By: Adam Sharp
Editor, The HIVE Newsletter
Nasdaq: HIVE | TSX: HIVE
In early February 2022, a major winter storm was headed towards Texas. Many feared a repeat of 2021, when the power grid failed and left four million people without electricity in freezing temperatures.
There were new concerns this year that the large increase in Bitcoin mining operations would contribute to the next emergency. Since China banned Bitcoin mining in mid-2021, a big chunk of the industry has migrated to Texas.
But Texas crypto miners voluntarily shut down operations ahead of the storm, cutting their power consumption 98-99%. Vice reported on the story in an article titled “Texas Bitcoin Miners Shutting Down to Help Power Grid Survive Winter Storm”.
Lee Bratcher, president of the Texas Blockchain Council, told Vice that all industrial-scale miners in the state shut down ahead of the storm. And Bloomberg reported that Texas governor Greg Abbott is relying on Bitcoin miners to get through the winter storm season.
This is one aspect of the crypto energy debate that critics don’t seem to understand yet. Miners don’t want to operate during peak power demand. For one thing, it’s very expensive. Spikes in electricity prices can easily make mining uneconomical.
But more importantly it’s not very popular with the locals to mine full-steam ahead during rolling blackouts.
To address these concerns, many miners, including HIVE, have agreements with their utilities to curtail power consumption during emergencies. These are known as curtailment agreements, and they are rapidly becoming a standard in the industry. Miners get a better electricity rate, and utilities get better load balancing.
And in many cases, these curtailment agreements aren’t even necessary. As we saw in Texas, miners are more than willing to do their part to prevent the power grid failing.
Power demand is elastic. Responsible crypto miners help balance load during peaks, and encourage investment in clean energy.
Bitcoin’s Energy-Intensity is a Feature
In 2021 the New Yorker published an article titled “Why Bitcoin is Bad for the Environment”.
“At a time when the world desperately needs to cut carbon emissions, does it make sense to be devoting a Sweden’s worth of electricity to a virtual currency? The answer would seem, pretty clearly, to be no.”
The piece makes a decent argument, but it makes a big assumption: that there’s no value in BTC. They completely miss the fact that Bitcoin is decentralized global money. That’s a very ambitious goal, which requires robust security.
Bitcoin’s proof-of-work system provides that security. It protects the network by making it very expensive to attack.
Yes, that consumes a fair amount of energy, but all monetary assets have costs. Gold has to be mined and stored. Fiat currencies have all sorts of costs, including printing, central bank overhead, and regulation.
In the U.S., our financial sector is tremendously large. It makes up 22% of all corporate profits in the country. Here’s a chart from Statista showing the 2020 breakdown.
Did you notice that Federal Reserve banks are the #6 “industry” by profit? Yup, printing money and holding trillions of dollars in bonds pays quite well. All profit is returned to the Treasury Department, but it’s interesting to see how the Fed accounts for such a big chunk of overall corporate income.
Bitcoin and the broader crypto world have the potential to dramatically streamline financial transactions. One of the best crypto investors on the planet, Marc Andreessen of a16z, has a nice way of summing up the ambition and importance. This is from a 2014 Bloomberg Magazine interview about Bitcoin.
“We have a chance to rebuild the system. Financial transactions are just numbers; it’s just information. You shouldn’t need 100,000 people and prime Manhattan real estate and giant data centers full of mainframe computers from the 1970s to give you the ability to do an online payment.
You would not today, starting from scratch, invent any of these financial businesses in the same way. To me, it’s all about unbundling the banks.”
This is no toy or science project. Bitcoin is an emerging alternative financial system. Naturally, there will be costs associated with building it.
HIVE Leads on Efficiency
From the start HIVE has taken a deliberate approach to power. We build in cold regions with cheap, clean power. Today we operate highly efficient data centers in Canada, Sweden, and Iceland.
HIVE is a founding member of the Bitcoin Mining Council (BMC). The purpose of the organization is to encourage transparency around energy and share best practices. BMC recently reported that a survey of miners shows a 66.1% sustainable power mix in the industry in Q4 2021.
As the importance of Bitcoin grows in coming years, we believe it will become clear that the energy it uses is anything but a waste. And we’ll keep working to make our footprint as small as possible.
Have a great weekend everyone!
Editor, The HIVE Newsletter