Can Joe Biden Make Cryptomining Green?

Mining from crypto assets is a power-hungry activity that spawns demand for more electricity than Denmark, Chile, Finland or the Netherlands. U.S. crypto miners consume as much as 1.7% of all electricity generated in the United States, equal to a full year’s consumption for U.S. residential lighting.

In March, President Biden directed the White House Office of Science and Technology (OST) to prepare a report on the relationship between crypto assets and cryptomining and the U.S. commitment to meet its climate change goals of reducing greenhouse gas emissions to 50% of 2005 levels by 2030, creating a carbon-free electricity grid by 2035 and achieving net-zero carbon emissions by 2050.

The OST report estimates that global electricity generation to support the largest crypto operations emits about 140 million metric tons of carbon dioxide per year, or about 0.3% of the global total. In the United States, crypto operations emit between 25 and 50 metric tons of CO2 in a year, about 0.4% to 0.8% of the nation’s total.

To help mitigate the environmental impact of crypto operations, the report noted that the industry should focus on several objectives: “reduce GHG emissions, avoid operations that will increase the cost of electricity to consumers, avoid operations that reduce the reliability of electric grids, and avoid negative impacts to equity, communities, and the local environment.”

When Ethereum completes the “Merge” (currently set for next week), consumption could fall dramatically. The OST report estimates that cryptomining for Ethereum using the proof-of-work method could use as much as 93.9 terawatt-hours of electricity per year. After the Merge, Ethereum mining will switch to a proof-of-stake method that, if adopted by all crypto assets, could reduce global electricity usage from 0.4% to 0.9% of total global generation to as little as 0.001% of total generation.

In a proof-of-stake mechanism, miners (called validators) essentially bid for the opportunity to validate a crypto transaction. Validators offer something of value rather than the proof-of-work’s energy-consuming computing power to validate transactions.

Bitcoin, the market leader with an asset value of some $389 billion as of August, uses the proof-of-work mining method. OST estimates that there were 2.9 million mining devices consuming 1,975 to 3,472 watts each crawling through the blockchain in 2021 trying to confirm a transaction and get paid with more bitcoin. A proof-of-stake device, of which about 190,000 were in use for five different assets, consumed between 6 and 168 watts per device. Bitcoin has so far shown little interest in switching to the proof-of-stake method.

The OST report also recommended that crypto miners used flared and vented methane to generate electricity for their activities. Some new crypto mining operations recently have been located near oil and gas extraction operations to take advantage of the methane that the energy producers have been emitting into the atmosphere.

Comparing crypto transactions to credit card transactions, OST said that in 2020 Visa, MasterCard and American Express combined consumed less than 1% of the amount of electricity consumed by Bitcoin and Ethereum. Not only that, but crypto transactions are much slower, although proof-of-stake is faster than proof-of-work.

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