How The Energy System Benefits From Bitcoin Mining
Cryptocurrency is an integral part of the investment and technology markets. Over the years, Bitcoin has proved itself to be useful as a digital currency and solid investment option, having averaged an annualized 230% return between 2011 and 2021.
But beyond its utility and future investment potential, Bitcoin could also be beneficial to the energy system. Today we discuss how Bitcoin affects the energy system and what it could mean for the future.
What is Bitcoin Mining?
Before we can define how Bitcoin affects the energy system, we first need to understand how the mining process works. Bitcoin mining is a process where high-powered computers solve many cryptographic and mathematical puzzles. To make it possible to solve these puzzles, computers must now be equipped with specialized chips like application-specific integrated circuits, or ASICs.
The first miner to solve the puzzles will be rewarded with Bitcoin. But, for any Bitcoin to be earned, the computers (miners) must be connected to an energy source at all times, consuming vast amounts of electricity. If not connected 24/7, the chances at solving a crypto puzzle and earning a reward before another miner does, drops.
As such, countries that don’t have renewable sources of energy, or have poor grids, view Bitcoin as being detrimental to their environment and energy sector.
While most policymakers agree that Bitcoin can benefit the economy, some see its energy usage as unsustainable; which is why a lot of crypto mining activities have been limited or even banned in some areas. Unfortunately, it’s this lack of knowledge and illiteracy in these sectors that have hindered the growth of Bitcoin to its full potential.
Change Isn’t Always Straightforward
When a new technology arises, it’s usually met with resistance until it’s better understood. Erik Thedéen, the vice-chair of the European Securities and Markets Authority, called for a ban on all proof-of-work mining (the method by which new Bitcoin is issued). He’s just the latest among many EU politicians who have attacked Bitcoin mining without doing their homework. Sadly, the most illiterate when it comes to Bitcoin technology are regulators and policymakers.
But, as you’ll see, the role that Bitcoin mining plays in energy systems could in fact be beneficial. And once the benefits become more widely known, global regulators may embrace the technology…
And Bitcoin’s price could further rise.
Now, there are three ways in which you can measure an energy source’s usefulness:
- Abundance
- Reliability
- Cost
When speaking from an environmental perspective, the world’s preferred option for electric power is renewables. However, many renewables don’t’ hold up well against the criteria above. Yes, some renewable energy might be abundantbut not everyone has access to it.
It can also be intermittent, meaning some sources (like solar/wind) may not be as steady or reliable as traditional fossil fuels. Of course, other renewables like geothermal, hydro, and nuclear are reliable, but aren’t available everywhere.
While the whole world scrambles to transition over to renewable sources of energy, Bitcoin mining has an important role in making it all possible.
Renewables, such as wind and solarexpensive and unreliable sources of energy. However, Bitcoin mining can improve resilience on power grids and reduce electric waste by absorbing excess power. Crypto mining can also incentivize further production of renewables, which could drive down manufacturing costs for solar and wind infrastructure…
Making them more widely available.
There’s no denying that mining Bitcoin is energy-intensive. But don’t be misguided into thinking that it diverts energy from other better uses. The truth is that it acts as an on-demand solution for gathering energy whenever overproduction occurs. Without Bitcoin mining, the extra energy available goes to waste, making the grid less efficient.
Moreover, Bitcoin miners are one of the few demand generators capable of shutting down operations to quickly help the grid keep up with residential power demand. This happened recently in Texas where winter ice storms placed incredible pressure on the electricity grid. At that time, miners were able to shut down to assist the grid in heating homes and keeping people warm.
Simply put, Bitcoin mining (especially miners who operate green) increase the efficiency of the electricity grid and reduce waste, while generating revenue for the supplier and opening new opportunity for additional green power.
In a decade’s time, we may look back at Bitcoin mining as the primary driver of the renewable energy revolution. Yes, Bitcoin could be the key to a greener future.
It’s Time to Change the Narrative
Policymakers, especially those in the EU, must change their perception of Bitcoin. The technology brings too much to the table to ignore. Unfortunately, many governments still fail to see its value. Perhaps its fear of losing centralized control over financial systems and populations?
Maybe.
While it’s understandable why the EU might be fearful of a technology that no one has control over, and concerns over its energy usage are legitimate…
Once the industry becomes greener, adopts, and drives more renewable energy, perceptions will change…
And Bitcoin’s price could rise even further.
Sources:
https://www.nasdaq.com/articles/the-energy-system-benefits-from-bitcoin-mining
https://www.trend-online.com/cryptocurrency/how-bitcoin-mining-benefit-energy-system/
https://www.woodmac.com/news/opinion/how-bitcoin-mining-can-support-the-energy-transition/
https://www.investopedia.com/terms/b/bitcoin-mining.asp