Sorry doomsayers, Bitcoin’s not going to boil our oceans — or eat holes in the ozone — any time soon.
According to the third installment of CoinShares’ biannual mining report, 74 percent of power on the bitcoin mining network comes from renewable energy sources.
This figure is off a few percent from the firm’s November 2018 report and just an estimate. CoinShares arrived at this figure by taking the concentration of the network’s hashrate in each region and multiplying each region’s share of the hashrate by the percentage of renewable energy sources in that region. From this, the firm arrived at an estimate for the global weighted average for the use of renewables in Bitcoin mining’s energy consumption.
Bitcoin and Renewables: A Perfect Partnership
The majority of this renewable energy comes from hydroelectric power in energy-rich regions like Southwest China, the Caucasus, Scandinavia and the Pacific Northwest, to name a few. These hydroelectric meccas often produce an overabundance of energy which leads to dirt cheap energy costs and even underutilized power.
With mining farms thriving in these areas, CoinShares says this supports the thesis that, much like water flowing to the point of least resistance, miners will seek out areas with the most efficient energy sources to cut operational costs. This mindset, the thinking goes, could also spur innovation for renewable energy development, especially in areas where the net return for such projects is often negative.
“Overall, our findings reaffirm our view that Bitcoin mining is acting as a global electricity buyer of last resort and therefore tends to cluster around comparatively under-utilised renewables infrastructure,” the research reads. “This could help turn loss-making renewables projects profitable and in time — as the industry matures and settles as permanent in the public eye — could act as a driver of new renewables developments in locations that were previously uneconomical.”
Besides hydro power, the study found that wind was the next most-utilized renewable energy source, though it trailed by a wide margin. Some miners subsist exclusively on solar power, though “such operations are still relatively rare,” the report reads.
China Still Dominates
Yes, hydroelectricity is still king in the realm of bitcoin mining. And CoinShares reminds us that, because of this, China continues to dominate the landscape, with 60 percent of all mining taking place there. Staggeringly, all but 10 percent of this hashrate comes from the region of Sichuan, and this also accounts for 45 percent of all renewable energy mining.
Probably best known to Westerners as the home of Szechuan cuisine (and a viral dipping sauce), Sichuan’s name is also often mistakenly translated as “for rivers” because of the four major waterways that provide a surfeit of hydroelectricity to the region.
For instance, during the wet season in the greater Yunguichan region, which encompasses Sichuan, energy costs can be as low as $0.025 per kWh (for reference, the national average in the U.S. is $0.12 per kWh). These wet seasons lead to what CoinShares calls “seasonal mobility” for Chinese miners, who may migrate from Yunguichan to Xinjiang or Inner Mongolia for cheaper electricity in the dry seasons.
With 60 percent of mining happening in China, CoinShares found that the remaining 40 percent is split between Washington, New York, British Columbia, Alberta, Quebec, Newfoundland and Labrador, Iceland, Norway, Sweden, Georgia, Iran and a handful of smaller operations spread around the world. Non-Chinese regions were found to hold a 23.8 percent share of renewables for mining.
The study also found that mining hardware efficiency continues to increase while hardware costs continue to decrease, and this inverse relationship accompanies an increasing uptick in network hashrate. Unsurprisingly, China was found to dominate hardware manufacturing.
So, these are the main takeaways from the report: Basically three quarters of all mining is done on the backs of renewables; China is still a heavyweight for both hashrate and ASIC manufacturing; and mining processes are becoming more efficient.
The report does concede that “the Bitcoin mining industry remains a highly private and secretive industry. As a result, our estimates may be subject to significant potential uncertainty. While we have made no attempt to formally quantify these uncertainty levels, we intuitively guesstimate that, e.g. our renewables penetration figures should be taken to include a tentative uncertainty of around ±10%.”
Even factoring in this 10-point margin for error, if 64 percent of bitcoin mining were conducted using renewable energy, that would far outpace renewable use in other sectors. At 74 percent, bitcoin mining uses four times more renewable energy than the global average for international industries.
So next time someone tells you Bitcoin is inching us toward a Mad Max-esque hellscape, tell them to check the numbers.