Here’s what bitcoin mining industry is doing to be more eco-friendly

Bitcoin and many other blockchains use the proof-of-work (PoW) consensus mechanism.

In the proof-of-work (PoW) consensus mechanism, transactions are verified, bundled into blocks, and added to the chain. And every time a node adds a block to the chain, it is rewarded with newly minted tokens.That’s why the process is called mining, and the participating nodes are referred to as miners. Because, while there is no physical shovel and dirt involved, the end purpose is to uncover newly minted tokens.

The PoW consensus mechanism requires miners to expend vast amounts of computation power to verify transactions. And as the popularity of Bitcoin and other cryptos grew, the volume of transactions increased exponentially. Therefore, the need for new miners to process these transactions also shot up.

Due to the increase in miners in the network, the computational power used increased significantly. Along with this, miners also started employing powerful hardware (GPUs) to speed up the block addition process. All this, in turn, resulted in exceptionally high energy consumption.

The Cambridge Bitcoin Electricity Consumption Index estimates that the Bitcoin blockchain uses around 136.38 terawatt-hours of electricity every year. This is more than what the Netherlands consumes.

Digiconomist, a cryptocurrency analytics site, reported that Bitcoin mining consumes around 2,145 kilowatt-hours of electricity for every transaction. That’s the same amount of power the average American household consumes over 73 days.

These numbers were mind-boggling and caused lawmakers around the world to sit up and take notice. Countries started coming down hard and fast on crypto mining activities. China was the first country to ban mining activities, causing a mass exodus of the mining industry to other parts of the world. Since then, the mining industry has been facing scrutiny from the US congress, the European Union and even billionaires like Elon Musk.

Seeing this backlash, the mining industry immediately went into damage control mode. Founder and CEO of MicroStrategy, Michael Saylor, along with other prominent figures of the mining industry formed the Bitcoin Mining Council (BMC).

The voluntary council comprises some of the biggest bitcoin mining companies, such as Bit Digital, BitFury, Bitfarms, Atlas Mining, and more. Its mission is to promote sustainable mining practices and educate people about bitcoin and bitcoin mining.

And the BMC has seen success since it was formed. Its fourth quarterly report in 2021 showed that the percentage of the global Bitcoin mining industry deploying renewable resources to mine Bitcoin has increased from 1 percent to 58 percent.

Individual members of the BMC have also employed various methods to reduce their carbon footprint.

One member of the council, TeraWulf, has pledged to carry on their crypto mining activities using 90 percent zero-carbon energy. They are currently developing two non-carbon energy sources. One is a hydropower plant in New York, and the other is a nuclear power plant in Pennsylvania.

However, the lack of infrastructure has become a hurdle for some mining companies. For instance, the crypto mining company, Sangha Systems, has set up a mining operation by repurposing an old steel mill in Illinois, Chicago. The founder of Sangha Systems, Spencer Marr, a former lawyer, founded the company to promote clean energy. However, his company is still dabbling in fossil fuels due to the lack of alternative energy options in the town of Hennepin, where the mill is located.

Similarly, Argo, one of the most prominent bitcoin mining companies, is working on constructing a 126,000-square-foot facility fueled by mostly wind and solar energy. However, Argo's CEO, Peter Wall, has clarified that due to power grid restrictions, they cannot guarantee that Argo's new centre will have no carbon footprint.

It is safe to say that while bitcoin mining is stepping in the right direction, there is still a long way to go. There needs to be a comprehensive strategy developed by Bitcoin mining companies in conjunction with the state and federal authorities where they are located. Banning bitcoin and other proof-of-work cryptos is not viable as these cryptocurrencies have shown resilience over the past few years.