Broadly speaking, the universe of publicly traded bitcoin miners is chock full of relatively young companies. This implies that growing pains are to be expected and opportunities to get things right are plentiful, too.
Fertile territory for improvement for bitcoin miners, including those residing in the VanEck Digital Assets Mining ETF (DAM), is to embrace renewable energy as a cornerstone of the mining process. Some DAM member firms are already doing that, and it’s a good thing because the industry is under fire to improve its sustainability posture.
Critics assert that the bitcoin mining industry, broadly speaking, isn’t cutting it when it comes to being a good environmental steward. In fact, they claim bitcoin mining is harmful to the environment.
“Taking Bitcoin (BTC) as our focus, this analysis estimates climate damages of mining coins and explores several criteria for signaling when these damages might be unsustainable. First, the trend of estimated climate damages per BTC mined should not be increasing, as the industry matures. Second, per BTC mined, its market price should always exceed its estimated climate damages; i.e., BTC mining should not be ‘underwater’ wherein per unit climate damages are greater than coin market prices for any appreciable period,” according to a study from Scientific Reports.
The study indicates that carbon emissions from bitcoin mining surged 126% for the six years ending 2021. That’s more than enough for industry observers to sound the alarm bell regarding environmental sustainability. Translation: DAM components have ample motivation to start embracing or continue increasing usage of renewable energy.
“Using network hash rate data from January 2016 through December 2021 and data on mining equipment power consumption and efficiency,” added Scientific Reports. “On the basis of these estimates, in 2020 BTC mining used 75.4 TWh yr of electricity, which is more energy than used by Austria (69.9 TWh yr− in 2020) or Portugal (48.4 TWh yr− in 2020).”
That trend is moving higher, confirming that bitcoin miners need to make renewable energy inroads. Beyond getting critics off their backs, there’s good reason for miners to reduce their carbon footprints. Notably, there’s evidence suggesting that bitcoin miners that reduce use of fossil fuels also reduce costs.
Coal and natural gas are the primary power sources for bitcoin mining in the developed world, and miners need to consider that because prices of both commodities are soaring this year amid slack supplies.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.