Bitcoin Mining Now Uses 10.9% More Renewable Energy, Goes Unreported
Bitcoin mining may not be the great evil we have been led to believe it is, says Daniel Batten.
Since the China ban, the Bitcoin Mining Council reports a significant increase in the use of renewable energy. In some quarters, they have been questioned due to the fact that they rely on self-reported data.
To avoid this criticism, I decided to do an independent analysis based on publicly available information, statistics and news reports to confirm the impact on the amount of the Bitcoin network using renewable energy.
Where there is uncertainty, I assumed a worst-case scenario (ie: I assumed in the direction of greater use of fossil fuels). This means that the finding of a 10.9% increase in the use of renewable energy across the entire Bitcoin network is a minimal increase.
Bitcoin Mining: Misreporting
Before we dig into the weeds, how did the reports that it had become less green (which is widely discussed in the NY Times, among others) get so wrong?
In summary: they relied on a single study, which contained serious flaws, the most important of which were
1. Incorrect analysis of both the net hashpower change and the mix of renewable energy before and after the ban in China
2. Failure to consider the 47x reduction of mining in Iran (98% non-renewable net) combined with the 4x growth of mining in Canada (67% renewable net)
The study also relied heavily on one piece of information that was accurate at the time but has since changed:
3. Miner migration to Kazakhstan
Bitcoin Mining: Analysis
1. The mining ban in China was in practice only a power ban on fossil fuels
As a nation, China is now the world’s largest contributor to green Bitcoin mining.
How do we know that?
First:
Global hashrate from China is still over 20% according to 2 separate sources (China’s own cyber security Qihoo360 and Cambridge University which estimates that 21.1% of mining still happens in China as of January 2022.
A source who wished to remain unnamed, an owner of a China-based Bitcoin mining operation, confirmed:
“Bitcoin mining in China using hydro and solar power is widespread. But if you try to mine Bitcoin using coal, you will be crushed because of the central government’s emissions targets. What the ban in China has done is eliminate all coal-based Bitcoin mining in China that took place for 9 months of the year.”
Second: 9 months a year? Yes that is correct. 9 months.
Many people assume that mining companies in China used to use hydropower for 6 months of the year, coal for the other 6 months.
However, this is not accurate. Cheap hydropower was only used by Bitcoin miners during the wet summer months: a period when sudden heavy rainfall causes more generating capacity than hydro stations can find customers for, causing them to reduce energy. Bitcoin miners would only use this energy when it would otherwise be reduced (wasted).
Here are the charts where we see that across different regions of China, a consistent pattern of very high rainfall over a period of around 3 months.
Because China had almost half of the Bitcoin network at pre-ban hashpower, the coal based energy made the entire Bitcoin network >30% more fossil fuel based.
The shift of the vast amount of coal-based Bitcoin mining, mainly to the US and Canada, has decarbonized the Bitcoin network by a non-trivial amount.
But didn’t a lot of it go to Kazakhstan too? Yes initially, but it didn’t end there. That brings us to our next point.
2. Kazakhstan has not ended up being the big factor most people imagine
Calculating Kazakh hashrate is important because 99% of their network is based on fossil fuels. So a permanent mass move to Kazakhstan would actually have had a non-trivial impact on how green Bitcoin mining was.
However, as of August 2022, Kazakhstan’s contribution to global hashrate is rapidly decreasing to its pre-ban level.
Here’s why:
As of March ’21, Kazakhstan represented 7.4% of the world’s hashrate. It rose briefly to 18.1% in Aug ’21.
But had already reduced to 13.4% by Jan ’22.
Since then, I estimate that the Kazakhstan hashrate has dropped another 3.8% minimum.
Here’s the logic behind that estimate:
Since January 22, Kazakhstan has endured blackouts, a 1-2.5c/KWh tax on crypto mining (enough to render many operations unprofitable), the seizure of 67,000 illegal mining machines and the loss of 202MW of power in a single raid of 13 mining sites, followed by a second raid of 106 mine sites.
The first raid alone on 13 sites (202 MW power) would have reduced Kazakh hashrate by ~5.4 EH (2.5% of global hashrate) assuming 80% of machines were S19Pros.
Assuming that the second raid of 106 mining companies in total was only half the size of the original 13 mining companies because they targeted the “long tail”, then the total hashrate loss in these 2 raids would have been 3.8%, reducing the flow . Khazak hashrate at 9.6%, slightly more than the level before the China ban.
3. The Explosion of Bitcoin Mining in Canada; there is decimation in Iran
Iran has a 98% fossil fuel-based grid. According to Cambridge University, almost all mining has now stopped. (Like from 4.7% in Mar ’21 to 0.1% by Jan ’22).
The loss of Bitcoin mining to Iran alone removes 4.5% of fossil fuel use from the Bitcoin network.
In contrast, over the same time frame, Canada has significantly increased its contribution to global hashrate. From 1.6% in Mar ’21 to 6.5% by Jan ’22.
This is significant, because Canada uses 67% renewable energy. This increase of Bitcoin mining in Canada alone makes the Bitcoin network 3.3% more renewable.
Net greening due to changes in hashpower in Iran and Canada: +8.3%
When we include these plus migration to the US and calculate the overall renewable energy mix, we take into account that international, grid-based electricity is currently greening at a rate of approx. 0.7% per year globally, and the fact that there is more renewable off-grid Bitcoin mining than 18 months ago (Iris, Dame, Green Mining Capital to name a few), the total Bitcoin network is at least 10, 9% more renewable-based than before the China Mining ban.
Bitcoin Mining: Future Trends
The future looks positive for further greener networks, for three reasons.
1. Individual companies are beginning to pledge to become 100% carbon neutral
Marathon, which could become the world’s largest Bitcoin miner by hash rate by mid-2023 based on their current new ASICS purchase agreements, has pledged to go from 70% renewable to 100% renewable by the end of 2022. With the volume of EH promised by mid-2023 (23.3 EH/second), this will represent 10% of the network coming from a 100% renewable source, greening the entire network by a further 2.7%.
Importantly, Marathon has followed through on their promise with action, terminating their contract with their major (non-renewable) power supplier earlier this year.
2. A significant portion of new hashrate is carbon negative or renewable based
For example, I am currently in contact with 20 new Bitcoin mining companies. Of these companies, 90% of them are either carbon negative or 100% renewable (8 are carbon negative, 10 are renewable).
3. Carbon negative mining is increasing exponentially
We’ve gone from 1 to 12 Bitcoin miners reducing methane since the start of 2021. This is important because methane is 84 times more warming than CO2 over a 20-year period. So removing methane from our atmosphere is the strongest action we can take to immediately mitigate climate change.
About the author
Daniel Batten is a ClimateTech investor, author, ESG analyst and environmental activist who previously founded and led his own technology company.
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