What consequences will the places where bitcoin miners are located have?
According to MIT Technology Review, someone who bought Bitcoin in 2017 would be a millionaire today. But while the industry has been profitable for some, local communities have paid the price.
Bitcoin mining started booming in 2016 when the Bitmain company launched specialized machines. Miners all over the world are looking for cheap electricity to run them. The Bitcoin network works on a proof-of-work (PoW) basis and therefore requires a lot of energy. Accordingly, each transaction on the system uses 1,173 kilowatts of electricity, more than an average US family uses in a month.
“The arms race between the mines started almost overnight‘ said Colin Read, an economics professor at New York University.
The city of Plattsburgh, in upstate New York, is recognized by miners for having a leading source of cheap hydroelectric power managed by the Niagara Energy Authority.
For example, cryptocurrency mining company Coinmint leases a Family Dollar store in Plattsburgh, deploys floor-to-ceiling servers, and runs them 24/7. When the company wanted to expand into a nearby mall, Bill Treacy, Plattsburgh’s lighting division manager, said it had to invest $140,000 in infrastructure itself. He was surprised because Coinmint had no objection to paying the amount and then consumed up to 10 megawatts, estimating that this amount of electricity could provide enough electricity for 4,000 local homes.
Many other miners quickly followed in Coinmint’s footsteps, with some even suggesting using up to 5 gigawatts, showing how energy-hungry miners are. However, Treacy had to decline because “That’s a quarter of what New York State consumes in a day“. Plattsburgh officials say they are receiving applications weekly to open the mine.
In January 2018, Plattsburgh experienced a severe cold, which led to an increase in people’s electricity use for heaters. As a result, the city quickly exceeded its consumption threshold for hydroelectric power and had to buy energy elsewhere at a higher price.
As the long winter ended, surrounding areas discovered that the Bitcoin mines were producing massive amounts of heat and needed constant ventilation to prevent overheating. However, this drop in temperature had a significant impact on the surrounding areas. According to statistics, cryptocurrency mining added $165 million in annual utility bills for small businesses and $79 million for individuals in New York State in 2016-2018.
Economist Matteo Benetton, a professor in the Hass School of Business at the University of California, Berkeley, believes mining can cause a local recession. Where there is a fixed power supply, this will deplete the grid’s reserves and lead to power shortages, forcing regulators to regulate or even leading to widespread power outages. In an energy-rich region, mining could replace occupations that could create more jobs.
“There are benefits for the individual, but society has to pay the price‘ said Mr Benetton.
Faced with the above situation, starting in 2017, the New York Public Service Commission added regulations requiring high-energy consumers to pay higher fees and forcing cryptocurrency miners to foreclose their infrastructure. certain floors and pay an amount to ensure they can pay their utility bills. Coinmint has to pay a guarantee of more than one million USD based on the last two months of electricity bills.
Economist Matteo Benetton said the big economic benefits encourage miners to run as many machines as possible but need to increase transparency on energy use.
Meanwhile GS. According to Colin Read, the bans only result in miners moving the threat to new locations. For example, when China banned bitcoin mining to meet its 2021 emissions target, activity shifted to places like Kazakhstan, where electricity is primarily coal-fired. He said the energy consumption of the cryptocurrency network will increase by 30% by the end of the 2020s, generating an additional 32.5 million tons of CO2 per year.
“As the price of bitcoin increases, so does the mining reward, resulting in energy consumption. More than 32 million tons of CO2 per year will exacerbate the climate crisis, whether it comes from New York or Kazakhstan. Everyone has to bear the consequences“, he said.
Source: MIT Technology Review