On April 14th, 2021, the global hash rate in Bitcoin mining suddenly went down by 23%. However, what caused the dramatic fall in the network? An accident at a coal mine in Xinjiang, China, ended up interrupting part of the region’s energy production.
The Bitcoin network has a self-defense mechanism, reducing the difficulty of entering new blocks when the number of miners in the network drastically decreases. However, the event put the aspect of “dirty energy” used in Bitcoin in the spotlight, which just adds to the existing controversy.
However, some companies believe in environment-friendly solutions for mining Bitcoin. In this article, you will discover what green bitcoin mining is and how it works.
Before we start, we want to say that for the majority of investors it is still more profitable to own a Bitcoin than to buy Litecoin or Ethereum. It’s safe to affirm that bitcoin won’t leave the scene any soon. As long as Bitcoin remains the world’s most valuable digital asset, there will be people mining it – either using “green” or “dirty” energy sources.
Back to Basics – How Does Bitcoin Mining Work?
Nowadays, it is virtually impossible to mine Bitcoin using an average home PC. Over the years, the popularity of Bitcoin grew exponentially, which led to an increasing number of miners trying to profit by mining the BTC network.
However, the growing competition caused a dramatic increase in the demand for computing power, resulting in the creation of multi-millionaire mining pools and companies focused solely on crypto mining.
In a standard mining operation, there is a powerful infrastructure of hardware, electricity, and cooling ventilation involved. Miners are rewarded when they find a solution to a mathematical problem inside a block.
The calculation process is so complex that the only way to find valid answers is based on trial and error. Hence, the computer used in mining consumes a lot of energy, meaning miners have to install them close to sources of electricity with the lowest possible cost.
The Bitcoin network is programmed to issue a new block every 10 minutes. Hence, once a specific miner finds the solution for a new block, the race to find a new block starts over again.
Generally, the miner’s effort is rewarded with 6.25 Bitcoins, plus the fees paid on transactions included in the block. The growing demand for electricity leads miners to search for places where the costs are low.
Currently, the world’s biggest mining hubs are located in China, which is responsible for 46%of the global power used for bitcoin mining. These numbers used to be as high as 75% until September 2019, when the Chinese government started to issue a set of regulations to crack down on all Bitcoin-related operations in the country.
Other world-leading mining hubs include companies located in the United States, Switzerland, Russia, and Iceland. Another important factor is that places with colder temperatures favor Bitcoin mining, as hardware heats up as the processing happens.
Why is the Energy Used for Bitcoin Mining Considered “Dirty”? – Explaining the Controversy
Generally, miners are looking for cheap energy, and that usually depends on low taxes. In other words, if a government surcharges on energy production, miners will automatically look for other sources.
China uses coal as an electrical energy source, which is considered a “dirty” energy source.
Some regions rely on natural gas, including Kazakhstan and Russia – regions with a large presence of miners. With the recent ban on crypto mining in China, thousands of miners have migrated to Canada and the US searching for alternative energy sources.
Green Bitcoin Mining – Doing the Same Old Thing By Different Means
Today, there is an emerging group of American bitcoin miners who are turning one of cryptocurrency’s biggest liabilities – its hell-bent thirsty demand for processing energy – into an eco-friendly asset.
Whether they’re getting rid of tailings, helping balance the power grid in their states, or tapping the flames in oil and gas fields – all alternatives to so-called “dirty” energy sources, these crypto energy entrepreneurs are profiting by engaging in green bitcoin mining.
With countries like China, Indonesia, and Iran struggling to severely restrict or ban bitcoin mining, there was never a better opportunity for US miners to reach the top of the world.
Currently, US Bitcoin miners are acting as a buffer for the new green energy. They buy excess energy when it’s not needed and then shut down their mining rigs when demand increases, releasing energy back into the grid.
However, what really counts as green energy? According to environmentalists, only wind and solar energy. Ultimately, mining Bitcoin in a completely “green” way is still a challenge.
Conclusion
Undoubtedly, Bitcoin mining requires a lot of energy. Processing a transaction on the bitcoin network consumes a million times more energy than processing a transaction on Visa’s banking network.
