Can crypto ever be eco- friendly?

At the end of 2020, after 30 years in operation, Eduardo Kopper had to shut down the turbines of his hydroelectric plant, Poas I, located in Costa Rica’s Central Valley region. The Costa Rican Institute of Electricity — the country’s public electricity distributor — rejected Kopper’s bid to sell his energy because the country has a surplus of renewable power.”Essentially, we couldn’t do anything,” Kopper said. “It was a worrisome situation. We were trying to at least sustain our workers.”It was then that he learned about bitcoin. The cryptocurrency is a huge energy consumer, with a carbon footprint comparable to Kuwait’s, according to the Bitcoin Energy Consumption Index.

Dedicating his plant to Bitcoin mining struck Kopper as a way to convert his green energy directly into currency. By April 2021, after three months of inactivity, Poas I was back — as a renewables-powered cryptocurrency mining center. And Kopper isn’t the only one. Miners across the Americas, and particularly in the United States, are jumping on the “green Bitcoin” bandwagon. Large US crypto mining companies — such as Bitfarms and Neptune Digital Assets — are now marketing their operations as “green.” Legislators in Brazil, meanwhile, are debating a tax exemption for renewable-powered crypto mining.

Bitcoin’s staggering energy consumption is central to how its blockchain technology functions. New bitcoins are “mined” by solving complex math puzzles, a feature called “proof of work.” This ensures the blockchain network is decentralised. But it also demands a vast amount of processing power, as miners race to solve these problems first. Cognizant of the environmental impact of the energy-hungry currency, more than 200 companies and individuals launched the Crypto Climate Accord last year, committing to net-zero operations by 2030, mainly by switching to renewable power sources.

But not everyone sees green mining as a win-win solution to cleaning up the dirty currency. Economist and Bitcoin expert Alex de Vries said expending precious renewable power on “random computation,” rather than sectors that provide jobs and other economic benefits to a national economy, can be problematic. In fact, until recently, renewables already played a major role in crypto mining, as they’re often the cheapest source of power.

A study by cryptocurrency analysis firm CoinShares estimated that in 2019, at least 74% of Bitcoin’s global energy consumption came from renewables, much of it cheap Chinese hydropower. But, in 2021, the Chinese government banned all cryptocurrency-related activities, in part because of their huge energy consumption. Sweden, meanwhile, has called on the European Union to ban crypto mining, arguing that it diverts renewable power that could be used to decarbonise other sectors, putting climate targets in jeopardy. Jose Daniel Lara, a Costa Rican energy researcher at UC Berkeley, concedes that in Costa Rica, which has an energy surplus, there’s some logic to green cryptocurrency mining. Ideally, Costa Rica would export its surplus power. But that just isn’t possible at the moment. As much as its energy-poor neighbour Nicaragua, for example, might benefit from Costa Rican energy, it doesn’t have the infrastructure to import it. Bitcoin mining has allowed Kopper to revive two of his shuttered 1 MW hydropower plants and convert the electricity into something that can be exported without the need for physical power grids.

Kopper insists that, with a global shift toward renewables, green mining could clean up bitcoin’s carbon footprint in the long run. “We’re making an effort to differentiate dirty Bitcoin from clean Bitcoin,” he said. “It might take some time for consumers to recognise this, but I think it’s a matter of time.”