Six Innovative Projects Aim to Reduce Bitcoin Mining's Energy Consumption

The issue of the environmental consequences of bitcoin mining has garnered renewed attention in recent weeks, prompted by a proposed Texas bill seeking to restrict its grid involvement and a critical article in The New York Times that condemned the industry.

According to data from the Cambridge University Centre for Alternative Finance, bitcoin mining currently utilizes approximately 145 terawatt hours (TWh) of electricity annually - a level equivalent to the energy consumption of Sweden, as reported by the International Energy Agency.

Critics argue that bitcoin's proof-of-work algorithm is intentionally wasteful, given its ever-increasing electricity requirements. However, proponents of the technology contend that this feature serves to maintain network security and preserve decentralization, rather than being a flaw.

A third perspective views bitcoin's energy consumption as a potential opportunity, with a growing number of companies and products emerging that seek to reduce the environmental impact of mining through innovative solutions that build upon existing infrastructure and promote sustainability among miners.

A variety of initiatives are underway to promote a greener bitcoin industry. Some of these projects focus on market-based solutions, such as creating incentives for environmentally friendly mining practices, while others are more technical in nature and aim to enhance efficiency and maximize the reuse of heat generated by mining data centers.

Renewable energy credits

BlockFills, a crypto lending platform, and Isla Verde Capital, a fund management company, have developed a product that seeks to provide a "green" energy solution not only for miners but also for investors in the cryptocurrency industry.

The product in question involves the trading of environmental assets in the form of carbon emissions offsets and Renewable Energy Credits (RECs). Carbon credits, which represent greenhouse gases that have been sequestered through initiatives such as reforestation, are a well-known but controversial type of asset.

Renewable Energy Credits (RECs) represent the ownership of the sustainability of electricity generated from renewable sources such as wind, hydro, and solar. Each certificate represents one megawatt hour (MWh) of renewable energy produced. These certificates are typically traded over-the-counter (OTC) and are separate from any power purchase agreements.

BlockFills and Isla Verde Capital customize the acquisition of RECs and carbon credits to suit the needs of miners, and subsequently retire them so that they can make claims about their use of renewable energy sources.

The RECs are also geared towards bitcoin investors. “Massive asset managers” are now “looking at bitcoin, but they have these sustainability mandates that they must follow,” said BlockFills John Divine. The RECs can help them invest comfortably.

This might actually raise the price of RECs, “which directly incentivizes investment in renewable energy technology,” Divine said.

Incentivizing sustainability

Block Green, a Switzerland-based initiative, is working to encourage sustainable mining practices through a decentralized lending protocol. On their platform, liquidity providers seeking bitcoin-native investment opportunities can purchase future hashrate, or computing power, over a specified time period.

The Block Green platform provides "know-your-miner" information regarding a company's financials, operational data, energy sourcing, and strategy. The project believes that market mechanisms on the platform will encourage sustainable mining practices, as liquidity providers will select miners with sustainable operations, resulting in lower costs of capital.

“We are currently working with some of the largest miners in the U.S. and Canada and we have begun integrations with institutions such as custodians, exchanges and asset managers looking to give users access to transparent and scalable” returns on their bitcoin, said a spokesperson for the firm.

Tokenizing clean bitcoin

Clean Incentive and Sustainable Bitcoin Protocol (SBP) are additional solutions that are utilizing financial incentives. These companies aim to encourage investments in "clean" bitcoin by creating new, blockchain-based assets that miners can trade to benefit from their use of renewable energy sources. These assets are ideal for investors who wish to own environmentally-conscious bitcoin and are looking for a verifiable means of doing so.

SBP and Clean Incentive are using financial incentives to promote investment in "clean" bitcoin by creating blockchain-based assets that miners can trade to benefit from their use of renewable energy sources. To qualify for these assets, miners must confirm their use of clean energy with third-party auditors and be included in a registry. They receive a Sustainable Bitcoin Mining Certificate for each block reward they receive, which is a blockchain-based asset that they can sell to institutional investors. SBP conducted its first transaction of a sustainable bitcoin certificate in February.

Similarly, Clean Incentive looks to “collect, validate and tokenize ESG [environmental, social, and governance] attributes” from a network of miners, said its founder and CEO Casey Martinez, a data scientist with experience in renewable energy.

The startup Clean Incentive, led by data scientist and renewable energy expert Casey Martinez, is currently in stealth mode but has already enlisted several miners to its network. In November, Clean Incentive partnered with a small-scale miner called Ocean Falls Blockchain based in Canada.

Efficient cooling

Firms are offering a range of technical solutions, encompassing both hardware and software products.

In March, LiquidStack, a company specializing in immersion cooling, announced that their hardware-based cooling solution can reduce energy consumption in bitcoin mining computers by 40% and shrink their land footprint by one third.

According to LiquidStack, their solution utilizes only 0.02 MW of energy for cooling per megawatt (MW) of energy used for computing in a data center, whereas other alternatives consume anywhere between 0.1 MW to 0.7 MW for the same purpose.

In March, LiquidStack, one of the pioneering companies in the immersion cooling industry, secured funding from Trane Technologies (TT), a 150-year old heating and cooling company that generated $16 billion in revenue in 2022.

“What made LiquidStack attractive was its potential to improve sustainability for data centers, including bitcoin mining, and its innovation,” said Amber Mulligan, VP of Strategic Sales and Marketing, Commercial HVAC Americas at Trane.

Mulligan pointed out that LiquidStack's technology simplifies and enhances the efficiency of heat reuse, which creates various synergies for miners. Since the heat is managed through liquid cooling rather than traditional air cooling, it becomes more convenient to capture and channel it for other purposes.

Vancouver's mining services company, Lincoin, has developed a software program that enables miners to manage their operations more effectively and profitably, including their involvement in demand response programs and heat reuse initiatives.

Demand response is a strategy used by miners and other energy consumers to curtail their operations during periods of high energy demand, enabling the grid to meet the consumption requirements. This often results in financial compensation for the miner. Meanwhile, heat reuse is the practice of utilizing surplus heat generated by a mining operation for other purposes, such as greenhouse cultivation.

Lincoin's Rails software is capable of integrating real-time data from more than 20,000 grid nodes that operate within nine deregulated electricity markets throughout the United States and Canada. This provides miners with valuable insights and opportunities to optimize their operations and improve profitability.

“Large scale miners use Lincoin to monitor real-time profitability, manage and optimize their operations, streamline tasks and participate in grid ancillary services while smaller miners use Lincoin to innovate by managing heat in greenhouses, monetize their surplus solar energy generation, or simply mine intelligently,” said CEO Medi Naseri in an email interview with CoinDesk.

Source Coidesk