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How bitcoin mining contributes to climate change?

On Tuesday evening, the New York state Assembly passed a bill that would put a moratorium on new bitcoin mining facilities that require an air permit for on-site fossil fuel burning. The bill now heads to the state Senate, which passed a similar bill last year, and then to Democratic Gov. Kathy Hochul, who has not publicly expressed an opinion on the proposal.

Although this is the first of its sort in any state, it is unlikely to be the last, as the energy-intensive process of cryptocurrency mining is increasingly being scrutinised for its role in climate change. Environmentalists argue that allowing unrestricted crypto mining is incompatible with meeting these goals. A number of states have set ambitious goals for reducing greenhouse gas emissions that cause climate change — New York aims for an 85 percent reduction by 2050 — and allowing unrestricted crypto mining is incompatible with meeting those goals.

Liz Moran, a policy advocate for the environmental law charity Earthjustice in New York, told Yahoo News, "We heartily endorse this legislation." "It takes an incredibly sensible approach to this rising industry's energy use," says the author.

Bitcoin mining, by far the most popular cryptocurrency by market capitalization, consumes enormous quantities of electricity: According to Cambridge University academics, bitcoin uses around 121.36 terawatt-hours each year. That's more energy than Argentina's 45 million people consume, as well as Google, Apple, Facebook, and Microsoft combined. According to a study published in November by the trading education site Forex Suggest, simply offsetting the carbon emissions of bitcoin and ethereum — the second-most-popular cryptocurrency — would necessitate the planting of 384 million trees every year.

The crypto sector has its own, lower carbon footprint estimations. Earlier this year, the digital investing business CoinShares estimated that cryptocurrency mining accounts for only 0.08 percent of global carbon emissions, assuming a far lower quantity of electricity is required.

Cryptocurrencies lack a government stamp of approval or a physical substance that can be used to authenticate their legitimacy. Instead, virtual money or "tokens" are confirmed using blockchain technology, which records transactions in a network-wide database. New bitcoins are created by "mining," which involves validating and recording new transactions in the blockchain. Miners verify the validity of a group of bitcoin transactions bundled into a block — a process that involves checking 20 to 30 different variables — and compete to be the first to have their validation accepted by solving a mathematical puzzle in "proof-of-work," the most energy-intensive approach to mining.

Bitcoin miners need a slew of supercomputers running 24/7 to win this game.

Bitcoin is limited in quantity. More transactions are necessary to unlock the same number of bitcoins as more of it is unlocked. As a result, bitcoin mining's energy requirements are constantly increasing. For example, the website Digiconomist calculated in April that each bitcoin transaction consumes as much electricity as the average U.S. home consumes in a month, or 1 million Visa credit card purchases. A bitcoin transaction now costs the same as 75 days of average household electricity or 2.7 million Visa transactions.

Simultaneously, rising bitcoin values — which are now worth more than $46,000 per coin, up from less than $4,000 in 2019 – attract more miners to the market. (One reason the Cambridge study from last year found the industry uses more than twice as much electricity as a 2019 study in the scientific journal Joule found is the steady increase in the volume of mining.)

Coal and gas-fired power plants produce a lot of pollution when they use all of this electricity. According to Digiconomist, bitcoin has a carbon footprint similar to that of the Czech Republic.

New York has the most bitcoin mining of any state, accounting for 20% of the national total, according to data from Foundry USA, the largest mining pool in North America. The United States is responsible for 35% of all bitcoin mining worldwide.

"We need to move society to a point where we can phase out fossil fuels, and that will be far more difficult if we increase energy use," Moran added. "And there's where the basic difficulties with proof-of-work crypto mining arise, because that industry consumes so much energy that transitioning away from fossil fuels will be much more difficult." And this is something that we in New York are particularly concerned about. So New York has enacted a significant climate bill, with the goal of having a carbon-free [energy] grid in place by 2040. That will be more difficult, if not impossible, to achieve if proof-of-work crypto mining is allowed to expand unrestrictedly throughout the state. That level of energy use will make meeting our objectives much more difficult."

The scope of the New York bill is actually pretty limited. It makes no mention of crypto mining that isn't proof-of-work, or proof-of-work mining businesses that simply connect to the electric grid or use on-site clean energy like wind or hydropower.

The fact that two businesses have recently purchased and reactivated once-closed fossil-fuel-burning power facilities in the state to conduct proof-of-work mining on site has prompted New York to take action. Cryptocurrency mining companies have discovered that instead of paying the retail rate for electricity transmitted through the power grid, they can save money by pulling electricity directly from a power plant.

Last year, Greenidge Generation, a publicly traded business that mines bitcoin at a gas-fired power plant in Dresden, New York, announced plans to treble its operations by the end of 2022 and "replicate its vertically integrated mining approach at other power sites."

It has installed 17,000 machines so far, with ambitions to rise to 32,500 by the end of the year, requiring enough electricity to power nearly 100,000 households.

The power plant's carbon dioxide and nitrogen dioxide emissions climbed tenfold, according to data obtained through the Freedom of Information Act by Earthjustice and the Sierra Club in 2020.

Greenidge has defended its environmental record, claiming in a March 31 statement that the facility emits 70% fewer carbon emissions than it did when it was a coal-fired power plant in 1990 (the year used as a baseline for the New York climate goals) and that its current emissions "are only 0.2 percent of the statewide target for 2030."

"This is no longer a game in which people validate cryptocurrency in their homes." "It's really turned into a really competitive process where these companies are trying to validate cryptocurrency," Moran explained. "The reason they are, in many cases, reactivating ancient power facilities is that they require a significant amount of energy to operate." These computers consume a lot of energy, so they can compete by running 24 hours a day, seven days a week."

If the bill passes, New York's Department of Environmental Conservation will not issue new licences for crypto mining operations for two years while it performs a study of the business.

An increase of cryptocurrency mining activities can affect even regions with generally clean power supplies. In 2016, bitcoin miners flocked to the small community of Plattsburgh, New York, near the Canadian border, to take advantage of the inexpensive electricity provided by local hydropower dams on the St. Lawrence River. Plattsburgh has a monthly allotment of cheap power under a long-standing contract, but whenever it surpasses that amount, it must pay significantly higher rates.

Plattsburgh's then-Mayor Colin Read told Forbes magazine that residents and small businesses saw their monthly bills skyrocket. The bitcoin miners' neighbours complained about the incessant humming of supercomputers, which caused noise and heat.

The town issued an embargo on new cryptocurrency mining operations, but it was removed once restrictions were in place to ensure that mining businesses paid their excess electricity bills and that other negative effects of their presence were mitigated.

Other environmental problems, besides from emissions, are also cited by crypto mining critics. The Natural Resources Defense Council said on its website Wednesday that the Greenidge factory draws 139 million gallons of water from Seneca Lake per day to cool its machinery, which is the equivalent of 27,000 full tanker trucks. "The heated water, which may reach 108 degrees Fahrenheit, is then dumped back into the lake." Warmer water can hasten the formation of poisonous algal blooms, which have been occurring on the lake in recent years, putting 100,000 people's health and drinking water at risk."

A state judge recently dismissed a lawsuit filed by environmental groups seeking to stop Greenidge's proposed expansion, stating that the project "would not damage the air or water of Seneca Lake."

"The project is yet another significant investment in Yates County, allowing us to continue to create good-paying jobs and new careers in an emerging, future-focused sector for local residents — all while staying within the state's nation-leading environmental standards," said Dale Irwin, president of Greenidge Generation, in a statement lauding the decision.

However, others in the bitcoin business are working on solutions for climate change. The Crypto Climate Accord is a decarbonization initiative for the bitcoin and blockchain industries. More than 200 businesses and individuals from the crypto, banking, technology, climate, and energy industries have joined the movement and promised to move away from fossil fuels.

"It was very much framed after the Paris climate agreement," Jesse Morris, CEO of Energy Web, an international nonprofit that develops open-source software to assist energy companies in "building business models and products focused on all of the technologies that will get us out of the climate crisis," said. Because it leverages blockchain technology, Energy Web is a founder member of the Crypto Climate Accord.

Morris remarked, "Our focus practically lines up one-to-one with legislation that came out of New York." "What we're working on is a tool that will make it very simple for bitcoin miners to demonstrate that they're using renewable energy." There is currently no method to verify a bitcoin miner's claims regarding the type of electricity they use.

"We're working on both technology and certification requirements to help miners demonstrate that their operations are truly sustainable," Morris added. After all, New York law permits new bitcoin mining that is fueled by renewable energy, but it is unclear how a mining business would demonstrate to the state that it is using renewable energy.

Mining companies have a number of options, Morris said, including moving in an area with an existing clean energy portfolio, establishing a power-purchase agreement with a clean power source, such as a wind farm, or even constructing new clean-power generation on site.

Some cryptocurrency mining companies are already claiming to run entirely on renewable energy, but as Morris points out, those claims are currently difficult to verify.

Not every state or municipal authority is as concerned as the New York Assembly or the city of Plattsburgh about the implications of bitcoin mining. Mayor Mattie Parker of Fort Worth, Texas, stated Tuesday that the city is already mining bitcoin in Community Hall in an effort to lure more bitcoin entrepreneurs to her city. Mayor of New York City, Eric Adams, is a crypto supporter who has decided to get his wages in cryptocurrency.

Environmentalists expect that if New York passes the crypto bill, the state's study of the business will result in rules that control crypto mining that isn't done at a power plant, and that measures like those urged by the Crypto Climate Accord will be required.

"It only addresses one issue, but we believe it's a good place to start," Moran said. "We do want the state to look into the industry and make sure that even with this increased energy use, the state can still reach its climate targets."