast considerable green energy capacity.
According to Foundry CEO Mike Coyler:
“Miners around the world are looking for stranded power that is renewable. That will always be your lowest cost. Net-net this will be a big win for bitcoin’s carbon footprint.”
Before the mining restriction came into effect, China was the world’s Bitcoin mining epicenter, with nearly three-quarters of the total BTC miners. However, in May, the country’s hash rate on the network fell by more than 50% after many provincial governments forced mining firms to suspend activities.
Today, the pioneer cryptocurrency consumes almost 0.33% of the world’s total power production, which is roughly equivalent to the electricity consumption of countries like Chile and Bangladesh.
Since Bitcoin mining is a competitive industry with low margins, it’s obvious that miners would rush to locations that offer cheap electricity.
“They need to constantly reduce their electricity costs, which is their number one expense, in order to be competitive,” noted Ria Bhutoria, former director of research for Fidelity Digital Assets.
Data indicates that many of the ousted miners are headed for the US, which has recently jumped from the fifth to the second position, and now hosts 17% of the global crypto miners. This might be a great development for Bitcoin’s carbon footprint in the longer run.
Rise of Renewable Energy Use in the US
The market as a whole in North America has been pushing for energy reforms in the last few years. Furthermore, renewable power sources are becoming increasingly cost-effective in the region. This is supported by a 2020 report from the investment bank Lazard, which shows that commonly used renewable energy sources are either equal or in some cases even lower in prices than their conventional energy counterparts.
The crypto industry in the region has also not fallen behind the green energy trend. Whit Gibbs, founder and CEO of crypto mining service provider Compass, estimates that a large share of power for Bitcoin mining in the US comes from renewable energy, which he puts at more than 50%.
Also, crypto mining firms transitioning to the US or Canada are well aware of the regulatory and ethical barriers in the region.
Alex Brammer, who works with the Luxor Mining team, has been helping Chinese crypto miners settle in the region. He revealed that miners know that “public markets nowadays have no appetite for proof of work mining that is powered by non-renewable [energy sources].”
He further said, “I have yet to even have a discussion about a deal involving coal power, which is heartening to us.”
Miners Also Looking Into Kazakhstan
Bitcoin mining is veering in the right direction for now. However, there are concerns over operations that are shifting to places like Kazakhstan, where data centers are largely powered by coal.
In this case, Brammer feels miners’ pivot to the country may be temporary since most of them are reliant on dated equipment. “
But as older-generation machines reach the end of their service lives, those companies will likely deploy new machines into more stable and energy-efficient and renewable jurisdictions,” he stated.
In the meantime, crypto miners in Kazakhstan will also be deterred by a new law that will introduce taxes on crypto mining from 2022. Brammer thinks that this will definitely reduce the incentives for mining in the country.