Can a Bitcoin Mining Council make crypto biodegradable?
15:38, 2 June 2021
A wealthy man with no experience of bitcoin mining and a dislike of centralised decision-making is promoting a new Bitcoin Mining Council. Tesla chief executive Elon Musk announced the new enterprise last week along with Michael Saylor, CEO of enterprise analytics outfit MicroStrategy.
So what are the Bitcoin Mining Council’s goals and ground rules, and should you care?
Transparency and sustainability
“The [leading] miners have agreed to form the Bitcoin Mining Council to promote energy usage transparency and accelerate sustainability initiatives worldwide,” said Michael Saylor in a tweet.
The initiatives appear to be a move towards standardised energy consumption reporting, increased reliance on renewable energy sources and industry-standard environmental, social and governance (ESG) type aims.
Peter Wall, chief executive of Argo Blockchain, who was on the 90-minute call with Musk, told the BBC that many US bitcoin miners use renewable power and a Bitcoin Mining Council could encourage more to follow.
"It's early days, it's embryonic,” he said. "There will be lots of discussions about the best way to promote sustainable bitcoin mining and to do it not just in North America.”
Musk's environmental concerns
The move is an abrupt U-turn for Musk. In February he confirmed Tesla bought $1.5bn in bitcoin – thought to be close to 10% of Tesla’s own $19bn cash holdings at the time – before announcing on 12 May that Tesla purchases via BTC were suspended for environmental reasons.
"We are concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel," Musk said. "Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment.”
Away from the clear good intentions there is not a huge amount of detail on the ‘how’, ’when’ or even ‘who’ of the Bitcoin Mining Council. Remember that the ethos of crypto is fundamentally leaderless.
Yet if the crypto space is to be made cleaner for big mainstream institutions, financiers and public oversight-type bodies, an environmental clean-up is inevitable. Too many companies would find it impossible to avoid the shareholder unease.
Much mainstream capital is already becoming greener, hence the rise (and rise) of ESG funds over conventionally tilted portfolios, supercharged by the global COVID-19 pandemic.
Yet ESG has switched increasingly from a ‘do no bad’ position to ‘positive impact’, including off-setting commitments, a practice Marty Bent and Ethan Vera of mining pool Luxor have little time for.
Energy vs control
“Miners are being forced in many cases to change their renewable energy source by carbon offsets to position themselves a certain way,” Vera said during a recent discussion at Consensus 2021, hosted by crypto exchange Coindesk.
“ESG,” adds Bent, “is a complete accounting scam that gives subsidies and carbon credits to companies that just masquerade.” He added: “People don’t care about energy consumption. They care about control.”
So far all mining members of the newly convened Bitcoin Mining Council, including Riot Blockchain, Core Scientific and Hut 8, appear to be North America-based.
Yet much of the environmental concern is focused on China. A great proportion of the bitcoin network hash rate comes from non-renewable sources – coal in Xinjiang Province, Mongolia and Kazakhstan, or mined from Iranian gas and oil.
So, the workload is cut out. There is talk of Council energy transparency reporting but the fundamental remit appears to focus on power-hungry mining consumption. Other questions follow, then: how would any directives or edicts be upheld, or even enforced? How might cheating be monitored?
Local conditions matter
Recent new research from the University of Surrey in April, part-written by Professor Yu Xiong, says bitcoin mining is a threat to China’s attempt to be carbon-neutral by 2060.
But Professor Yu also says cryptocurrency algorithms might bring on a low-energy alternative – “or perhaps work towards energy-efficient hardware that could improve the carbon footprint of bitcoin mining”.
These, though, are sustainability ‘workarounds’ in a (generally agreed) climate emergency. China’s recent regulatory attempt to crack down on cryptocurrencies saw mining company BTC.TOP confirm that no mining services for mainland Chinese clients would be offered in future.
"Next, we will mainly mine in North America," Jiang Zhuoer, the chief executive of BTC.TOP, wrote. ”It's not worth running the regulatory risk.” But Jiang acknowledges this could see a shift from industrial-sized data centres to Chinese home miners.
So how much influence, then, might any kind of independent central standards body really have? Is Elon Musk the right person to understand the economics of mining practices, and beyond? Or, does bitcoin have a completely unfixable sustainability problem?
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