Bitcoin Mining Could Revolutionize Energy Production: Arcane Research

Arcane Research – a digital asset research firm – has published a report examining Bitcoin mining, and its relationship to global energy.

The paper argues that the mining industry can transform worldwide energy production for the better – contrary to its frequent portrayal as a social and environmental blight.

Strengthening the network and renewable technology

The reportpublished on Wednesday, provides four ways that mining can improve energy systems in a desirable and economical way.

The first is stability: Miners can act as a buyer of last resort for unreliable, uncontrollable energy sources, such as wind and solar. This is due to the constant demand for electricity from miners, and the low cost of immediately reacting to a given supply shock at any granularity.

Mining reactivity also enables the industry to feed energy back into the grid when demand is too high. For example, industrial miners in Texas gathered turned off in July to help protect the grid during a heat wave, as part of a statewide demand response program.

Such reactivity will be particularly important in the coming years, as the world increasingly moves away from flexible fossil fuels to non-flexible renewables. Thanks to proof of work, stranded renewables can become profitable by leveraging the location agnosticism, modularity and interruptibility of miners.

“Bitcoin miners can seek out areas of excess wind and sun and build a data center of the exact size needed to consume the excess energy,” the report explained.

Recycling of gas and heat

Miners not only support renewable energy, but also make oil drilling a cleaner and more efficient process.

Oil drilling often produces natural gas that cannot always be exploited economically for consumption. As such, oil producers are forced to flare the gas, without economic benefit and polluting the environment in the process.

In contrast, if oil producers chose to use natural gas for mining, they could both profit from and reduce the greenhouse gas emissions associated with the by-product. Once again, mining is uniquely suited to this function for its location agnosticism, modularity, and portability.

The Bitcoin mining oilfield has grown particularly rapidly in the United States and Canada in recent years. Exxon – a large multinational oil and gas company – expressed plans to use Bitcoin mining for this express purpose in March.

The primary motivation among the oil industry appears to be emission reduction. Data from Crusoe energy shows that it is by far the most economically efficient method of reducing emissions – over 4X more efficient than wind investment, and over 6X more efficient than solar energy investment.

But just as oil drilling produces natural gas as a byproduct, Bitcoin mining produces heat as a byproduct.

This provides another opportunity for recycling financial resources. Bitcoin miners could potentially use heat recovery for district heating while subsidizing those heating costs with the Bitcoin it generates.

Furthermore, if these miners are powered by renewable sources, the industry can effectively reduce the carbon emissions associated with heating – the world’s largest single source of CO2 emissions.

“Reusing the heat from bitcoin mining is essentially using the same thing energy twice,” Arcane explained. “This offsets energy used by the bitcoin mining industry since it outcompetes other miners who do not reuse the heat.”