By Daniel Bernstein
As the summer heat rose in 2022, a freeze in the cryptocurrency market began to set in.
Billions of dollars have been lost in crypto. Bitcoin, the most-traded cryptocurrency, now sits around $24,000 per coin as of this writing, having lost 38 percent of its value in June and falling from its November 2021 peak of around $69,000, and pulling down the rest of the crypto market with it.
Despite huge losses, the mining industry is still expanding. In Texas, crypto miners have been invited by politicians like Gov. Greg Abbott and U.S.Sen. Ted Cruz to take advantage of the state’s weak regulations and cheap energy. Texas is one of the most attractive places in the world for crypto mines, meaning miners from all over are looking to open shop in the state.
Crypto “mining” — the process of producing new coins — can be an energy-intensive process. In fact, Bitcoin alone is estimated to use as much energy as all of Argentina — even after a drop in energy usage due to the recent crash.
Bitcoin is mined using a energy-intensive process called “proof-of-work,” which uses a network of computers to solve a mathematical problem — the solution creates digital currency. This is a form of validation for the digital asset, meant to exist without the regulation of a central authority like the Federal Reserve, because as more coins are produced, the harder the problems become to solve, limiting the amount of production.
This means that you can’t mine Bitcoin on your laptop anymore. You need more power.
Proof-of-work mines have thousands of computers running round the clock, working to create more coins and requiring huge cooling systems to prevent the computers from overheating. Texas, which famously has its own energy grid with no federal regulation, has had problems with electric reliability during both major winter storms (Winter Storm Uri in February 2021) and record-setting heat waves (June and July 2022). This is the context in which the crypto industry is becoming a major user of Texas electricity.
Of course, the miners themselves won’t tell you this. The crypto industry and its allies say crypto mining actually helps the grid, because it can be turned off whenever the energy is in high demand, like they did during the July 2022 heatwave.
But Bitcoin and crypto mining can only alleviate the strain on energy demand that they’ve caused. If they free up a gigawatt of energy in a time of crisis by turning off their computers, that’s great, but they use hundreds of megawatts of energy that Texans could have used earlier to avoid bringing us to the brink of disaster in the first place.
Additionally, mines are incentivized to shut down during crises, because energy costs skyrocket — why would they want to keep running when their costs increase? Still, some crypto miners are looking for ERCOT — which manages the state’s electric grid — to pay them to shut down, even though they face economic pressure to do so anyway. So, when crypto mines contribute to energy demand, get paid to shut down, and, at the very most, reduce only the damage that they’ve caused, do they really deserve a round of applause?
No, they do not.
Crypto miners want to use up whatever energy they can on the Texas grid, and as a result, air conditioners have to compete with mines for power.
On a grand scale, this issue opens up the broader question of the future of our environment and climate, in Texas and the rest of the United States. Renewable sources of energy like solar and wind power are growing in Texas. But most of our energy still comes from fossil fuels, which emit carbon into the atmosphere and increase our susceptibility to the dangers of climate change.
Crypto mining, by increasing the demand of energy and thus the use of fossil fuels in the state of Texas, can directly impact the environment. This doesn’t even begin to mention the pollution and e-waste that is a byproduct of mining. We’ve seen this in upstate New York, where a Bitcoin mine run by Greenidge LLC was credibly accused of polluting the air, creating tons of waste out of overused computers, and heating the waters of Seneca Lake, causing harmful algal blooms. As such, Greenidge’s pollution permits were denied by the state of New York. Now, they’re among one of the many Bitcoin miners coming to Texas.
Cryptocurrency originally marketed itself as a more democratic and accessible alternative to fiat currencies. But when it takes massive mines with thousands of computers to mine a single Bitcoin, the democratic ethos disappears, and what’s left is an environment-harming money machine for the wealthy.
There needs to be controlled regulation regarding proof-of-work crypto mining. Otherwise, Texas, a state with a recent history of blackouts and energy crises, will see power demand dangerously increase, putting the electrical grid and the environment at risk, for the benefit of crypto miners’ pockets.
The Public Utility Commission of Texas, the Texas state government, and the Texas Work Group on Blockchain Matters, which was created by Abbott for the sake of researching the industry, need to craft regulations. They have to ensure that power is always available to the people and ensure that there will be no more energy crises before they hand the keys to the electrical grid over to the Bitcoin mines.
Daniel Bernstein is an Environmental Policy Advocacy Summer Intern with Public Citizen’s Texas office, and a senior at Cornell University in Ithaca, New York. He’s written about the environmental effects of crypto mining for the Cornell Daily Sun.