Mining Companies Use Wasted Sustainable Energy to Store the Value of Electricity and Benefit Local Economy
Just like the California Gold Rush almost two hundred years before in the United States, there is another group of “miners” competing the scarce resources, Bitcoin, in Sichuan province, China, geographically similar size as California.
If treated as a currency, there are no other currencies that could waste such a massive amount of electricity than Bitcoin. According to Digiconomist, mining Bitcoin will consume 73.12 TWh electricity this year, which is close to the entire electrical usage of Austria. All told, it takes around 0.28 to 0.5% of global electricity consumption to fuel bitcoin.
The mechanism of the Bitcoin protocol needs those “miners” to compute the results of the hash function to write new transactions into the blockchain network. In return, currently, the miners can get 12.5 Bitcoins and transaction fees as a reward. With more miners involved, the mining difficulty will increase with a higher hash rate, which means consume more electricity. In these two years, because of the significant increase in the Bitcoin price, the hash rate increases more than hundreds of times to around 100 EH/s, while China takes 60% of it. Therefore, environmentalists criticize that miners use dirty, coal-based power. According to an article in the journal Joule, thetotal mining consumption might lead to 22 Mt CO2 annual carbon emissions, which is the level between Jordan and Sri Lanka.
Although manyare criticizing the vast energy consumption, mining Bitcoin still has a more positive effect on the environment becausesustainable resources generate most of the energy used in mining Bitcoin. Bitcoin can be a medium to store the value of wasted energy from hydropower, wind power, or oil exploitation. Besides, compare with other value storage mediums like gold, Bitcoin has higher utility value and cheaper cost in transaction and mining.
In southwest China, especially Sichuan province, there is enormous potential to build a hydropower dam since plentiful mountains, big rivers, and canyons. With economic development rapidly these years, hundreds of hydropower infrastructure projects developed to replace the old thermal power station, it takes more than 90% of the total power source in Sichuan. However, compared with the Yunnan province, which also dominated by hydropower, Sichuan has less heavy industry. The electricity was generated mainly used in agriculture or transferring to cities. The demand is only substantial in March and April for irrigation. Besides, the growth rate of electricity is decreasing in these 16 years, according to China Electricity Yearbook.
In the wet season, water has to be abandoned since there are no such needs of energy consumption, wasted totally 28.73 × 109 kWh in 2016 in Sichuan. Therefore, many hydropower stations start to use mining machines to mine Bitcoin. It gradually becomes the primary income of these power stations because of very low-cost electricity costs. Therefore, this data in the previous environmentalists claimed should be reconsidered. Not all of the mining has to generate a large number of carbon emissions.
In the dry season, some miners start to migrate their mining machines to the northwest of China, like Xinjiang/Inner Mongolia. In these areas, coal-based power also gradually replaced to solar power and wind power, especially in the windy period of wintertime. According to the Coinshares, renewable energy in these provinces takes 12% of the total amount of consumption. According to Valarhash, owns three mining pools in the top ten largest mining pool in the world, more than one third of their mining machines will migrate to northwest of China in the winter and back to Sichaun in the spring.
Compared to other industries like electro, mobile in China needs a government subsidy to use more environmentally friendly energy. The mining industry is a more self-driven choose because mining very sensitive to the electricity price. Besides, with more high-performance chips adopt in this industry and fewer rewards in the upcoming halving, the consumption of electricity will decrease or at least constant. China also mines the most considerable number amount of gold in the world, which is another medium of storage value; the cost is 20 times higher than Bitcoin.
It should be noted that tidal energy and the natural gas coming with oil exploitation are gradually using in Bitcoin mining. It starts to motivate people to think about how to recycle power, which cannot easily storage and transfer. This industry indirectly pushes the energy sectors into sustainable development.
Bitcoin mining was listed as an unwanted industry in the Industrial Structure Adjustment Guidance from China’s National Development and Reform Commission (NDRC) in the early of this year. However, after President Xi Jinping announced to embrace blockchain technology on 24th October, the mining industry has been removed from the list. Right now, there is no such regulation to guide on this industry. The government should start to notice and encourage mining activities limited to using renewable energy.