Can Crypto Mining Reward Sustainability Survive Regulatory Eyes?

Cryptocurrency and Bitcoin mining activities continue to engage the US Congress on energy consumption. Different reports in the US have raised environmental concerns. Now miners are changing their approach by going the sustainability route.

The much-discussed migration of crypto mining from China to the US has increased power consumption requirements in US regions. Now, US regulators have reiterated concerns about the rampant energy consumption spree.

Mining crypto like Bitcoin is an energy intensive process. It requires specialized computers to solve complex mathematical problems to verify transactions on the blockchain. These computers consume significant electricity. The process is highly competitive as miners race to solve the problem first and earn a Bitcoin reward.

Mining activities in the USA

Certain states with low energy costs and favorable regulations, such as Texas and Wyoming, are popular destinations for crypto miners. As more miners operate in these states, the noticeable increase in energy consumption puts pressure on local power grids.

For example, in Texas, the Electric Reliability Council of Texas (ERCOT) has expressed concerns about the strain on the state’s power grid due to the influx of cryptocurrency miners. According to ERCOT, Bitcoin mining could consume up to 3% of the state’s electricity supply by the end of 2021.

Similarly, in Wyoming, some communities have reported significant increases in energy consumption due to cryptocurrency mining operations. Increased electricity demand has led to concerns about power outages and grid reliability.

Regulators are cracking down on mining activities

Crypto mining and miners have faced criticism for their high energy consumption. Some estimates show that industry uses as much energy as entire countries. Cryptocurrency mining it requires significant computing power, which in turn requires significant energy consumption. The energy consumption required to mine cryptocurrencies has concerned environmentalists and policy makers.

A Whitehouse 2022 report was among the first publicly available responses to the US President Joe Biden Executive Order on Cryptocurrencies. The office detailed its approach to the question of what kind of impact cryptocurrency mining has on the environment. Details in the Whitehouse report include the scale of the impact and how different cryptocurrencies require different energy needs.

Crypto mining, particularly bitcoin (BTC), uses significant electricity, undermining US sustainability goals.

Bitcoin Power Consumption Index Source: Digiconomist
Bitcoin Power Consumption Index Source: Digiconomist

“Global electricity production for the cryptoassets with the largest market caps resulted in a combined 140 ± 30 million metric tons of carbon dioxide per year (Mt CO2/y), or about 0.30% of global annual GHG emissions” , the report said.

How the mining operation affects the US

Further, the study uses another comparison where crypto industry operations use as much electricity as the nation’s home computers combined.

Last year, Senator Elizabeth Warren and a group of Democrats urged the Environmental Protection Agency and the Department of Energy to take action against cryptocurrency mining. They cited the high levels of energy consumption required for mining as “disturbing” and highlighted the potential environmental impact of the industry.

Oversight Report Source: Warren Senate
Oversight Report Source: Warren Senate

Here, Congress has called for gigawatt-scale energy use by cryptocurrency miners, questioning the sustainability and environmental impact of the industry. Recently, Massachusetts Senator Elizabeth Warren called for more transparency from cryptocurrency miners due to concerns about the environmental impact of Bitcoin, the cryptocurrency.

Senator Warren urged the Environmental Protection Agency (EPA) and the Department of Energy (DOE) to use their authority to require crypto miners to disclose their energy use and emissions.

Feb.6 Memo from Congress Source: Warren Senate
Feb.6 Memo from Congress Source: Warren Senate

Miners take responsibility, make changes

In response, many crypto miners have defended their energy use, pointing out that most energy comes from renewable sources. They argue that because crypto mining’s energy consumption is not constant, it can help balance the network and use up excess energy that would otherwise go to waste.

In addition, some crypto miners have pointed out that the industry is constantly working to improve energy efficiency, by developing new mining hardware that requires less energy to operate. They argue that this is necessary to ensure the long-term viability of the industry.

BeInCrypto reported on February 21 that Bitcoin mining accounted for more than 50% of sustainable energy sources. Bitcoin has increased its sustainable energy mix to 6.20% per year since January 2020. Areas like Iceland have emerged as the most stable Bitcoin mining region due to its famous abundance of cheap geothermal energy. It accounted for 1.30% of the global hash rate and the highest per capita hash rate of any country.

Such developments in 2023 indeed help to strengthen the struggling miners who were struggling to make ends meet. Mining difficulty has increased more than 9% in the past two weeks to reach an all-time high.

Bitcoin mining difficulty is 43.05 trillion Source:
Bitcoin mining difficulty is 43.05 trillion Source:

Field of Development?

Others have criticized the cryptocurrency mining industry for its reliance on fossil fuels, particularly in areas where renewable energy is not yet widely available or affordable. They argue that the industry needs to prioritize the use of renewable energy sources more and that governments should incentivize this transition through policy and regulation. However, some US lawmakers have raised the green flag to support mining activities, given the financial incentives.

Overall, the debate surrounding energy use in the cryptocurrency mining industry is complex and ongoing. One such topic up for debate is the sustainability of Bitcoin mining reward. Speaking to BeInCrypto, one of the Redditors claimed that BTC’s reward model may lead to its downfall in the future.

Screenshot shared by Redditor discussing mining cost analysis
Screenshot shared by Redditor discussing mining cost analysis

While there are concerns about the environmental impact of the industry, there are arguments about its potential benefits and efforts to improve its sustainability.

Denial of responsibility

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