Energy and Climate Implications of Digital Assets

Bitcoin Today Coalition is a non-governmental, non-partisan organization. We advocate on behalf of the business ecosystem enabling 46 million Americans to own and secure bitcoin. The Bitcoin Today Coalition leads educational efforts at the federal and state levels.

We support bitcoin and its beneficial impacts on innovation. Energy resiliency and the transition to a renewables and nuclear-dominated grid, grid stability, national security, and future job growth all benefit from bitcoin. Its sound monetary properties promote financial inclusion and uplift those left behind by the traditional finance system.

Our members represent a broad constituency. We work alongside entrepreneurs and innovators, veterans and national security practitioners, and economic development professionals and academia. Energy industry stakeholders and human rights activists endorse our cause as well. The Bitcoin Today Coalition looks forward to working with the Science and Technology Policy Office and responses to your points of interest are as follows:

1. Protocols: According to research from the New York Digital Investment Group (NYDIG) “Bitcoin consumed 62 TWh of electricity in 2020, which resulted in 33 million tonnes of carbon dioxide emissions, insignificant in global terms, representing just 0.04 percent of global primary energy consumption and 0.1 percent of global carbon emissions.” ¹

Compared to other industrial energy consumption, bitcoin mining's remarkable use of sustainable energy is already estimated at 58% of the total generation capacity used to power bitcoin data centers globally, versus the current estimated US sustainable energy mix of 21%. Additionally, North American bitcoin miners are trending toward even more renewable options when possible and are expressly targeting sustainable energy in their corporate mandates.

With respect to “less energy-intensive” consensus mechanisms, Proof of Stake does not belong in the mining technology category. Instead, Proof of Stake is an industry term for a shareholder-governed consortium. One that is controlled by founders and represents single points of failure. It specifies a method of control of a distributed ledger, but it does not realize decentralized distribution, nor mitigate the systemic security risks present in systems of highly centralized control. Proof of Work, ruled by time, math, and physics, is the core competitive advantage of bitcoin, in contrast to all other cryptocurrencies.

Bitcoin is not managed by any central body. Anyone can be a miner or join a mining pool, and miners do not need to be verified individuals or entities. Their incentive is to make as much bitcoin as possible while spending as little energy as possible, and this incidentally improves the security of the network, without giving them any governance or policy control over how the network runs, nor giving them any responsibility for validating that bitcoin users are interacting on-chain in a way that complies with the consensus rules of the network. The role of validating transactions and ensuring consensus falls to a globally distributed network of validating nodes that have nothing to do with mining and consume almost no energy.

Mining simply provides security, preventing malicious actors from modifying the ledger in nefarious ways, including to “double-spend” (e.g. commit fraud) by rewriting the chain. Proof of Work mining provides this security because real processing power is required to take node-validated transactions, arrange them into “blocks,” and append those blocks to the ever-growing globally distributed ledger that is the bitcoin blockchain. Unlike in Proof of Stake, with Proof of Work one cannot “be a founder,” or have lucked out by getting the cryptocurrency early to have an influence over who says which transactions should be validated and appended to the immutable ledger of account of the monetary system.

The incentive structure of Proof of Work, imbued as it is with its own internal system of checks and balances between governance-providing nodes and security-providing miners, is such that it would take more energy to defraud the network than it would simply to become part of it and make money through it.

Notably, Proof of Stake is not more efficient than Proof of Work, as it does not accomplish the same objective. A skateboard uses less energy than a helicopter, but isn't considered more efficient. Proof of Stake merely confirms who asserts control over the state of a ledger. Transactions must still be processed and Proof of Stake does not process them. Proof of Work is the only legitimate solution to the problem of decentralizing money and relying on it as a secure store of value. That its security mechanism is going to be what helps to accelerate our transition to a clean, reliable, renewably powered national grid is just a fortunate externality.^2,3

2. Hardware: In actuality, bitcoin mining equipment does not need to be replaced frequently due to rapidly improving mining equipment and cooling technologies and methods. In 2021, ASICs over 6 years old accounted for as much as 40% of global hashpower, proving even older models are still actively functional. Models 7 years old are still actively being bought and sold. Hashrate from older ASICs produced as far back as 2015 and 2016 is visible on the blockchain, proving that these units are still actively engaged.⁴

Moreover, bitcoin ASICs can be nearly 100% recycled. The major parts of a miner are its aluminum heat sink and case. Even if the machine as a whole is no longer viable, both parts can be recycled or resold. They are not composed of any toxic materials, and recycling is a common practice among enterprise consumers. ASICs do not contain e-waste like toxic lithium batteries and other chemicals found in cell phones, which as consumer products, are unfortunately not recycled as often.

3. Resources: Resources used to sustain bitcoin are varied beyond simply plugging machines into electrical outlets. It’s well known that a byproduct of oil drilling is methane gas. Unfortunately, in many cases the costs of refining this methane are more than the return that would be received, leaving the well operator to burn this noxious fuel into the open atmosphere. We know this because of an analytical technique invented by the company Coin Metrics called “Nonce Analysis.”⁵

Because bitcoin miners can operate anywhere in the world, they are able to target this harmful greenhouse gas and prevent it from being released into the atmosphere. Instead of the flare gas being vented or burned and emitting methane in our air, bitcoin mining firms capture the gas, redirect it to generators, and then to ASICs that are mining bitcoin. So in fact, bitcoin mining is actually helping to clean the environment by monetizing waste energy.

This is not constrained to just the oil and gas industry: Bitcoin miners are recycling the methane emitted from pig-manure, thermally-decomposing waste tires to produce reusable material (steel belts) and residual energy streams, and capturing renewable wind and solar energy that would otherwise be curtailed due to transmission constraints - all to send power to ASICs and mine bitcoin. Bitcoin can and will be the buyer of first and last resort for all types of energy that would otherwise be wasted, oftentimes with harmful environmental consequences.

Because bitcoin miners can operate anywhere, they’re able to utilize what’s known as stranded energy. Stranded energy is usable, but located too far away from population centers for transmission. Bitcoin miners are able to capture this otherwise uneconomic asset and put it to a useful purpose, increasing global energy conversion efficiency, and reducing harmful pollutant and waste streams from entering our ecosystem.

4. Economics: Bitcoin mining technologies have been proven to enhance electric grid capacity⁶, by monetizing the build-out of renewable and nuclear generation assets without the need for government subsidies. Bitcoin miners can form joint ventures with energy generation asset developers and operators Together, they build a business model that enables developers to obtain project finance to build assets in locations that do not yet have the grid infrastructure (transmission capacity) or load (residential or industrial) to be feasible to build otherwise.

This effectively allows the United States to build the amount of renewable generation capacity we know we are going to require before we start requiring it, all while minimizing the number of government subsidies required for this critical infrastructure build-out. Bitcoin mining expands the geographic flexibility and growth potential of renewable generation assets, allowing us to monetize wind and solar energy today as we wait to build out the grid-level transmission infrastructure that will be required to take this energy to its eventual end-use, the American people and business of the next generation.

Mining focuses us towards the future from an infrastructure perspective, and in doing so it also creates future-oriented jobs and enhances financial inclusion⁷ for society’s most underserved communities. Five million manufacturing jobs have been lost over the last couple of decades due to offshoring our manufacturing base and transitioning to a near-total reliance on global supply chains⁸. These states often have pockets of energy, infrastructure, and talent in place to support data centers. Bitcoin mining can continue to be part of the solution to employing unemployed and underemployed in these regions as it simultaneously enables a post-Industrial renaissance that turns the rust belt into a new global monetary center of gravity.

5. Past or ongoing mitigation attempts: Bitcoin mining is already close to net-zero emissions and is becoming more efficient by the year. Currently, about 73% of bitcoin mining is carbon neutral. Since 2009, bitcoin mining computers have increased their energy efficiency by 40,000%. Over the past eight years, bitcoin miners have become 5,814% more efficient. In Q1 2022, mining efficiency increased by 6%, and year-over-year saw an increase of 63% in mining efficiency.⁹

This trend is certain to continue as the industry makes more investments in technological and green energy innovation. Additionally, bitcoin miners monetize renewable and nuclear energy at the source during times when the energy would otherwise be wasted or stranded due to lack of demand or distance from population centers.

6. Potential energy or climate benefits: The world needs innovation in energy to prevent climate change and other environmentally-damaging phenomena. Bitcoin mining is where the greatest innovation in energy is happening. Bitcoin mining is an ideal first customer for variable renewable energy (VRE) projects as it allows for immediate payback without having to deplete local economic development funds to break even.

Grids that are more reliant on VRE will require more flexibility. Instead of curtailing VRE, Bitcoin mining can consume this power, enhancing local economies. Additionally, mining’s ability to immediately shut off machines allows grid operators to have a flexible demand response, giving grid operators the opportunity to lower prices for consumers and stabilize grid response in times of extreme peaking or emergency.³

7. Likely future developments or industry trajectories: Because miners are incentivized to consume the least amount of energy to produce the most hash rate (meaning that they want to spend as little as possible on energy to get as much bitcoin and transaction fees as possible), it is inevitable that exponential innovations in the energy space will continue. This will mean improvements in many spaces, which include:

Greater energy efficiency in computing, which will apply to the whole energy-intensive space of computing (Moore’s law);
Reductions in energy waste through energy innovation and IP development;
Maximizing the use of stranded energy creating a more resilient grid; and
Reinforcing grid stability and national security, insofar as the trajectory of the United States is intertwined with the bitcoin network, by further decentralizing the verification (mining) process, e.g. by popularizing home heaters that use the heat given off by mining.

8. Implications for U.S. policy: Geopolitically, it is imperative that the United States take bitcoin seriously, and progress toward a bitcoin-positive regulatory environment. As more publicly traded companies, including Block (formerly Square) and Tesla embrace the multidisciplinary potential of this technology, they will be able to build products yet unrealized. To build these products, it behooves companies to recruit the best and brightest. A positive bitcoin outlook in the private sector will enable the United States to continue to lead the world in global competitiveness and talent.

Should the United States pursue a more progressive agenda by investing in bitcoin mining or purchasing the commodity outright, the stronger the United States will be as more nation-states build positive legislation around this no longer nascent industry. Should game theory nation-state adoption take place, and the United States have a position in this distributed, global industry, the better it will fare against nations that do not support bitcoin. One such nation is China, whose authoritarian bent clearly reflects why they’ve banned the use of bitcoin, or of mining, for their citizens.

China banned bitcoin in order to advance the adoption of its CBDC and thus further the aims of its surveillance state. While China’s ban had a big impact on the market initially, as miners were driven from the country in short order, bitcoin and the mining hashrate recovered in less than a year. Bitcoin has proven itself to be resilient among the largest of adversaries. By embracing this resilience and incorporating it into the United States’ national security strategy will benefit generations of Americans.

9. Other information: Bitcoin miners also offer ancillary benefits for the greater data center and computing industry. Due to cost savings being directly correlated to profit, bitcoin miners are incentivized to use as little energy as possible. Beyond using stranded or wasted energy, innovation in technologies to reduce spending to cool the machines is a competitive pursuit. As much as 40% of energy consumed in data centers is used to cool the computers.^{10, 11}

Immersion cooling enhances the thermal management system of data centers, reducing energy expenditure and infrastructure buildout.Bitcoin miners are leading R&D and deployment of immersion cooling at scale. In the case of bitcoin mining, machines can also be “overclocked” maximizing potential computing power with less hardware. Additionally, immersion cooling reduces the need for fans and air cooling and reduces air particulate damage to machines, which reduces the need for repairs and downtime.

Bitcoin miners are often at the cutting edge of technology development because they immediately benefit from the efficiencies generated. This industry’s experimentations and deployment at scale will continue to enhance ancillary industries, including data centers. The enhanced efficiency and longevity of machines and reduction of energy spend make immersion cooling a legitimate use case for miners to experiment with all while benefiting other industries.

The Bitcoin Today Coalition Board of Directors (501(c)(4) Non-Profit Organization) thanks you for your time and thoughtful consideration.

Sincerely,

Alex Brammer, PhD

Amanda Cavaleri, MSTC

CJ Wilson

Donna Redel, JD & MBA

Jayson Browder, MPA

Jimmy Song

Robert Malka

¹ NYDIG, “Bitcoin Net Zero,” 2021

² Bitcoin Mining Insights, “Bitcoin Mining & The Grid (Part 1): Generators”

³ Bitcoin Mining Insights, “Bitcoin Mining & The Grid (Part 2): Transmission, Curtailment, and Behind-The-Meter”