Bitcoin Miners Are Dung Beetles Of Energy – Bitcoin Magazine
This is an opinion piece by Robert Warren, Partner in Distributed Hash and Business Development at Upstream Data Inc.
The layman only knows one thing about Bitcoin mining – it uses one a lot of energy, and it is bad.
This virus of anger, successfully spread by the climate extremists and anti-Bitcoin street corner preachers (who usually carry a proof-of-stake torch) is supposed to be the death knell for our budding industry. We use a lot of energy, and using energy is obviously one terrible thing. It follows that we should be despised, persecuted and regulated out of existence.
We are in a climate crisis, sort of we everyone knows, the best course of action is to install solar on your roof, buy a Tesla, shut down the coal and gas plants in your region, and argue anything but that is systematically racist. Proof-of-work is the enemy.
This argument is, to most reasonable people who like to run the dishwasher and keep the light on at night, patently ridiculous.
But there is still the one big problem: “Doesn’t Bitcoin mining still use a lot of energy? And don’t those computers clog up our landfills the second they become unprofitable?”
If you find yourself interrogated by the Bitcoin curious, having to answer for all these megawatts we use, there is one question you must ask in response: “Doesn’t Bitcoin use a lot of energy?”
Yes, but what energy?
Source: Author
NOTE: Before we go any further, let’s make a clear distinction between energy and electricity. Energy comes from primary sources such as a natural gas well or hydroelectric dam. These primary sources are used to generate electricity, the secondary energy we create worldwide, sent through high voltage power lines and used to power our dishwashers. For a resource to explore further, see HERE.
NOTE TO THE NOTE: Today, not all bitcoin miners use waste or excess energy. My contention is that this is the direction our industry is trending in the long run, regardless of generation type, because simple supply and demand drives miners to the lowest price of energy.
What Energy Do Bitcoin Miners Use?
As long as waste energy exists, Bitcoin mining exists and is profitable.
Let me say it again for you in the back rows. As long as there is waste in energy production and supply chains, it will always be profitable to mine bitcoin, regardless of hardware type, manufacturer, age, location, anything.
Even recognized Bitcoin Mining FUD champions like Alex de Vries of Digiconomist fail the simplest economic analysis in the bitcoin mining space. That is, not understanding supply and demand. Therefore, they publish findings such as: “A similar dynamic ultimately determines the fate of ASIC-based mining devices as advances in ASIC chip efficiency result in more powerful devices that eventually displace older, less efficient technology… Because the technical lifetime of ASIC- mining devices usually exceed the period of time the device can perform its task profitably (McCook, 2018), the moment they become unprofitable determines their lifetime and the point at which they become electronic waste… We show in this study that the lifetime of Bitcoin mining equipment is still limited to only 1, 29 years.”
So we must understand that efficiency in the ASIC market is the only driver of energy consumption and produced e-waste?
I will invoke Brandolini’s Law (“The amount of energy needed to disprove bullsh*t is an order of magnitude greater than that needed to produce it.”) as my justification for not addressing the above directly, and will instead discuss the waste of energy.
By waste energy I mean the various points across energy supply chains where energy is available to do work, but for one reason or another does not. This takes various forms across the market, whether it is methane venting and flaring at oil and gas facilities, wind farms, hydroelectric power plants, nuclear reactors and solar energy plants that shut down due to low demand.
Bitcoin mining is the ultimate waste reduction tool, because as long as waste exists in the energy sector, and it always will, there will always be an incentive to mine Bitcoin with that energy, regardless of ASIC type. (NOTE: If you’re Alex de Vries, re-read that last sentence and reconsider your estimate of 1.29 years for ASIC lifetime.)
Source: Author
Source: Author
The least valuable energy is the energy that never reaches the market. The methane vented or flared on an oil well, the wind turbine that stands idle in a megafarm, that hydro turbine that does not spin. In the case of solar, you have production times that don’t match demand times, so excess capacity goes unused in the middle of the day. In other words, people turn on the lights more when the sun goes down down.
Bitcoin miners have no interest in your Science-Backed Turbo Grid™, your political idealizations, or whatever dream team you’ve assembled to form a research council. Whether you want 89% nuclear, 71% solar with Tesla Powerwalls, complete elimination of fossil fuels or 93.7% hydro is irrelevant, we don’t care.
We are the Eternal Free Market Free Agents.
We want your waste and surplus.
We are the dung beetles in the energy sector.
And already the framework for this robust industry is developing.
Rack, power distribution unit and transformer expertise for indoor operations, a range of containerized solutions designed to protect miners in rugged Texas Summers and freezing Alberta Winters, half engine half data center chimeras born for the sole purpose of consuming natural gas, home mining black boxes that dump excess heat into the house your during the cold season all exist. A secondary market in software and hardware is emerging in firmware, machine management, maintenance and life extension.
Everything is designed around a single goal, the identification and utilization of the lowest priced energy in the most efficient way possible. The lowest energy isn’t the electricity you use to charge your iPhone or watch Netflix—it lives far away in an overcapacity substation, or a natural gas plant with underutilized turbines. In this way, Bitcoin mining brings another market everywhere there is not one in the energy supply chain.
At almost every point in the energy supply chain, there is some waste or surplus that is better priced and consumed than left behind.
So when your Bitcoin-curious friends next corner you to ask about the freaking megawatts that bitcoin miners use, your first response might most productively be:
What energy do these Bitcoin miners use?
This is a guest post by Rob Warren. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc Bitcoin Magazine.
