This is a 104 megawatt bitcoin mining data center .
Inside are 32,000 machines, performing over one million trillion calculations per second.
This facility's 250,000 square feet.
A big facility, a lot of machines.
But the sound you hear is going to be the fans themselves that are running.
Validating transactions on the bitcoin network and mining new coins essentially involves guessing a
winning number, which at this moment takes on average over 100 sextillion tries.
All that work helps to secure the network by making it nearly impossible for bad actors to
accrue enough computing power to take control.
But in 2020, mining bitcoin also consumed 75.4 terawatt hours of electricity, more than all of
Austria or Portugal.
Sometimes it's been as much as Norway, which is about 120 terawatt hours, so it's a lot of
electricity.
Recently, the world's second largest cryptocurrency, Ethereum, moved away from the
massive computational guessing game known as proof-of-work to a new method of validating
transactions.
Ethereum has migrated to a system known as proof-of-stake, which swaps out miners for
validators. So instead of running these large banks of computers, validators leverage their
existing cache of ether as a means to verify transactions and mint new tokens.
This move, called the merge, eliminated nearly all of Ethereum's energy consumption and former
Ethereum miners have been left searching for alternate coins to mine.
So currently it's not profitable.
So I have my rigs shut off.
A lot of miners are selling their cards.
While it's technically possible for bitcoin to move to proof-of-stake too, there are no
indications that it will as crypto enthusiasts disagree on what method is most secure.
Instead, some large bitcoin miners are touting their use of renewables and even see bitcoin's
energy use as an asset.
We'll be fully carbon neutral at the end of this year in our operations.
I want to invest in more clean power.
You want bitcoin mining to keep going in the United States because every day when we buy power
off the grid, that's more money into the utility grid.
But Jones notes that after China banned bitcoin mining last year, the industry has only gotten
dirtier.
There may be individual efforts here and there, but globally the renewable mix, again, has seemed
to be going down over time, not up.
Bitcoin is the world's first cryptocurrency.
And when it was invented in 2009, people mined coins from their personal computers using less
than a second's worth of electricity.
Since then, energy use has skyrocketed, but the purpose of mining has remained the same.
When a miner correctly guesses an impossible to predict number, this serves to validate a group of
bitcoin transactions called the block and makes it impossible to tamper with.
As a reward for helping secure the network the winning miner is given bitcoin.
And that is what we know as mining.
We see millions of devices all around the world constantly, by a process of trial and error, try
to guess a certain winning number and if they guess correctly, then they get to create the next
block for the blockchain and then they get that reward for it.
But the network is designed such that the more miners are vying for the prize, the more difficult
it becomes to win.
On average, one block is mined every 10 minutes, no matter the price and how many miners are on the
network. So as prices soared and more people joined, miners started using specialized devices
called ASICs, which can make over 100 trillion guesses per second.
In May 2021, it took about 13 years worth of an average household's electricity to mine one
bitcoin. And while prices have tumbled since, mining difficulty and hence electricity usage has
actually increased all year, reaching a record high in October as large scale Ethereum miners
switched to mining bitcoin.
Today, most mining takes place in industrial scale data centers like this one in Marble, North
Carolina. It's operated by Core Scientific, one of the world's largest bitcoin miners.
Each individual machine today is about 3200 watts.
So if you imagine that's like two hairdryers, probably for one machine here in Marble where
we're at today, it's 104 megawatt facility.
Marathon Digital Holdings is another large miner currently building out facilities in West Texas
and North Dakota.
Today we have deployed an operational upwards of 30,000 machines and will scale that number
significantly. So by the middle of next year will be approaching 200,000 mining rigs installed for a
total capacity of about 20 exahash.
23 exahash means 23 quintillion guesses per second.
And while that's a lot, it's only about 9% of the entire network's current computing power.
If any one entity controlled 51% or more of the network, it could act maliciously and alter the
blockchain. But that would likely cost billions.
And the very fact that you have to spend resources in this process also makes it expensive for any
attacker that wants to attack this network because they have to pay for those resources as
well.
From a security perspective, the system has been working.
Many bitcoin enthusiasts fear alternate methods would be less secure and want to stick with this
tried and true approach.
From an energy perspective, though, proof-of-work has been a lightning rod for critique.
But an alternate validation method called proof-of-stake has been in development for a
decade now. Many smaller cryptocurrencies already operate using
proof-of-stake. And since its inception, Ethereum has planned to migrate to the system too.
So Vitalik Buterin, who's one of the co-founders of Ethereum, has been talking about making the
move to proof-of-stake consensus mechanism since 2014, and the transition has been repeatedly
pushed back for the last several years for a variety of reasons, most notably the fact that the
tech just wasn't ready.
But in September of 2022, after years of preparation, the network finally made the highly
anticipated switch, instantly reducing Ethereum's energy use by 99.9%.
We can see the merge is successful when we receive the first finalized block, and it happened
very quickly.
And with the finalization that was done, it did not show any error at the time.
So we quickly realized that the transition has been smooth.
And Ethereum's proof-of-stake system verifying transactions does not involve a massive
competitive guessing game which eats up tons of energy.
Instead, miners are replaced by validators who are pseudo randomly assigned to propose and verify
new blocks of transactions which earns them rewards.
To ensure that these validators act honestly, they essentially have to make a security deposit
staking a certain amount of coins into the network.
Ranjan says this will make the network more secure than proof-of-work because bad actors will
be punished and lose their money.
I think the penalties involved are very, very heavy here, so I don't think it's in their favor
to do any kind of notorious activity on the network.
The more coins someone stakes, the better their chances of being assigned to create and validate
blocks. Today, the minimum required stake is 32 ether, which for most of this year has been worth
over $40,000.
However, it is possible to stake much less by participating in staking pools.
Since the merge, some miners like Aaron Petzold, who has accumulated about $25,000 worth of mining
equipment over the years, have been looking to repurpose their graphics cards to mine altcoins
instead.
When the merge hit, I immediately switched my everything to ergo, in which I was making, I
think, profiting maybe $10 a day, which is nothing compared to when Ethereum was going strong
and very quickly within about two days so much hash rate diluted the
market of all these different coins.
Raven coin, flux, ergo, Ethereum classic to name a few where it's no longer profitable.
Well, Petzold used to mine bitcoin.
It's no longer profitable for him to do that either.
And while he has some Ethereum staked right now, he's holding out on staking more while he
evaluates the market.
Though Ethereum's price has actually fallen since the merge, Petzold is still bullish on its long
term prospects.
I do believe we will see a $4,500 Ethereum one day and a $10,000 Ethereum one day.
I don't know if it'll be in three weeks, three months, three years or 30 years, but I believe in
the technology and I'm optimistic about the future.
Yet he does have some qualms about proof-of-stake.
Overall, my opinion is I like I like proof-of-work because it's worked since the beginning.
Why mess with something that's been working and doing very well?
One issue with proof-of-stake, I feel, is it leads to centralization.
Concentrating power in the hands of those with 32 or more Ether to stake is a common concern, though
others say the risk of centralization is no different than with Bitcoin mining, where those
with the most computing power are most likely to win rewards.
Either way, the rich get richer, and if either the largest staking pools or mining pools wanted
to join forces, they could theoretically wreak havoc on their respective networks.
But while questions of security and centralization are up for debate.
There's no doubt that proof-of-stake is a massive improvement from an energy efficiency standpoint,
essentially eliminating Ethereum's carbon footprint, while Bitcoin still uses as much energy
as some small countries.
Benjamin Jones, associate professor of economics at the University of New Mexico, says he's often
asked how damaging bitcoin is compared to other commodities like gold or crude oil or solar power.
So he authored a paper on it.
People say bitcoin, digital gold, let's just say it's digital gold.
What are the climate damages of gold?
How do they compare to bitcoin? And we also did this for like crude oil, beef, chicken, pork,
natural gas, renewables, wind, solar, precious metals like platinum and copper.
Jones and his colleagues found that from 2016 to 2021, each $1 in Bitcoin market value created was
responsible for an average of $0.35 in global climate damages due to the emissions associated
with mining. For comparison, a dollar's worth of gold produces only $0.04 of climate damages, while
natural gas is responsible for $0.46.
Crude oil burned as gasoline is responsible for $0.41 and beef is responsible for $0.33.
Over the years, Jones studied the climate damages of bitcoin actually exceeded the coin's value
about 6% of the time.
We're able to estimate this because we have a pretty good sense of where miners are located when
they sign up for mining pools.
And so we get information on their IP addresses and then we can apply country specific emissions
factors for carbon and other pollutants to give us some sort of daily measure of the carbon
emissions every day to mine bitcoin around the globe.
China, which previously hosted up to 75% of global bitcoin mining capacity, kicked miners out in mid
2021 as the country saw crypto as a threat to both its central banking system and to a lesser
extent, its environmental goals.
This led to dirtier mining overall, though, because while China has an abundance of
hydropower, many miners moved to Kazakhstan, reminding is largely coal powered, and the U.S.,
which is now the world's largest bitcoin miner.
Nobody seems to expect bitcoin to move to proof-of-stake any time soon, though such a
massive change would require massive buy in from the network and many bitcoin enthusiasts and
investors see proof-of-work as a better proven, more secure system.
They think that proof-of-work mining is the only way to make a secure cryptocurrency, so
they are currently not making any moves towards implementing a proof-of-stake based
system.
Large miners who've made the upfront investment in mining equipment also have a financial stake in
the proof-of-work model.
But now some are trying to retool and rebrand as renewable energy champions.
As we move to become fully carbon neutral, by the end of this year, our energy mix will be a mix
primarily of wind energy with some grid energy, and that grid energy will offset the fossil fuel
portion of that with renewable energy credits.
Previously, Marathon was notorious for reviving an old coal plant in Montana to power its bitcoin
mining operations.
Now the company has closed its Montana plant and is partnering with a wind farm in Texas,
purchasing excess wind energy that would otherwise go to waste.
This is a wind farm where we operate behind the meter, so we're not sitting on the grid taking
energy directly off the grid.
We're behind the meter at the source of energy generation at this wind farm and only use grid
energy when the wind is blowing, if you would.
Global estimates for the amount of carbon free electricity used in mining vary widely, though one
industry group reports that nearly 60% is carbon free.
While Cambridge University, which publishes the daily Bitcoin Electricity Consumption Index, found
that in January of this year, about 38% came from renewables or nuclear power.
That's about the same percent as the U.S.'s overall electricity mix.
And so I think nailing that number down is really important.
But the problem is how do you get the data right?
Because this is anonymous at the end of the day.
And so it's really hard.
It's a really challenging to do that.
Jones's Research shows that given his data from 2016 to 2021, if Bitcoin mining used 93% carbon
free electricity, then the climate damages as a share of coin price would drop to 4%.
Putting bitcoin's damages on par with solar power or gold.
But no matter whose renewable energy estimates, we believe that's a long way off from where we
stand today. Core Scientific's data center in Marvel runs fully on grid electricity.
Executive VP of Client Services, Russell Cann, says that's actually beneficial because when
there's high electricity demand, such as during a heat wave, bitcoin miners can power down their
operations in an instant.
So, you know, power company says, listen, we have this excess energy and 8300 hours out of the year,
we're going to sell it to you at a very inexpensive rate because these other 300 hours a
year we're going to turn you off because we need that generation in order to go and feed the rest
of the grid and feed to hospitals and schools.
And while, say, not, mining bitcoin at all would also lessen strain on the grid, Cann says that
ultimately investing in the grid through these large data centers will allow utilities to build
more energy infrastructure, ideally green infrastructure.
That's money to say, look, we need another 100 megawatts and we want it to be solar, or we need
more nuke, or we need wind and solar combo or need more hydropower.
So if I want to have green power, I'm going to invest in more bitcoin mining and I'm going to
encourage it to come to the United States versus somewhere else.
While Ethereum's price has dropped after the merge, its founder, Vitalik Buterin, speculates
this could just be an example of the phrase "buy the rumor, sell the news," where hype around an
event drives up the price of an asset only to have it drop later on.
And while bitcoin's price remains low, more miners have flocked to the network in the wake of
the merge. As data centers, space and electricity previously devoted to Ethereum mining has been
freed up. That means bitcoin is consuming more electricity than ever before.
But so long as the network continues to operate smoothly and securely, the move will likely serve
as a signal to regulators, crypto enthusiasts and skeptics alike that the industry can transition to
sustainability.
So slashing energy consumption by more than 99% will also go a long way toward lowering the
barrier to entry for institutional investors who have been battling the optics of contributing to
the climate crisis.
The White House released a report warning that proof-of-work mining operations could get in the
way of efforts to mitigate climate change so it definitely helps with optics.
The recent report from the Office of Science and Technology Policy analyzed the climate and energy
implications of crypto assets in the U.S.
and put fourth a series of recommendations that include developing environmental performance and
energy efficiency standards for cryptocurrencies, tracking and analyzing the energy usage and fuel
mix of crypto miners and greater transparency and reporting these metrics.
I think what just happened with Ethereum switching from energy intensive proof-of-work to
negligible energy use, proof-of-stake was a game changer.
And I think that's where, if regulation is going to have an impact, it's how do we get bitcoin to
make that switch?
New York State even passed a bill in June that would place a moratorium on crypto mining in the
state if it's not powered by renewables.
But the governor has yet to sign the bill into law.
Meanwhile, some former Ethereum miners like Petzold are still hoping they'll be able to find
another use for their mining equipment.
I'm optimistic that there'll be another coin that that's GPU mineable because there's just so much
equipment out there right now that there's someone that I'm sure that wants to take advantage
of all this equipment they can use to secure network.
That's just a no brainer.
In all likelihood, energy intensive mining for bitcoin, in particular, is likely to continue for
the foreseeable future.
So now Jones says it's just a matter of figuring out what exactly the damages are and what damages
society is willing to accept when it comes to an emerging technology like crypto whose full value
to society is yet unknown.
A lot of things use electricity and a lot of things have impacts on the climate, but I think
it's just putting it into context what the damages are.
And bitcoin is particularly a damaging, relatively speaking, commodity.