Profitable creation or mining of bitcoin and other cryptocurrencies requires masses of computers dedicated to solving deliberately complicated equations – a business that globally consumes more electricity than entire nations, but for which these start-ups say that flaming gas jets placed next to oil wells are perfect sources of energy.
âI think the market is huge,â said Sergii Gerasymovych, CEO of EZ Blockchain, which has six different data centers powered by natural gas in the U.S. states of Utah and New Mexico, as well as in Canada.
Across the country, companies like EZ Blockchain are setting up shipping containers where racks of hundreds of computers mine cryptocurrency, fueled by natural gas from oil wells that would otherwise be burnt to the ground. ‘outdoors.
Interest in their work has grown over the past year. Bitcoin and other cryptocurrencies like ethereum and dogecoin have seen sky-rocketing price spikes since the Covid-19 pandemic rocked the global economy and large corporations began to embrace the technology.
But a backlash has formed against the energy consumption of digital assets, fueled by concerns that it relies on carbon-emitting energy sources that contribute to climate change.
This week, Tesla boss Elon Musk criticized Bitcoin’s energy consumption, particularly energy produced from coal, and said he would no longer accept cryptocurrency as payment for his electric cars.
While nascent industry entrepreneurs say using natural gas that is otherwise wasted represents a solution to these problems, its ability to reduce emissions remains to be seen, said Tony Scott, chief analytics officer at oil and gas research firm BTU Analytics.
âIn the grand scheme of things and compared to other loads, yes it’s small,â Scott said. “They create economic value (but) they don’t necessarily significantly change emission profiles.”
– Burning energy – A large number of processors around the world are dedicated to mining bitcoins. The business uses 149.6 terawatt hours per year, according to the Cambridge Bitcoin Energy Consumption Index (CBECI). This is a little less than all the electricity consumed by Egypt.
As the most popular cryptocurrency, bitcoin is undoubtedly valuable, trading at around $ 50,000 in mid-May from less than $ 10,000 a year ago, prompting miners to find the source of it. cheapest energy to increase their margins.
Enter the flared natural gas.
Oil producers burn natural gas if they can’t find a way to process it, which, with low prices and complicated pipelines to build, can be the case around the world.
âMiners tend to be based in areas where there is usually excess energy. What is new … is this whole concept of gas flaring,â said Jason Deane, bitcoin analyst at Quantum. Economics.
Flaring burns many greenhouse gases in natural gas, but the International Energy Agency said the roughly 150 billion cubic meters of natural gas burned globally in 2019 emitted roughly the same amount. of carbon dioxide than Italy.
Using flaring gas to power application-specific integrated circuits that mine bitcoin doesn’t completely end emissions, but is more efficient than flaring and uses energy that would otherwise be wasted.
âWe come in, they’re zeroing for their gas, we say, hey, we’re going to come in (and) take the gas away from you, give you a little something,â said Matt Lohstroh, co-founder of Giga Energy Solutions.
“We will be able to reduce the emissions you put out, burn them, create economic value on our side.”
– Cheaper energy – The advantage of natural gas lies in the cost of electricity. The CBECI estimates that the average global energy cost for mining bitcoin is around $ 0.05 per kilowatt hour. Lohstroh said natural gas electricity can bring the cost per kilowatt hour to less than $ 0.018.
Interest has grown in diverting flared gas to cryptocurrency mining, and not just because digital assets are gaining in value.
âThe issuance of new flare licenses is more scrutinized and I think these producers are realizing that,â said Britt Swann, who is leading holding company Ecoark’s expansion into cryptocurrency mining.
“They’re ready to play ball and find a way to use that gas without necessarily wanting any value for it.”
Where businesses differ is on what to do with Bitcoin and other digital assets once they get them.
Ecoark intends to convert it to dollars, but Lohstroh plans to own the bitcoin that he mines, which he says will one day support a new global financial system.
âNo need to sell the world’s most valuable asset that is undervalued,â he said.