The world’s top cryptocurrency has a massive carbon footprint, but ARK Invest says Bitcoin could boost investment in renewables.
Pushing back against climate activists concerned about Bitcoin’s carbon footprint, the head of research at Cathie Wood’s ARK Invest is arguing that the world’s largest cryptocurrency, far from being a danger to the planet, will help generate more electricity from renewable energy.
“Bitcoin critics often assert that bitcoin mining consumes more resources, specifically energy, than the benefits it creates,” Brett Winton, ARK Invest’s director of research, wrote in a blog post published on Wednesday. “Critics also assert that the computation required to secure Bitcoin, even if necessary, is environmentally damaging and ruining the planet. We believe that the opposite is true.”
During Bitcoin production, a global, decentralised network of computers (aka mining rigs) races to verify blocks of Bitcoin transactions, with the winner receiving new Bitcoins.
Bitcoin’s price has skyrocketed from $29,413.29 on January 1 to as high as $64,899 on April 13. One Bitcoin is currently worth over $53,000, according to Coinbase.
But that payoff comes at a price to the planet, because mining rigs are often composed of thousands of powerful computers that consume vast quantities of electricity.
In China – which accounts for some 65 percent of global Bitcoin mining, according to the Cambridge Bitcoin Electricity Consumption Index – authorities have taken steps to rein in Bitcoin mining in an effort to limit greenhouse gas emissions from coal-fired power plants.
A recent report from Bank of America found that the energy used by the set of computers to power Bitcoin is on par with that of some developed countries and rivals emissions produced by some corporate heavy hitters like American Airlines and ConocoPhillips.
But Winton argues that Bitcoin mining could help boost the overall share of planet-friendly energy and encourage investment in solar energy systems if mining were integrated into a renewable energy system.
According to the ARK Invest model, without Bitcoin mining, solar energy could supply only 40 percent of grid power before utilities have to fund major investments with higher electricity prices.
“But with Bitcoin mining integrated into a solar system (solar + batteries) however, we believe energy providers — whether utilities or independent entities — could play the arbitrage between electricity prices and Bitcoin prices, as well as sell the ‘surplus’ solar and supply almost all grid power demands without lowering profitability,” Winton explained.
ARK Invest’s model further asserts that with Bitcoin mining, solar and batteries could satisfy 99 percent of what the grid needs.
The model’s conclusions are based on the thesis that solar energy will not be used to mine Bitcoin unless the demand of the grid is first met. From that premise, the model examines whether it is more profitable to store energy in the battery, or to mine Bitcoin.
“The Bitcoin miner allows the developer to more efficiently over-power the system with solar, allowing the miner to soak excess generated energy and power down to accommodate periods of increased demand or patchier sun,” Winton wrote.
Such innovation could create opportunities at the residential level, says ARK, especially if heat waste from Bitcoin mining can be used in other ways. And as battery supply remains tight due to demand from electric cars, Bitcoin mining for battery systems could produce opportunities in that arena as well, Winton argues.
Another plus side: A mining-attached solar system would be able to generate revenue as soon as it is internally wired as opposed to today’s systems, which can take months to get interconnected and cleared to sell to the grid.