Essay by Eric Worrall
As ordinary people suffer electricity blackouts and price hikes, Bitcoin miners have been restarting unwanted old coal plants, to produce the vast quantities of cheap, reliable energy needed to mint new bitcoins.
New York cracks down on carbon fuel-based crypto-mining operations
Two-year ban comes as state attempts to reduce emissions by 85%
Wed 23 Nov 2022 // 17:01 UTC
New York State has banned a practice becoming more common in the crypto-mining industry – the rescuing and repurposing of mothballed fossil fuel plants to exclusively provide energy for mining digital currency.
Governor Kathy Hochul yesterday enacted a bill in the works since May 2021 that establishes a two-year moratorium on applications or permits for “an electricity generating facility that utilizes a carbon-based fuel and that provides, in whole or in part, behind-the-meter electric energy consumed or utilized by cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions.” This includes applications to renew such permits.
The bill cites the contribution to climate change of dirty fuel plants at a time when the state has committed to reduce greenhouse gas emissions by 85 percent by 2050, with “net zero emissions in all sectors of the economy by that time.”
Though it notes that the industry is growing in New York, the bill says: “The continued and expanded operation of cryptocurrency mining operations running proof-of-work authentication methods to validate blockchain transactions will greatly increase the amount of energy usage in the state of New York, and impact compliance with the Climate Leadership and Community Protection Act.”
I love this story, because it makes a complete mockery of claims coal is too expensive or unreliable.
Bitcoin mining, despite the glamour, is a marginal business. Making a profit requires a gargantuan supply of reliable but very cheap energy.
To “mine” bitcoin, mining computers must provide “Proof of work”, the solution to a difficult cryptographic math puzzle. The puzzle is not mathematically complex, the difficulty is the trillions of attempts which are required to find the missing key, to create a valid solution – kindof like brute force code breaking with a computer, trying different keys until you find one which works. Each solution cryptographically secures not only the latest transactions, but all previous transactions, so solving these difficult equations helps secure the bitcoin ledger against tampering and theft. The difficulty of solving the puzzle, and lots of independent copies of the ledger, creates a near insurmountable impediment to tampering with past transactions. People who contribute to the Bitcoin community by helping to secure the ledger of transactions against tampering, by solving these immensely difficult “proof of work” cryptographic puzzles, are rewarded with newly minted bitcoins.
The specialised computers required to solve this cryptographic puzzle and find the missing key in a reasonable time are expensive, but the real killer cost is the cost of the electricity required to run those expensive computers.
US Bitcoin mining until recently was falling behind China, because Americans pay a lot more for energy than the Chinese. But Chinese authorities discovered rich citizens were using Bitcoin to circumvent strict Chinese currency controls, shipping their money electronically out of the country, beyond the reach of the Communist Party. To suggest they were less than amused would be an understatement. This discovery triggered a harsh Chinese crackdown on cryptocurrencies, which put a big dent in Chinese bitcoin mining.
Bitcoin miners needed a new source of cheap energy, and fast.
They found their energy source – mothballed US coal plants. Punitive environmental laws passed by green energy obsessed US politicians to shut down coal plants only applied to coal plants supplying the grid. Bitcoin miners don’t want to supply the grid, they want to supply their bitcoin mining computers, so the miners started taking advantage of this loophole in environmental laws, by restarting the coal plants, but using all the electricity produced by those coal plants to run onsite bitcoin mining computers.
This must have caused immense embarrassment to green politicians, who are trying to convince voters to accept price hikes and coal plant closures. Imagine the political blowback if, after watching coal plants being forced to close, voters suffering a mid-winter green energy blackout saw their local coal plant operating full blast, to power bitcoin mining rigs instead of supplying heat and electricity to their homes.
Now New York State has followed the footsteps of the Chinese Communist Party, and moved to shut down this embarrassing contradiction to their green energy narratives, by attempting to make sure those mothballed coal plants stay shut down.
via Watts Up With That?
November 24, 2022 at 12:12AM