What does the crypto industry and the early players think about greening of crypto mining? If you are into crypto mining and pay close attention to the development in this particular field, you must have come across the term ‘green crypto mining.’
If you are unaware of it or wonder what this trend is all about, you are in the right place.
This is a wake-up call for the crypto industry to get involved in a green revolution in crypto mining.
However, before you jump into it, here are a few specific things that you should know about it, especially what the early players and the crypto industry have to say about it.
It is seen of late that a number of leading crypto mining companies have already started to make amendments in their infrastructure and mining operations to make a transition toward cleaner and greener renewable energy to power up their systems.
For example, the Tesla CEO Elon Musk has backed out from accepting Bitcoin as a mode of payment for automotive sales.
This created a lot of commotion within the crypto community because this company is considered as a champion of sorts by a lot of players in the global digital asset market.
The main reason given by the companies for such back-outs is the PoW or Proof of Stake mining process on which the Bitcoin blockchain network relies.
This particular consensus algorithm consumes a lot of energy for its operation and therefore is considered to be unsustainable in the long term.
Since the announcement by Elon Musk, an increasing number of crypto mining companies also announced publicly that they too are thinking of moving toward using greener energy alternatives.
What Does the Crypto Industry and the Early Players Think About Greening of Crypto Mining?
The early players within the crypto space think that greening of crypto mining will make the blockchain networks more sustainable.
With such a strong belief among the crypto miners and the industry, make no mistake crypto mining and cryptocurrencies will be a lot greener.
This is something that is inevitable because there are already a lot of promising initiatives taken by several companies.
These initiatives that are underway are expected to improve the crypto space as well as the energy profile of the crypto coins such as Bitcoin and others.
It will expedite the shift towards a more sustainable crypto space and with the increased use of renewable energy the blockchain sector will not harm the environment with the crypto emissions as it is doing now due to use of fossil fuel generated energy.
Apart from using renewable energy, there are also a lot of other initiatives taken by the crypto mining industry and the blockchain sector to ensure the crypto world is made greener.
A few of these initiatives are:
- Embracing protocols such as Proof of Stake or PoS that are more energy efficient
- Looking for better ways of carbon offsets
- Following a demand response program and
- Using greener mining pools.
In addition to that, the crypto sector is also contemplating on the concept of carbon-neutral ETFs or Exchange Traded Funds.
This is also gaining rapid traction on a global scale among several leading investment management companies.
For example, the Ninepoint Partners LP based in Toronto has already taken the first step to implement it.
Such a movement towards renewable energy is quite promising and several companies are now boasting about their moves that have benefited them in a huge way to reduce the use of energy for their crypto mining operations.
For example, Bitfarms, the publicly traded North American Bitcoin mining company, claims that their decision of moving towards clean energy has paid off well.
They added that they are now powering only about 1.5% of the Bitcoin network by using 99% clean energy.
Then there is BitMEX, a platform dealing with crypto derivatives trading that has also declared that it has decided to go carbon neutral.
And, there is the United States-based Bitcoin mining firm Marathon Digital Holdings that looks forward to achieving its goal of 70% carbon neutrality within a very short time.
Therefore, there is no doubt that the focus is now on the energy usage of crypto, and crypto mining in particular to secure blockchain operations which are reliant mainly on fossil fuels.
However, moving towards renewable energy is quite an international challenge because the United States represents only 7% of the total hash rate as opposed to 65% of China.
It is for this reason that there is only about 39% of the Bitcoin network powered by renewable energy, according to a report by Cambridge University.
Of late, there is a Crypto Climate Accord designed which is an initiative of the private sectors to decarbonize the crypto sector.
This is an initiative that will make it quite easier for the blockchain projects to acquire offsets.
However, looking at the industry level, there are only about 40 crypto projects that have expressed their support for this Crypto Climate Accord.
The list includes names like Hut8 Mining, Argo Blockchain, and the Ripple project.
However, the list does not contain any marquee names in crypto as of now.
Nevertheless, it is expected that the crypto industry will take real and tangible actions when more data continues to float up as regards the impact of crypto and Bitcoin on the environment, experts think.
It is also expected by the experts in the crypto industry that the Crypto Climate Accord will help in laying the foundation of these types of actions and the early players, signatories, and supporters will stay committed to the goals of the Accord.
There is also a notable initiative taken by Square which is known as the Bitcoin Clean Energy Investment Initiative.
This is designed to support those particular crypto companies that facilitate the adoption of renewable energy and drive the efficiency of it within the Bitcoin ecosystem.
The industry and the early players believe that the crypto space will be powered completely by green energy and driven by it on a global scale, eventually doing away with its carbon footprint.
A lot of investments are already being made in this regard.
Some of the experts of the crypto industry and the market give some credit to the decision of China banning crypto mining and transactions in their country.
They say that this has resulted in the migration of hashing power from that country to another.
This is viewed to be a significant and a big positive for crypto, especially considering the decentralization aspect of the Bitcoin network.
They also believe that the ban on any activity related to crypto in China has proved to be a blessing in disguise for countries like the United States and their miners.
This is because they are now motivated to seek new and innovative ways to find and use clean energy for their mining operations in order to reduce their carbon footprint, a serious concern for the governments, miners, and environmentalists.
Is Renewable Power Mining the Only Option?
At this point you may wonder whether or not going green in crypto mining is the only way out to reduce the carbon offsets of it.
Well, here is the answer in detail.
According to a few chief strategy officers of NASDAQ and former heads of different banks, the ‘switch to green crypto mining’ is already happening at a rapid pace within the crypto mining landscape all over the world.
This can be seen in the activities of different crypto miners, both individuals and groups, who are striving actively for more sustainable energy practices which is perhaps only possible with the use of renewable energy sources.
This is a notable initiative noticed among the publicly listed miners especially who want to maximize their profits with reduced cost and use of energy as well as offer higher returns to their stakeholders and shareholders.
The experts believe this is perhaps the best and most effective integral approach that will help significantly in improving the sustainable practices in crypto mining and at the same time mitigate its impacts on the environment.
The sustainability efforts are however not restricted to moving to renewable energy such as solar power and wind-powered technologies.
A lot of companies also resort to other carbon-neutral sources which include hydroelectricity.
The industry analysts also believe that the crypto mining companies will also start working closely with independent Environmental, Social and Governance or ESG consultants in order to measure their mining footprint and sustainability.
As the industry moves towards an increasingly digitized future, the companies will enlist them to get the services of these ESG consultants to self-monitor and set targets for attaining carbon neutrality.
With such moves, it will be easier for the crypto companies to offer transparency about their energy usage.
At the same time it will also help these companies to enhance their sustainability and percentage of green electricity usage and other initiatives.
This will eventually help the entire crypto industry to be able to create specific targets to improve continuously and move towards a 100% clean energy.
What About Nuclear Energy?
At this point, you may also wonder whether or not nuclear energy is a worthy option to consider.
Well, most of the talk regarding renewable energy revolves around wind and solar power but using nuclear energy can also be a worthy and useful option.
For example, a North American mining and hosting firm Compass Mining has already gone a step ahead and entered into a 20-year contract with Oklo, a nuclear fission startup.
This deal will provide them with as much as 150 megawatts of clean energy generated by the mini reactors.
This is a good move because nuclear reactors are known not to contribute to air pollution of any sort during its operation, according to a report of the United States Energy Information Administration.
The best part is that when you use nuclear energy for mining crypto coins the cost of operation will drop down significantly.
As a result, there are quite a few crypto mining firms that are contemplating on exploring nuclear energy for their mining operations in the near future.
The market players and analysts believe that it all boils down to cost and efficiency while choosing a renewable energy source.
As it is Bitcoin mining will always be profitable irrespective of the region of the cost of power incurred when the market is bullish and buoyant.
It is, and will always be, an energy intensive process and therefore the more clean and green sources of energy are used by the crypto mining firms, the better it will be for the crypto industry itself as well as the entire planet.
However, the caveat here is to make sure that the renewable energy is not pulled away from the towns, cities, and households simply to power the operations of the crypto mining firms.
In that case, everything will be back to square one.
It Renewable Energy Cheaper?
As said earlier, everything boils down to cost and efficiency and therefore you may wonder now whether or not shifting to renewable energy for crypto mining will be cost effective.
Well, yes it will be and that is one of the most significant reasons that several major players operating within this particular crypto space have already started to move to using renewable energy.
The leading players in crypto mining believe that this is a positive step forward to make this world and its environment green.
In fact, renewable energy is much cheaper as compared to other forms of energy.
Usually generated from solar and wind power which is abundant and free, generating renewable energy simply involves the initial cost of installation and henceforth, once the break even mark is reached, everything is virtually free.
This is what makes shifting to renewable energy so much more attractive and productive to the crypto mining farms.
However, such an energy source needs something to make sure that its supply is stable and consistent and is not affected by the seasonal or daily fluctuations.
Shifting to Proof of Stake
The crypto industry experts and the players in this market space are also in favor of moving to a more energy efficient consensus protocol to reduce the use of energy for their mining process and as a result reduce their carbon footprints.
The Proof of Work consensus algorithm, on which the Bitcoin and most of the crypto networks rely on, is an extremely power hungry mechanism.
In this process each and every transaction made on the blockchain is first verified and authenticated by all the participants on the network before it is added to the blockchain as an immutable record.
As more and more people take part in it, the mining difficulty rises and so does the requirement of energy.
On the other hand, the Proof of Stake consensus algorithm is much more energy efficient since it allows people to participate in mining only when they stake their coins.
The amount of reward offered for their efforts are also based on the amount of collateral put up or coins staked by the participants.
Ethereum, the second-largest crypto coin after Bitcoin in terms of market capitalization, currently supports the Proof of Work consensus mechanism just as Bitcoin does but has plans to shift to Proof of Stake consensus algorithm soon with its launch of Ethereum 2.0.
This way this primary platform for Decentralized Finance or DeFi and Non-Fungible Tokens or NFTs will reduce its energy impact dramatically, while these two conceivably transformative technologies continue to offer huge returns on investments.
According to a statement of the Ethereum Foundation, the upgrade to the Proof of Stake consensus protocol will curb down the amount of energy used by this platform by as much as 99.95%.
In fact, according to them, the entire blockchain network will be able to function effectively and successfully with just about 2.6 megawatts of energy.
Therefore, it can be said that the power hungry days of crypto, especially Ethereum, are numbered.
When Ethereum does, it is expected that the rest of the crypto industry will move to it as well.
According to the reports of the insiders, other tokens in the DeFi system, such as Algorand, TRON, EOS, Cardano, are also contemplating to move to the Proof of Stake consensus algorithm to become a climate negative crypto coin.
Other ambitious and notable eco-coin efforts are that of SolarCoin which has also decided to run atop Ethereum.
When it comes to carbon offsets the blockchain powered technologies play a significant role, especially the crypto exchanges.
These crypto exchanges purchase carbon credits to become carbon neutral and keep on crypto forward to a greener world.
Though carbon offsetting is not the only answer to reducing the carbon footprint of crypto on the environment, it is surely quite good and an appreciable move, market experts say.
Several crypto platforms have come together and are using blockchain technology to help in their effort and tackle the challenges that hinders them from achieving their positive intentions.
For example, the enterprise blockchain for utilities Energy Web Chain has created a marketplace to offset carbon which in turn assists in organizing the Crypto Climate Accord.
Then there is Ripple that supports the stablecoin Tether works with Energy Web to create EW Zero, an open-source tool.
This tool will help any type of blockchain network to decarbonize by purchasing renewable energy in the local markets all over the world.
This way, Ripple says that it will achieve carbon net-zero by the end of 2030.
The Ripple CEO says that it is needed by all to make system shifts for the long term as digital payments continue to become more popular and evolve.
This will ensure that the digital transformation of the world does not come at a cost of the planet itself.
It is therefore necessary to ensure that every crypto player within this space holds them accountable and chooses greener energy and ways to mine and transact crypto with proper monitoring of their energy usage, the analysts think.
Apart from Ripple, another marketplace to offset carbon is Climate Trade.
This platform runs on Algorand and helps the blockchain networks to meet their carbon-negative goal.
Sustainability oracle is used here in order to track the carbon footprint of Algorand and incorporate off-chain data.
This allows them to get an equal amount of carbon credits in the green treasury. This helps the protocol to keep functioning as carbon negative.
Opportunity for Mining Pools
The mining pools comprise a group of miners who combine and share the computational power and collectively improve their chances to earn more block rewards.
When the crypto mining industry moves to greener renewable energy, there will also be some specific opportunities created for the mining pools.
These pools will use hash rate or computational power and operate on the energy drawn from hydroelectric sources that are green.
The first Bitcoin mining pool of the world that is powered by clean energy is Terra Pool which is a joint venture of DMG Blockchain Solutions and Argo Blockchain.
This focuses on eco-friendly Bitcoin mining and along with that offers an opportunity to the mining pool to bring in changes in the ways the Bitcoin mining community performs towards ensuring a more climate-conscious future.
This, the experts believe, will provide an opportunity for a continual growth along with much better operations and understanding of a climate-friendly crypto mining space.
At the same time it will also allow integrating some of the most recent, advanced, and innovative blockchain technologies.
Demand Response Programs
The crypto miners can also follow the demand response program by entering into a contract with the energy suppliers.
This will allow them to use the energy from the grid that may be curtailed rapidly to send it to other destinations such as in a hospital for a mission critical customer.
Companies like Compute North allow using such demand response programs which have the required infrastructure to provide the users with the required flexibility to adjust the demand for power at every facility according to the requirement.
This does not only offer stability to a critical partner overall but also to the local power grids by bringing in more renewable energy online.
Companies like Bit Digital follow such a demand response program that helps the company to meet the growing need for energy for the mining operations.
With the help of selected strategic partners they can now facilitate the changeover to more sustainable Bitcoin mining.
Such types of demand response programs help the businesses to focus both on the supply as well as the demand side of energy and maintain perfect balance between coin production and energy usage, carbon offsets and profitability.
As for the supply side, it allows the companies to evaluate and use new renewable sources that will complement the current renewable energy based crypto mining in a nice way.
As for the demand side, following a demand response program will allow the companies to optimize their ability to mine coins as well as manage their power usage more dynamically.
In short, the demand response programs allow the companies to follow a multi-pronged strategy to act, manage power and costs, as well as expedite the adoption of renewable energy sources for crypto mining.
Finally, the switchover to greener renewable energy for crypto mining ensures that the miners have a more secure and brighter future.
For your information, after China decided to ban crypto mining in the country in September 2021, Bitcoin mining experienced the most significant drop in the mining difficulty level by as much as 45%.
This drop allowed a lot of Bitcoin mining firms to produce a large quantity of coins at a much lesser cost per unit.
As a result of the ban on crypto by China, market experts and major investors such as Elon Musk predicted that the crypto industry will look for long-term sustainability and that will happen pretty quickly.
This, he said, had nothing to do with his decision to stop accepting Bitcoin payments.
Musk actually hinted that the crypto mining sector as well as the entire crypto industry will move towards renewable energy sources to ensure a greener crypto future.
And, the recent data available from Cambridge Centre for Alternative Finance suggests that he was right as it shows a significant drop in the amount of energy used for mining Bitcoin.
Therefore, time has already started to indicate that change is inevitably happening in the crypto mining sector.
Now it is to be seen how the future of the Bitcoin mining industry shapes up from here on out when more and more crypto miners choose to use green energy for crypto mining or move to other different crypto-friendly countries where renewable energy is relatively in abundance.
Therefore, the crypto industry is poised to shift to renewably-powered mining operations and, as the article points out, there is no doubt about it that such moves have already started.
This will protect the Earth and its environment from the ram of carbon emissions.