Intermittent Bitcoin Mining Fixes Energy – Bitcoin Magazine
Many aspects of the Bitcoin mining industry are poorly understood and often misrepresented. But one practice in this sector stands out from the misunderstandings and underestimation that surrounds it: periodic mining.
While most miners aim to achieve as much uptime as technically possible – meaning their machines are online and hashing rather than offline or turned off – some miners do not. Instead of continuous mining, their uptime is far below industry norms and operates on more complex schedules built around variables such as power supply and demand, time of day, profitability during the day, and even temperature.
This article aims to provide a brief but detailed overview of the economics and general operation of intermittent miners, highlighting a discourse that shows how and why this part of the sector is often misunderstood.
What is Intermittent Bitcoin Mining?
This type of mining is often associated with renewable energy sources (ie wind and solar) since these types of power are also generated on a regular basis. The wind does not blow all the time, and the sun will not provide as much power on cloudy days – renewable power is categorically intermittent. But bitcoin miners can easily adapt to fluctuations in these power generation schedules, unlike most other energy consumers. Lancium is one example of a mining company that builds periodic mining farms. Compute North is another example.
Indeed, under normal operating conditions (ie without the balancing effect of miners requiring renewable power), these intermittent energy sources can create unnecessary stress on electrical networks. The demand from miners, as discussed in more detail later, can serve to create a price floor for renewable energy generation projects, making them more attractive as infrastructure investments. Improving the economics of renewables isn’t the only use case for intermittent mining, but it’s one of the most debated.
Demand-response programs that provide interruptible power sources to miners can be powered by coal, natural gas, or other common fuels used to generate electricity. But to remain specifically focused on renewable energy, for example, when bitcoin mining is paired with an intermittent renewable energy source, both teams win.
Intermittent Bitcoin Mining Misconceptions
A recent wave of somewhat negative comments about intermittent mining came from Twitter posts written by several prominent proof-of-stake consensus advocates, including Ethereum co-founder Vitalik Buterin.
Martin Köppelmann, CEO of the “decentralized trading protocol” Gnosis, told his 33,000 Twitter followers that the idea of intermittent mining helping to develop more renewable energy sources requires “mental gymnastics.” Buterin jumped into the tweet’s reply to say, “I’ve never understood how this concept of turning miners on and off frequently makes any sense at all.” The end of the tweet shows that Buterin has apparently not considered the issue carefully. He wrote: “If you pay for hardware but only use it half the time, you will be losing money in a competitive market.”
And these tweets are no exception. Alex De Vries (aka, Digiconomist), a long-time irrational mining critic, former Dogecoin promoter and a former employee of the Dutch central bankhas claimed (without much supporting evidence) that “Bitcoin mining and renewables put up the worst fight.”
Several bitcoin advocates and actual miners have attempted to clarify and correct the ideas behind the intermittent mining strategies of Buterin and Köppelmann. Mining “increases the elasticity of demand for electricity” explained HODL Ranch CTO Jesse Peltan. Cryptocurrency research and developer Noah Ruderman also countered Buterin’s misunderstanding. “Mining makes money from energy that no one wants. Much of that energy is renewable. It’s just an energy supplement,” Ruderman wrote.
Intermittent mining is actually widely praised across most of the Bitcoin industry. For example, Gideon Powell, CEO of Cholla Petroleum, wrote that “[renewable energy’s] intermittent nature pairs beautifully with #bitcoin mining flexible load.” And Mike Colyer, CEO of Foundry, described bitcoin mining as one of the most important innovations for the electrical grid in over 100 years. What innovation exactly? “A large ground load that is intermittent,” Colyer wrote. The “most obvious use case” for bitcoin mining, according to Max Gagliardi, co-founder of Ancova Energy, is being paired with intermittent energy resources.
To the potential surprise of some critics, intermittent or interruptible mining strategies can sometimes be more profitable than continuous mining. A mining analyst at Galaxy Digital, for example, note the case study of Riot’s mining facility in Texas in July. By selling power back to the grid instead of mining it itself, it generated 30% more revenue over that period. And with that in mind, the next section takes a deeper look at intermittent mining economics.
Financial Considerations for Intermittent Bitcoin Mining
One of the main ways that uninterrupted mining is seeking a competitive edge in the current market is with increasingly sophisticated Power Purchase Agreements (PPAs). And when dealing with inconsistent power sources, miners must develop custom strategies to determine how much power they can use, when that power is available, and what type and generation of mining hardware and firmware they want to power with that power.
Hardware longevity is also a consideration, as repeatedly turning hardware off and on can limit its long-term usefulness. According to analysis by Braiins, even if miners are not running the machines at full capacity, minimal hashing to prevent complete shutdown can be a winning strategy. “Miners participating in load balancing programs and those using intermittent energy sources can help preserve their hardware by keeping it running in all but the most extreme peak demand scenarios,” suggests a blog post from the mining company.
Where is this need for intermittent mining as an energy supplement seen in the real world? California is seeing the economic case for building more solar significantly undermined as prices fall and the excess supply has no buyers. Bitcoin miners – power buyers of last resort – can easily mitigate these problems.
The Future of Intermittent Bitcoin Mining
Interruptible mining strategies will certainly become more dominant as the number of farms with 99% uptime or higher starts to represent a slightly smaller share of the industry. This will happen when pure mining companies negotiate lucrative PPAs with generation companies. And, more importantly, intermittent mining will come to the forefront of the industry as the power companies themselves build mining teams to either improve or salvage the economics of their power generation plans. Regardless, the future of bitcoin mining is bright.
This is a guest post by Zack Voell. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
