The co-founder of a Bitcoin mining company that works with “waste” by-products from oil wells in Texas says the oil and gas industry is watching cryptocurrency operations to polish green credentials with the public and investors.
Bitcoin mining requires powerful supercomputers that compete against other machines to solve complex math puzzles. Several important studies have shown that the process consumes enormous amounts of energy.
Matt Lohstroh’s video about his company’s digital currency at an East Texas oil well went viral last month. The clip shows a gas line running from the borehole location to a generator attached to a shipping container with large outdoor cooling fans. Inside the container are several racks of mining equipment connected with hundreds of red wires.
Giga Energy Solutions, which he founded in 2019 with college friend Brent Whitehead, doesn’t mine fossil fuels of its own to drive Bitcoin mining, but instead uses natural gas, a by-product of oil production that is normally burned. The process leaves a smaller carbon footprint than coal, which largely powers bitcoin mining concentrated in China, followed by the US, Russia, Kazakhstan, Malaysia and Iran.
The price of natural gas, one of the fossil fuels that fuel the climate crisis, has been falling in recent years. “Economically, it’s a waste product,” Lohstroh told The Independent. “Our company goes to one [oil] Producer that’s already flaring up – and they will continue to do so whether we are around or not – and we say we are going to take the gas out of your hands. You don’t have to make an effort and can reduce CO2 emissions by achieving a 90 percent combustion rate in our engines. “
The mining equipment in East Texas, which went into operation in January, has yet to collect data on reducing emissions. Mr. Lohstroh says that his company generally “has a net benefit on emissions”.
“My energy is not renewable, but it would be wasted otherwise,” he said.
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Giga Energy pays almost nothing for the natural gas. The company has more rigs in multiple locations in East Texas, the second largest oil field in the United States outside of Alaska.
In states like Texas, where energy regulations are less stringent, natural gas by-products can be vented, deliberately releasing gases, mostly strong methane, into the atmosphere. The other option is to set fire to gas in flare stacks to convert methane into carbon dioxide. This is a little less dangerous when it comes to warming the planet in the short term.
But even this strategy won’t last as a growing number of oil companies commit to the World Bank’s Zero Routine Flaring initiative by 2030. As the fossil fuel industry seeks to improve its environmental friendliness, it seems like a godsend that natural gas is extracted at the source for virtually free.
Mr Lohstroh said the oil company, which he did not want to call The Independent, had no expense on the cryptocurrency operation. The cost of equipment, installation and maintenance are covered by the Bitcoin miners.
“You’re getting zero for that gas anyway, so it makes almost no difference whether we’re at that well or not,” he said. “This will help these oil and gas companies achieve an environmental, social and corporate governance (ESG) mandate and thus reduce carbon emissions.” Increasingly, ESGs, which relate to the sustainability and societal impact of investing in a company, have become an important factor for global investors.
He added, “We have had public companies that would turn to us and say, ‘We don’t care if we lose money for it. We want to improve our public opinion and then help reduce carbon emissions from our flaring. ‘“
But it remains a glaring problem. Over the past decade, Bitcoin has grown from a fringe technology popular with cryptographers to the world’s ninth most important asset by market capitalization.
Countries sorted by energy consumption – and where Bitcoin falls on this list
(Cambridge Center for Alternative Finance)
The dramatic rise of cryptocurrency has spawned millionaires, reinvented money, and launched a billion dollar industry inspired by their revolutionary decentralized technology. But it has harmful side effects.
Analysis by the University of Cambridge suggests that the network consumes more than 121 terawatt hours (TWh) annually, which would rank it among the top 30 electricity consumers in the world if it were a country.
According to the latest data from Cambridge and the International Energy Agency, Bitcoin, which is currently valued at $ 57,340, requires the same amount of energy annually as the Netherlands did in 2019.
Alex de Vries, founder of Digiconomist, who studies the impact of new technologies, and a data scientist who studies financial crime for De Nederlandsche Bank, described the establishment of an oil well for Bitcoin mining facilities as “absurd”.
“It’s mind-boggling that it is somehow helping the environment to use a by-product of fossil fuel extraction to mine bitcoin,” he told The Independent.
“We have no problem with climate change because fossil fuel companies are not efficient enough. And if you make operations more efficient, you are not helping the environment anyway. It just doesn’t make sense intuitively.
“Firstly, it helps produce fossil fuels, and secondly, it still burns fossil fuels. We want to accelerate away from fossil fuels. We don’t want to make fossil fuels more profitable. I can’t wrap my head around it. “
He’s not the only one pointing out the cryptocurrency’s climate problems.
“Bitcoin uses more electricity per transaction than any other method known to man, so it’s not a great climate thing,” Bill Gates, a longtime Bitcoin skeptic, recently told the New York Times.
Mr Johstroh denied that companies like him are propping up the fossil fuel industry at a time when climate researchers tell us we need to move quickly to clean energy to prevent a climate catastrophe. An independent analysis this week found that the US will need to cut emissions by nearly two-thirds over the next nine years to stay on the net-zero path by mid-century. Biden’s government has promised aggressive action, including moving the energy sector to clean energy by 2035.
The Bitcoin mine founder said he did not believe that 100 percent renewable energy would be possible in 15 years, considering how dependent society remains on oil and gas, and stressed the lack of major breakthroughs in battery storage technologies for clean electricity.
“We believe that the [clean] The energy transition is a lot further away than most people think, ”he said. “Our world works with oil and gas. If we continue to mine oil for goods and services, natural gas will be a by-product of it and our business model will continue to exist. “
Bitcoin’s carbon footprint is only expected to get bigger. The market is currently valued at around $ 1 trillion, with 1.3 percent of the world’s population owning cryptocurrency by one estimate. However, with some of the richest and most powerful investors in the world jumping on board, it could accelerate the adoption of digital currency around the world. These investors include established financial firm Guggenheim Partners, Twitter founder Jack Dorsey, and even Elon Musk, the low-carbon tech mastermind behind zero-emission automaker Tesla.
Bitcoin enthusiasts say that big players in the market are making incentives like a “green bitcoin” more likely and that companies could buy carbon credits to offset electricity consumption. Governments taking more aggressive action to deal with the climate crisis could also help.
Estimates of Bitcoin’s reliance on fossil fuels versus renewables vary. Detailed data on the energy distribution of Bitcoin mining is difficult to obtain. Chinese miners make up about 70 percent of Bitcoin production, data from the Cambridge Center for Alternative Finance shows. During the rainy summer months they usually use renewable energy, mostly hydropower, but the rest of the year fossil fuels – mostly coal.
“The goal of every miner is to make a profit, so they don’t care what kind of energy they use if it is generated by water, wind, solar or coal,” said Jack Liao, CEO of the Chinese mining company LightningAsic, told Reuters.
In a 2019 whitepaper produced by CoinShares, a digital asset investment firm, the “renewable energy penetration in the energy mix of the Bitcoin mining network was estimated at 73 percent” and claimed it was “more reliant on renewable energy.” more aligned than almost any other major industry in the world “.
Bitcoin enthusiasts argue that with the electricity grid switched to renewable energy, so will Bitcoin, “It’s not that much Bitcoin that is the problem.” Yves Bennaim, the founder of 2B4CH, a cryptocurrency think tank, told Reuters. “People say it’s energy intensive and therefore harmful to the environment, but that’s just the type of energy we use today. As Bitcoin rises, there will be more incentives to invest in renewable energy sources. “
Pointing out the enormous energy consumption of the existing financial system, Mr Lohstroh and other proponents of the cryptocurrency counter the arguments of the climate by saying that bitcoin is a tool for protecting human rights as it creates an electronic financial system without borders in which assets are not confiscated can be. Proponents also say that the average Bitcoin transaction is tens of thousands of dollars compared to the small dollar amounts of average traditional electronic transactions.
This does not mean that there are no ethical and compliance issues. US Treasury Secretary Janet Yellen said last month that while cryptocurrencies have been promised, their use for illegal purposes is a “growing problem”.
“I see the promise of these new technologies, but I also see the reality: cryptocurrencies have been used to launder the profits of online drug traffickers. They were a tool to finance terrorism, “she said.
Mr De Vries, who created a Bitcoin energy consumption index, also questioned the simplistic view that Bitcoin would be part of a clean energy transition. He noted that Bitcoin winners would be those who work with the most powerful and fastest machines and continue to use what is currently the cheapest and most stable source of energy, fossil fuels.
He also pointed out that the computers worked best for the first six months and that a mountain of e-waste grew because the specialized hardware could not be used for other purposes. Crypto networks also put pressure on a global chip shortage – incidentally, the same ones that Tesla needs for its vehicles.
“If Bitcoin were to grow, it would appear to be much faster than we are able to clean up our network,” he said. “Then it will have such a big impact on the world and delay our ability to meet climate goals.”