The Bitcoin halving is over — greener mining is coming

People typically care about price above all else when it comes to the Bitcoin halving.

Instead, what they should be paying attention to is the net positive Bitcoin can have for the future of humanity.

While Bitcoin has long been criticized for being bad for the environment, the trend toward renewables and mining actually shows the opposite. Yes, fossil fuels are still a major component of the Bitcoin network, but with the halving freshly behind us and the block subsidy cut in half, miners with fewer operational expenses, like renewables, will continue their ascent.

The halving will be a catalyst for a greener, more renewable bitcoin mining movement to finally be recognized among its most staunch critics as a net positive for the environment.

Fossil fuels are the fiat of bitcoin mining

Bitcoin mining has been constantly criticized for its energy consumption and use of non-renewable energy sources. While the trend is reversing, a significant portion of bitcoin mining still relies on fossil fuels.

But why has there been a reliance on fossil fuels in the first place? Simply because fossil fuels have incredibly high energy density and are relatively stable, making them ideal as an energy carrier.

Read more from our opinion section: This Bitcoin halving cycle, miners need a new energy strategy

While fossil fuel plants have relatively low upfront costs to build, they require the continuous procurement of fuel, i.e. low capex high opex. And that fuel is subject to variable pricing and increasingly prone to shocks. With climate change taking center stage this year, and with the role fossil fuels play, there is increased regulatory risk. Fossil fuels are essentially borrowing against the future for instant gratification, and it is we the people who will inevitably foot the bill for the consequences, with compounding interest. This is the definition of high time preference thinking — and it’s antithetical to Bitcoin’s philosophy.

But the good news is that there is a trend toward renewables and longer term, low time preference thinking already taking shape.

The economics of renewables

In addition to the environmental benefits, the shift towards renewable energy sources in bitcoin mining also makes economic sense. While renewables have a high initial capital expense, once they are installed, the energy produced has a low marginal cost — it costs nothing for the sun to shine or the wind to blow or the geo to therm. If there is no buyer for any given kWh, then the cost of said unit of energy will go to $0. This is increasingly the case for renewable generation capacity that has yet to connect to the grid.

What’s more, renewable energy sources like ocean thermal, wind and solar power, have become increasingly cost-competitive with fossil fuels in recent years. As a result, miners using renewable energy sources can enjoy lower operational costs, making them better positioned to weather the reduced block subsidy as we progress through the fifth epoch.

Additionally, the use of renewable energy sources enables energy sovereignty and decentralization. Whereas only a few nations have fossil fuel deposits, every country has access to renewables. This has led to massive centralization in the energy industry where a handful of super majors and state-run oil companies exert vertical control on the entire supply chain.

Facing the long term economics

Despite the economics favoring renewables over fossil fuels for the bitcoin mining industry, there are still challenges to overcome in the long term. The external cost of fossil fuel use has yet to be factored into their cost. This amounts to a government and taxpayer subsidy that artificially depresses the price today, making fossil fuel use more attractive in the short term.

What’s more, the intermittency of some renewable energy sources, like solar and wind, poses grid balancing challenges. But in areas with significant renewable energy resources, like Texas, bitcoin mining is gaining recognition for its ability to nearly instantaneously cycle on and off. During times of excess production, mining facilities provide a buyer for unused energy, while during high demand, the facilities are able to shut down to free up that power. This unique attribute is being integrated directly into the generation side, expanding renewables to new frontiers.

Gradually, then suddenly

As bitcoin mining continues to favor renewables and decarbonize energy markets in this fifth epoch, it will be undeniable how powerful this one two punch is. We will see more renewable, off-grid mining operations pop up, and we will even see historically dominant fossil fuel miners integrate renewables into their mix. It will likely take bitcoin mining catalyzing a new renewable energy source, like ocean thermal, for some of the staunchest critics outside of the industry to come around and see mining as a net positive. But it’s only a matter of time.

Nathaniel Harmon is the co-founder of OceanBit, a leading ocean thermal energy conversion (OTEC) provider ushering in an era of clean baseload energy. Nate is the inventor of Demand Response OTEC, a chemical oceanographer and engineer who received his M.S. in Marine Geology, Geochemistry, and Marine Geology and a B.S. in Environmental Science from the University of Hawaii where he focused on autonomous oceanographic instrument development and microfluidic chemical engineering. Prior to co-founding OceanBit, Nate worked on proposals and research for the Hawaii Clean Energy Initiative and founded the Bitcoin-software development and consulting firm Blockchain Solutions Hawaii.

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