Both crypto mining and oil drilling contribute a significant amount of CO2 to the atmosphere. Apart from the production of methane during oil drilling, a dangerous gas that has greenhouse effects, gas flaring results in the emission of 281 million tons of carbon dioxide every year according to a report. Similarly, Reuters reported that Bitcoin mining is estimated to generate 22 to 22.9 million metric tons of carbon emission annually. Yet, their relationship does not end there.
Crypto miners have recently discovered that they can reduce the carbon emissions from gas flaring if they partner with oil drillers. On the other hand, rather than wasting natural gas from flaring, oil drillers will partner with Bitcoin miners. Furthermore, cryptocurrency miners claim Bitcoin mining colocation to produce electricity used in mining reduces the production of methane. The question then remains: is this a sustainable solution to the massive amounts of carbon emission produced by both oil and crypto mining?
Bitcoin Mining
Mining Bitcoin and other cryptocurrencies requires high amounts of energy. Bitcoin mining is the process of producing new blocks of Bitcoin, as well as transaction verification and authentication. Mining requires solving complex mathematical problems carried out by sophisticated hardware. The first to solve these hashing puzzles are rewarded with the next block mined. Miners with a higher hash rate have a higher probability of solving the complex problems required in Bitcoin mining. The more advanced technology an individual uses for mining, the faster the computer is able to mine Bitcoin.
Open-air GPU mining rigs, USB Bitcoin miner, water-cooled Bitcoin miner, and ASICs are some of the technological tools used in mining. However, these advanced mining rigs also consume much more electricity. Data from the Cambridge Center for Alternative Finance suggests that Bitcoin mining currently consumes 123 terawatts of electricity annually. This is equal to 0.55% of electricity produced globally. Experts say that this amount of energy could easily power a small country in Europe. Although the amount of energy utilized in cryptocurrency mining cannot be used to measure Bitcoin’s complete carbon footprint, it still generates massive amounts of carbon emissions. Some believe that the annual carbon emission from Bitcoin mining is comparable to that of nine million cars.
China’s Ban on Bitcoin Mining
Asia, with its diverse sources of fuel, was leading cryptocurrency mining before 2019. 70% of all Bitcoin mining occurred in China until mid-2019 when China banned all forms of cryptocurrency mining in the country. Bitcoin mining data centers in China were shut down through government orders; this reduced the global production of Bitcoin by 38% for a period of time. Although some miners have found ways to evade Chinese authorities through underground mining, the ban has significantly reduced the Chinese’s influence on Bitcoin mining. This is because most of the miners that were in China have since migrated to other countries like the US and Kazakhstan.
Is the US the New Leader of Bitcoin Mining?
The short answer is yes. As of now, the US is leading the world in cryptocurrency mining. The likely reason why is that the US has an immense amount of interest in the oil industry, as well as the industries connected to it, like Bitcoin mining. CCAF has reported that Bitcoin Mining in the US has increased by 428% while China’s Bitcoin mining has dropped to 0%. Wyoming, North Dakota, and Texas are some of the states in the United States with crypto-friendly legislation that attracts Bitcoin miners. Crypto mining rigs are consistently springing up across the country, with investors finding innovative means to make a profit from Bitcoin mining.
While electricity generation from clean sources of alternative energy like wind and hydroelectric power is the order of the day, mining Bitcoin using vented gas persists.
Natural Gas Flaring as a Source of Electricity to Bitcoin Miners
When fossil fuels are drilled from oil wells, the excess that cannot be transported due to the lack of enough infrastructure is burned by the oil miners. This is known as gas flaring. Gas flaring contributes enormously to the amount of CO2 and methane in the atmosphere globally. Annually, 142 billion cubic meters of gas is flared which is equivalent to 4.6% of the total natural gas consumption in the world. For the world to achieve net-zero carbon emission by the year 2050, gas flaring must be curbed completely. Therefore, by 2030, the venting of gas must be reduced by 90% globally.
The Rise of Bitcoin Mining-as-a-Service Firms
With many countries aiming to achieve net-zero emissions within the next 30 years, some Bitcoin mining companies tagged as a “mining-as-a-service firm” have developed means to put wasted vented gas to use.
Crusoe Energy
Based in North Dakota, Crusoe Energy is aimed at reducing gas flaring by providing mobile mining data centers for virtual currency mining that are taken closer to oil drillers. The data centers are installed in shipping containers and moved to any place across North America whenever it is needed.
The gas flared by oil drillers is immediately converted to the energy needed by Bitcoin miners. Rather than waste gas, oil producers will be paid and Bitcoin miners will use the flared gas to power giant supercomputers.
Crusoe Energy enjoys the support of certain state legislators. For example, a law has been passed in North Dakota that offers tax credits to oil producers that adopt such onsite mitigation. This energy initiative is believed to be a win-win situation for both Bitcoin miners and oil drillers.
JAI Energy
The Wyoming-based JAI Energy owns a 12-acre Bitcoin mining farm that uses stranded, flared natural gas. Once an oil drilling duo, JAI energy founders, Leechman and Ballard, switched to using flared gas to mine cryptocurrency to reduce the effect of gas flaring on the environment.
The company also manufactures portable mining data centers and uses generators to convert electricity on-site to power computer processors for Bitcoin mining. According to the company, the oil producers are paid in Bitcoin on the total hash rate per second of processing power inputs.
EZ Blockchain
EZ Blockchain adopted a proof-of-work algorithm to mine cryptocurrency through its designed mobile flare mitigation system which is readily deployed to oil drilling sites. Based in Chicago, EZ Blockchain developed EZ Smartbox and EZ Smartgrid. Both aim to create the infrastructures necessary to capture the flared natural gas used for industrial crypto mining.
Final Thoughts
Bitcoin mining colocation to ensure sustainable energy solutions is the marriage between cryptocurrency miners and oil drillers. Their connection relies on stranded, flared, wasted natural gas. Rather than losing money burning natural gas that cannot be transported, oil producers will be paid in Bitcoin to sell the waste products to digital coin miners.
However, despite claims by the cryptocurrency miners that using flared gas as a renewable source of electricity to power Bitcoin mining, experts have warned that this is not a lasting solution to carbon emission. Instead, it will encourage oil producers to dig more oil wells.
Featured Image: Twenty20
