tl;dr: With low-cost energy as a key driver of profitability, miners may be the early adopters of renewable energy sources that will ultimately benefit all of us.
I had a crazy thought while reviewing 2nd Global Cryptoasset Benchmarking Study from Cambridge Judge Business School.
The report is full of valuable information about the size of the global crypto market, how many people are estimated to be active vs. passive users of crypto, and the penetration in different regions.
Kudos to them for doing such a great job.
Jumping down to page 77, though, you get into the section on crypto miners.
Much has been written about the energy consumption of Bitcoin and other Proof-of-Work chains and, no doubt, it’s a lot.
Let’s leave aside the philosophical question, for a moment, of how much energy we should be willing to expend in order to create a global, immutable, decentralized trust layer and how that compares to our existing financial system.
Instead, let’s think about the solar panels on my roof.
I was one of the first people in my neighborhood and certainly one of the first people I know to have solar panels on my roof. I am referring to Americans, since all the Israelis I know have them already.
Anyway, after I got them, more and more people started to get them. Not because of me, just because of time passing. We’re definitely not at 100% penetration, but I did notice that the costs associated with solar panels were dropping.
Now, this comes as no surprise because this happens with every technology-it gets cheaper over time (except iPhones!)
Part of the reason for that is because early adopters finance the further research and development of new technologies, allowing manufacturers to find lower-cost options, thus making the products accessible to more people.
Now, back to crypto.
In the report, the #1 factor affecting the decision of miners for choosing a location:
“Access to ample and low-cost electricity supply.
Running hashing facilities requires substantial amounts of electricity that can be adjusted dynamically in accordance with market conditions. It is not unusual for mining farm operators to make deals with local energy suppliers to guarantee access to sufficient and affordable electricity.”
And it turns out that a large number of miners are gravitating towards renewables (like hydro) that would otherwise be unused (see page 84)
A megawatt of renewable-driven energy is not the same as a megawatt of coal-fired energy obviously. While the miners are not choosing renewables for philosophical reasons, the impact may be the same.
They are providing demand for previously unmet supply.
This led me to wonder if the raw energy consumption of crypto may actually, in a strange way, lead to more cost-effective renewable energy for everyone else?
That would be pretty crazy.
Could Crypto Mining Help with Climate Change? was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.