A renewable source for (crypto) mining
Originally published in February 2021
Some recent events have made me reflect on Crusoe Energy Systems, a startup first introduced to me seemingly forever ago around January 2020:
- A growing debate about Bitcoin’s consumption of energy
- China’s Bitcoin mining dominance, responsible for around 66% of the world’s total output
- Texas winter storms, which caused a spike in natural gas prices (and outrage at Jerry Jones)
And how do these points tie together with Bitcoin and this company? Because Crusoe Energy’s business model is a smart, climate-beneficial, proof-of-work energy source.
The basic premise goes like this: Fracking produces oil along with excess gases. With no established pipelines near many fracking sites and high shipping costs, drillers have no choice but to burn the gasses into the atmosphere. Crusoe Energy found a way to convert that wasted power into electricity on-site and use the electricity to power remote computing services. Seems useful, right?
The criticism towards Bitcoin mining’s energy consumption feels rejuvenated on social media of late. No need to rehash the debate, aside from stating a fair assumption we’d all would like to see actionable solutions to make Bitcoin mining “cleaner”. Yes, mining for physical gold contributes to climate change. So does the printing and circulation of our current fiat system. But at the end of the day, Crusoe helps mitigate Bitcoin’s impact, if ever so slightly, so I’m down with it.
There is also a second reason to be excited, which is increase the hashing power in the United States. The US only accounts for roughly 7% of the world total, on par with other productive countries, but significantly behind China’s 66% referenced above. The centralization of Bitcoin mining leads to inherent risk. What if the Chinese government decided to crack down on Bitcoin mining, an activity it has so far refused to do, but could one day suddenly reverse? That would be devastating for the network and hurt the ability to validate transactions quickly.
Low electricity costs are the main reason China is leading significantly. It allows Chinese miners to function at peak efficiency and outlast foreign competitors. China uses a mix of “clean” hydraulic energy and “dirty” coal to power Bitcoin mining. With Crusoe, we have another opportunity to leverage technology for “clean” mining. Like many of you, I strongly believe Bitcoin has a future as a store of value. It is imperative for the United States to attract miners without sacrificing at the altar of climate change.
So, to recap – Bitcoin mining is energy-intensive, and we have a company with a creative strategy to take excess flared gas, convert that to electricity, and use it to safely mine Bitcoin. That sounds like a win-win proposal for two of the points above (sympathies to Texas…but not sorry to Jerry Jones).