Energy consumption and the environmental impact of bitcoin (BTC) mining have been reviewed and closely monitored by many international financial institutions. The International Monetary Fund (IMF) mentions that bitcoin mining consumes “large amounts of computing power and electricity.”
Bitcoin mining is an energy-intensive process as it is a Proof of Work (PoW) blockchain that involves providing cryptographic evidence to the network that a certain amount of a given computational effort has been used. The information used to confirm this is stored in the block for acceptance into the network by other participants.
Elon Musk, one of the richest people in the world, co-founder and CEO of Tesla, announced in February 2021 that the automaker will accept Bitcoin as payment for its products and services.
But in May of that year, Tesla suspended support for accepting bitcoin payments, citing the company’s concerns about the “rapidly growing use of fossil fuels for bitcoin mining and transactions, especially coal.” It also led Musk to praise Dogecoin (DOGE) as a better payment method than Bitcoin due to the higher environmental cost of BTC transactions.
However, a new solution appears to be emerging to deal with the narrative that has entered the public consciousness.
Associated natural gas is a by-product of oil drilling that is often offset by processing costs, leaving it stuck in the well. As such, it is often only burned on an oil rig, giving it the name “flare gas”.
On Feb. 17, CNBC reported that oil giant ConocoPhillips had launched a pilot program in Bakken, North Dakota. Instead of flaring associated gas, the company sells it as third-party fuel for bitcoin mining.
The idea of using associated gas to mine bitcoins is not new. In 2019, Brent Whitehead and Matt Lostro founded Giga Energy Solutions, a company that mines Bitcoin from electricity generated from this gas. The company delivers a shipping container full of bitcoin mining equipment to an oil well and then turns the stuck natural gas into generators that turn the gas into electricity and use it to mine bitcoins.
Crusoe Energy is another company that uses the energy of glowing gas to mine bitcoins. The company has grown into one of the biggest players in the field and has also received investments from one of the oldest cryptocurrency exchanges in the world, Coinbase and Winklevoss Capital, a company founded by the Winklevoss twins, founders of the Gemini crypto exchange.
A report by Crusoe Energy Systems states that using this gas to extract bitcoins reduces CO2-equivalent emissions by about 63% compared to continuous flaring of the gas.
Cointelegraph spoke with Ethan Vera, CFO and COO of Viridi Funds, a company that provides cryptocurrency investments to bitcoin miners, about the impact of ConocoPhilip’s involvement in innovation.
“Although ConocoPhillips is one of the largest energy companies that has publicly announced its involvement in bitcoin mining, many other energy companies have already begun the process of creating mini-test sites. If the bitcoin mining economy grows and with the rise in total USD mining revenues, many large energy producers will look to enter the market on a larger scale.”
The Energy Impact of Bitcoin Mining Can Be Overstated
According to the University of Cambridge’s calculations for the Cambridge Bitcoin Electricity Consumption Index, the estimated power demand of the Bitcoin network is 15.57 gigawatts (gigawatts) or 136.48 TWh per year. Looking at the historical data of the network’s electricity demand, one can see that this demand has steadily increased over the years as the network has grown.
Despite this increase in energy demand, the environmental impact may be exaggerated. A report by CoinShares published in January of this year attempted to measure the carbon footprint of bitcoin mining. Contrary to popular belief, the results of the report show that bitcoin mining accounts for just 0.08% of global carbon dioxide or carbon dioxide production. The report found that the grid emitted 42 megatons (million tons) (1 million tons = 1 million tons) of carbon dioxide in 2021, out of a total global emissions of 49,360 million tons of carbon dioxide.
Sam Tabbar, head of security at Bit Digital, a listed bitcoin mining company, told Cointelegraph:
“The environmental impact of bitcoin mining is greatly exaggerated by the traditional financial authorities (IMF, etc.)