The New York Times has revealed the true cost of the digital race for Bitcoin. The news identified 34 major Bitcoin mines in the US that are each putting enormous pressure on the power grid, and profiting from doing so.
After winter storm Uri knocked out power plants across the state of Texas, tens of thousands of homes were left in the dark. By the end of 14 February 2021, almost 40 people had died. At the same time, just outside of Austin, computers were using enough electricity to power roughly 6,500 homes as they raced to earn Bitcoin.
Performing trillions of calculations per second, the computers continued to run until just after midnight, when the state’s grid operator ordered them to shut down. Over the next four days, Bitcoin company Bitdeer earned more than $18 million for not operating. In return for keeping its computers offline, the state paid Bitdeer an average of $175,000 an hour.
For a business to profit from Bitcoin mining, it can require as much electricity as a small town. A computer guesses an elusive combination of numbers that Bitcoin’s algorithm will accept about every ten minutes, winning enough Bitcoin to be worth (in today’s prices) $170,000. The operation of these companies can create costs, including higher electricity bills and carbon pollution, that affect everyone around them.
China, which was the site of most Bitcoin mining until June 2021, shut down Bitcoin operations citing their power consumption among other things. The amount of electricity used by Bitcoin miners in America, which soon became the industry’s global leader, and the effect on energy markets and the environment have been unclear.
Each of the 34 Bitcoin mining operations identified by Times uses at least 30,000 times as much electricity as the average US home, consuming a total of 3,900 megawatts of electricity. According to the publication, another New York City’s worth of homes is draining the nation’s power supply.
The Mawson Infrastructure Group mine in Midland, Pennsylvania, uses more than twice as much power as the nearby Pittsburgh airport.
The extra electricity use in America causes as much carbon pollution as adding 3.5 million gas-powered cars to the nation’s roads, according to WattTime. Bitcoin operations tend to market themselves as environmentally friendly, establishing themselves in areas rich in renewable energy. Ultimately, their power needs are too great to be met by these sources alone.
WattTime found that coal and natural gas plants meet 85% of the demand that Bitcoin operations add to their grid. In Texas, where 10 of the 34 mines are connected to the state grid, the increased demand has increased electricity bills for power customers by 5%.
Can Bitcoin Operations’ Power Use Be Compared to Hospitals?
In interviews and statements heard by Times, many Bitcoin companies argue that they are no different from other large power users, such as hospitals and factories, except for their willingness to shut down quickly in favor of the grid. While hospitals arguably have enough human benefit to justify the use of large amounts of electricity, there would be serious consequences if they reduced electricity consumption as routinely or dramatically as Bitcoin operators are able to.
Bitcoin miners’ ability to shut down almost instantly allows them not only to save money, but even to make money by manipulating the US power markets: they can avoid fees charged during high demand, resell their energy at a premium when prices rise and even , as in Texas in 2021, pay to turn off.
In practice, although Bitcoin companies are paid by the network to promise to shut down if necessary to prevent blackouts, they are rarely asked to do so. As such, they earn extra money to operate as normal. In Texas, five operations have collected $60 million from the program since 2020. Bitdeer’s 2021 outcome came as a result of such a deal.
Several companies get paid through these agreements most of the time they operate. Most years they are asked to switch off for just a few hours, then they get paid even more. “Ironically, when people pay the most for their power, or lose it altogether, the miners make money selling power back to Texans at prices 100 times what they paid,” said Ed Hirs, who teaches energy economics at the University of Houston.
In addition to hospitals, industries including metal and plastic production also need a lot of electricity, which causes pollution and increases power prices. Manufacturing may not save lives, but at least it brings jobs to an area. Bitcoin mines tend to employ only a few dozen people once constructed, which encourages less local economic development.
Bitcoin operations’ economic benefit goes almost entirely to their owners and operators. In 2021, the year Bitcoin’s price peaked, 20 executives in five publicly traded Bitcoin companies received nearly $16 million in salary and over $630 million in stock options.
Essentially, in addition to the consequences of such huge power consumption, Bitcoin mining only benefits a few, while the masses suffer the impact of carbon emissions and increased prices. Although Bitcoin’s value has fallen, as two of the largest US-based companies file for bankruptcy, new mines continue to open across the country.
It’s not as if there aren’t alternatives to powering cryptocurrency with less electricity: Ethereum, the second most popular cryptocurrency, switched its algorithm to cut the amount of electricity needed to power its network by 99%. Bitcoin advocates oppose changing the algorithm because proof-of-work has been resistant to attack for longer and on a larger scale than any other approach to creating virtual currency stakes.
Like artificial intelligence development centers, cooling the masses of computers used in Bitcoin mining also drains power supplies.
Source: WattTime analysis, New York Times research Power levels are as of March 9 and based on information provided by each company or its most recent prior public statement. Fossil fuel percentages do not include energy imported from other states, the type of which is unknown; resulting in low numbers for the Merkle Standard mine in Usk, Wash., and the Atlas Power mine in Butte, Mont.
Despite claims by the president of the Texas Blockchain Council, Lee Bratcher, that the industry is stimulating the development of renewable and natural gas plants, Dr. Jenkins of Princeton says Bitcoin operations are more likely to keep fossil fuel plants in business than lead to more renewable energy. In New York, a gas-powered facility was able to reopen due to a sharp increase in power demand from Bitcoin mining.
To round off: Bitcoin mining uses massive amounts of power, to the detriment of both the planet and communities near mining facilities. It not only reduces job opportunities, but actively worsens local economies for the benefit of a few individuals.
There is a Bitdeer mine in an old aluminum smelter just outside of Rockdale, where two of the largest mines (for fuel, not cryptocurrency) in the country operate. When the industrial plant where Bitdeer now operates closed, “it just cut the legs out from underneath [the] community, says city manager Barabara Holly.
At a time when everyone is sacrificing for the good of the planet – or should be – it’s time for big operations to be held accountable. Without any widespread, material benefit, Bitcoin mining is perhaps one of the first things to go.
For the full report and data, read on New York Times article here.
