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Harvesting Surplus Energy

  • Writer: Matt
    Matt
  • 1 day ago
  • 22 min read

Someone invented a flexible way to turn any type of energy into money, directly from its source, without having to sell, store or even transport electricity.

This works with any primary source of energy:

  • hydro, wind, solar, nuclear, geothermal, ocean temperatures.

  • coal, oil, gas.

  • methane leaks, discarded cooking oil, rubbish dumps, farm manure and more…


⚠️ Read this again slowly.


Any energy source can now be turned into immediately usable money by any country around the world. No need to find buyers, build power lines or worry about export regulations and tariffs.


This new ability is creating opportunities everywhere, mostly in the energy industry but not only. Some of those opportunities are obvious, others are truly original and surprising. They happen at very different scales, both in developed economies and emerging countries.


Isn't electricity supposed to be used by real people rather than to make money?


Yes but the vast majority of the world's energy production capacity is wasted because of variations in demand. The opportunity lies with the unsold energy surplus.


How does this work? Read on to find out more...




  • Use fossil fuels

  • Compete with residential users



The textile industry used to take advantage of hydro power with water mills. This is an example of directly transforming an energy source into work. We can now take the same energy source and transform it into money.



Intro


Before reading the rest of this post, take a deep breath and think about this: before 2009, the only way human beings on planet Earth could take advantage of an energy source was to either use it on the spot to produce work (such as a windmill), store it (with batteries) or transport it to sell it to someone else (with power lines). There was no way to directly turn energy into money with a machine.


Economic incentives


The timestamping of blocks in the Bitcoin network (aka “bitcoin mining”) is a very young industry that emerged within the last 10 years. It is done by specialised machines spread all around the world that perform very tedious computations. The result of these tedious computations serve as proof that energy was expended and therefore that the owners of the machines deserve to be awarded new bitcoins.


The resilience of the network is based on assuming that individual actors behave in a way that maximises their gains. In the context of the interaction with the energy grid, this set of incentives creates win/win/win situations.


Sounds too good to be true? Yes it does. But as a teaser, let's consider a few examples of triple wins before diving deeper:


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Direct energy-to-money conversion


By rewarding miners who run Proof-Of-Work with brand new sats, someone invented a way to monetise any type of energy source (wind, solar, hydro, nuclear, geothermal) independently of location, independently of the rate of production (intermittent or constant) and independently of the presence of power lines.

A windmill in your backyard, a solar panel on your roof, a hot spring, a river with a water mill... There is a way to generate revenue out of them, without the need to be connected to an electricity grid and with minimal internet connection.


Here is another way to look at it: any energy source can be turned into something that can be transported anywhere in the world instantly at almost no cost, and stored in a way that outlasts any battery (as of today’s technology, though batteries are improving).


If this all sounds like abstract craziness to you then maybe this article has value. However the intent is to ground those concepts into reality. So let's dive into concrete examples.


Creative uses of timestamping


1. Balance energy grids


Before reading any further, it can be useful to get up to speed with how an energy grid works and what constraints it has to face.


What are the key problems that all electricity grids have to solve? According to Nima Tabatabai, it's power generation and grid balancing:

  • Generation: a grid has to generate enough energy to match peak demand. If energy demand is larger than production capacity, then power cuts and grid damage happen.

  • Balancing: energy produced has to match energy demand in real time. Whatever electricity is produced must be consumed on the spot, otherwise it is lost.


Wind and solar farms bring relatively new problems to the grid:

  • they are often far away from populated areas

  • they are intermittent and uncontrollable. Energy production is unpredictable and is difficult to match with demand.


Mining has a number of cool properties that make it a good tool to address the problems above and help balance the grid. Among which:

  • it is location-independent

  • it is interruptible


How does it help? You can place containers full of ASICs close to wind/solar farms and they can be turned on or off on-demand depending on the needs.

Grid balancing tools already include hydro dams and batteries. If a solar plant is fitted with a battery, a bitcoin mining container and a connection to the grid, then this plant has maximum optionality because it is able to:

  1. store when demand is low (shift through time) - with batteries.

  2. monetise when demand is low and batteries are full - with bitcoin mining.

  3. sell electricity when prices are high - to the grid connection.

  4. buy electricity and monetise when energy prices are low - from the grid connection and with bitcoin mining.


What’s in it for the Bitcoin companies? Cheap electricity. Either:

  • less expensive than in front of the meter

  • free

  • negatively priced (as it can happen in Texas for instance).


Ever heard of a load bank? It's a device used by power stations to offload excess power. This is just an expensive resistor that dissipates energy in the form of heat to protect the installations. It actually costs money to waste electricity. ASIC miners are the new load banks.


Some live examples of grid balancing around the world:


Grid balancing in Texas


Grid operators need a flexible consumer to release energy on-demand. Very few industries are able to adapt their energy usage when asked. Those flexible consumers are rewarded with cheaper electricity or special contracts.

  • ERCOT is the grid operator in Texas and proposes demand-response programs to take advantage of curtailment.

  • These programs give economic incentives to reduce demand.

  • For instance electricity customers can sell back to the grid a secured block of power when spot prices are high.

  • In July 2022 Riot made more revenue by selling power back to the grid than mining bitcoin. This is highly dependent on the type of contract.

  • Grid balancing in action: in January 2024, 25% of the hashrate went down to release energy to meet peak winter demand.

  • Despite relying heavily on intermittent sources (wind/solar), ERCOT managed to avoid using gas peaker plants. Most grids (and it's indeed the case in the UK and Europe) use gas power stations to generate electricity when demand is too high.


Electricity prices from wind/solar can sometimes be negative because of limitation of demand and transmission capacity (up to 20% of the time in some areas of central USA).


Grid balancing in the UK


There is a similar program to the US called Demand-Side Response (DSR). DSR assets can include manufacturing plants, refrigeration units, air con, energy storage. They get rewarded for increasing or decreasing their consumption on demand. Bitcoin mining can be just another type of DSR asset.


All this monitoring and on-demand control is software-heavy. Optimize Infrastructure is a UK company that specialises in software optimisers for solar/wind to manage batteries and Bitcoin miners.



Opportunities in Europe


Jaran Mellerud sees this as a possibility in the future because of the accelerated development of wind/solar. Currently high electricity prices are still a barrier to bitcoin mining in Europe, with the exception of the Nordic countries (Norway, Sweden, Finland)


  • Norway: abundance of hydro power.

  • Finland: new nuclear power plant.

  • France: France's baseload relies essentially on nuclear energy. You hear about the need for balancing solar and wind, but not so much about nuclear that is very stable. Yet electricity produced by nuclear power plants at night is mostly wasted. It is not clear what is done with this spare power apart from lighting up motorways or pumping water back up reservoirs.

    • Nuclear reactors don't like curtailment: reducing their output is not good for the equipment. In an ideal world, nuclear plants would run at full capacity all the time to maximise their lifespan. Unfortunately because nuclear is such a big share of energy mix in France (75%) and because wind/solar are given priority in the grid, nuclear plants are forced to curtail in order to avoid grid saturation. Sometimes they even have to be stopped for a few days.

    • According to Bruno Comby, it would take in theory a handful of power plants around the world to feed the totality of Bitcoin's current energy needs.

    • There are even situations in France where electricity prices can be negative. Unfortunately EDF does not take advantage of this extra capacity and prefers throwing it away as explained by Florent Gabriel from Summit Mining.


Grid balancing in other countries


In the UAE, most of the electricity comes from natural gas. This is one of those countries (Singapore included) where fossil fuel represents 99% of the energy mix. Driving a Tesla in Dubai does nothing to improve CO2 emissions. So does it make economic/environmental sense to mine bitcoin there? Well here is the problem: for some technical reason, power plants are combined with desalination plants and therefore they have to run at constant capacity throughout the year. When demand is low, natural gas is burned anyway. So you might as well mine the wasted electricity and reinvest the gains in improving the technology.



Other resources


Note: although not directly related to timestamping, streaming electricity invoice payments over Lightning is a new idea that can help energy companies with their cash flows. Smart meters can send an automated Lightning payment every hour, every day or every month. Energy customers see exactly how much they spend in real time and can take advantage of daily fluctuations in energy prices rather than being stuck to a fixed rate. Because payments are continuous and cash final, this gives a financial advantage to energy providers.

  • Example: Synota in the US provides such a service, as explained by the founder in this video. Austin Mitchell also described "transactive energy solutions" in greater detail during the Microstrategy World event in May 2023. The first customers of pay-as-you-go electricity meters are actually... bitcoin miners.


2. Finance energy projects


Energy can now be directly monetised. This naturally can help finance construction of new power plant projects, in particular in emerging countries. It is interesting to observe a mix between government initiatives, private companies initiatives and grassroot movements. Obviously bitcoin mining alone is not enough to cover the whole financing, but the mining revenues over the long term help projects reach break-even faster.


Examples:

  • Kenya: Micro hydro-plants that are part of a mini-grid.

    • What is a mini grid? It is a small-scale power plant not necessarily connected to the national grid. It taps into energy provided by rivers or small dams.

    • Why are mini grids used in Africa? Because building long distance power lines is too expensive. There is not enough population density or industry to justify the cost.

    • The company Gridless focuses on building equipment to finance those small power plants in various countries across Africa (Kenya, Malawi, Nigeria, Zambia). They use hydro, solar, geothermal and recently expanded to farm waste.

    • This video illustrates how energy producer Hydrobox partners with Gridless in Kenya to make rural energy projects economically profitable and bring electricity to villages that otherwise would be using candles and kerosene.

    • On Lake Naivasha, there is also potential for sustainable long-term mining of geothermal energy for decades to come.

    • Of course, those mini-grids serve the nearby population in priority. In this presentation, co-founder Janet Maingi explains how the GridlessOS automatically switches off miners following the power demand in the community.

  • Malawi: the example of the Bondo hydro operation also managed by Gridless illustrates how foreign organisations are generous with capex but do not help with operation of power sites. Why? Because those sites are not profitable if financed by local consumption alone.

  • Congo: 3 hydro plants in the Virunga National Park are used to help finance the park using mining. This is a great story: check out this article from MIT Technology Review and the documentary by Brave Wilderness showing the situation in the park.

  • Nigeria: a new government regulation encourages individuals to become energy producers up to 1MW, making it possible for communities to generate an income from their mini grids.

  • Oman: BBGS provides mining containers to the Green Data City project in Oman. The purpose of the project is to bring the carbon share of their electricity from 100% to 50%. Check out Sebastien Gouspillou's announcement at the Africa Bitcoin Conference (in French).

  • Ethiopia: in February 2024, the Ethiopian Investment Holdings, investment arm of the government, signed an agreement with a Hong Kong based data center company to allow it to start "data mining and artificial intelligence training operations". Several mining companies are attracted to Ethiopia because of GERD, their gigantic hydro dam on the Nile which is now full with water. There are plans to sell the power to local population and to neighbour countries but in the meantime, let's mine.

  • Bhutan: in April 2023, Druks Holdings and Investments (DHI), the investment arm of the Bhutanese government, confirmed that it had been mining hydro for a few years. In May 2023, DHI and Bitdeer announced they were raising $500 million to deploy mining equipment.

  • Indonesia: in May 2023, the governor of the West Java province invited miners to tap into the abundant hydro and geothermal energy resources of Indonesia. He estimates that 200GW of spare energy are available. Although payments in bitcoin have been banned for many years, this is a smart move to finance renewable infrastructure and reduce government spending.

  • El Salvador: the government plans a large project based on wind, solar and geothermal energy that consists in building the infrastructure from scratch in the department of Santa Ana. In October 2023, Volcano Energy announced their own mining pool Lava Pool in partnership with Luxor Techonology. They will not be working off geothermal only and will integrate with a variety of energy sources in the country. In May 2024, the government revealed in had been mining 474 bitcoins since 2021.

  • Canada: nuclear Small Modular Reactors (SMRs) could be financed in part with bitcoin mining as explained by Ryan MacLeod here and here.

  • UK, the issue of interconnect queues: building solar and wind farms is one thing. Selling the produced energy to consumers is another. Before it can be sold, it has to be transported. It does not magically appear in your light bulb when you turn on the switch. Building power lines to connect new projects to the grid takes time. There is a backlog of projects waiting for connection. In the meantime, what could be done with this stranded power? Mmm...

  • US: it's always good to have academic research confirm what the industry already knows through direct experience: a study published in ACS Sustainable Chemistry & Engineering indicates "the potential for bitcoin to provide economic benefits as an alternative to grid-powered mining at planned renewable installations across the U.S. states".

  • Hawaii: the startup OceanBit researches energy generation based on ocean temperature differentials. It's an old idea that popped up in a Jules Vernes book during the 19th century. Because it is an offshore setup, the usual transportation issues apply and bitcoin mining is a means of financing prototypes until the plant becomes large and profitable enough to justify transportation costs. The technology is called OTEC and we are bound to hear about it in the future because it makes so much sense.


For more information, check out this report by K33 (previously Arcane Research).


Stranded Energy: the idea of monetising energy sources regardless of their location and regardless of the presence of demand can go a long way if you look into the future.

  • It could allow countries in the Global South to accumulate wealth without having to rely on exporting something to richer countries.

  • it could make it possible to build "startup-cities" in remote locations around Small Modular Reactors to experiment with new types of governments.



3. Create incentives to collect nasty stuff


Methane gets special attention because its impact on the environment was shown to be 80x worse than CO2 in terms of greenhouse effect.


Methane comes from:

  1. holes drilled during oil exploration

  2. rotting rubbish in landfills

  3. cow poo and other farm waste

as described by Daniel Batten during Surfin Bitcoin 2022.

3.1 Pay oil exploration sites to flare gas cleanly


Methane escapes from the ground as a result of oil exploration. Drilling companies are required by regulation to burn it rather than release it.


Recently Turkmenistan was in the news as just a couple of oil fields had more CO2 impact in a year than the UK alone.


Processing methane for bitcoin mining is more cost effective. It is also cleaner than letting a flare burn by itself because of the controlled environment of the turbine.

  • According to Jaran Mellerud, gas flaring is five times more effective than wind farms in terms of emission avoidance per $1000 investment.

  • This video shows what a gas flaring station looks like.

  • Companies active in this field:

    • Crusoe Energy. Crusoe was recently mentioned in a blog post by the World Economic Forum about the benefits of catching methane. It's interesting to note that the article mentions the energy is used to power "data centres", without explicitly using the term "bitcoin mining".

    • EZBlockchain builds equipment and solutions for gas flaring mitigation. For concrete examples of how it looks like in the wild, browse their entire use cases page with plenty of photos of bitcoin mining installations.

    • Marathon Digital places data centers on oil fields in Texas and North Dakota to capture stranded gas.

Opportunities for fixing methane leaks abound. Turkmenistan, for instance, is known for having the biggest amount of super-emission events in the world. The oil companies there don't seem to care about fixing methane leaks. Maybe all they need in an incentive...


3.2 Reward municipalities for capturing methane from landfills


Similarly to gas flaring, there is a regulatory obligation in some countries to collect methane that naturally escapes from landfill. This is how regular landfill capture works.


How does it work and what equipment do you need? The Cashing in On Trash paper by Marathon Digital has a useful diagram showing the equipment required to exploit methane on-site with a mining container. There is also academic research about the viability of the idea.

3.3. Reward farms for capturing biogas


Farm waste also generates gas that can be burnt into bitcoin using an anaerobic digester.


Examples:

  • In Kenya, Gridless famously helps small energy plants be financially sustainable with mining equipment. They also provide rigs to plants that work off biowaste as shown in this short documentary by Bitcoin Dada on the DWA Estate in Kibwezi.

  • Brains makes bitcoin mining firmware (the programs that optimise ASICs operation) and tests it on a farm that converts cow manure into electricity. Check out their video to see the inside of the farm and the equipment they use.

  • In Ireland, a farm experimented with biogas with some help from an Irish company called Scilling Digital Mining

3.4 Reward people for not throwing away used cooking oil


What? Yep, as in the low-grade oil used to fry chips. Here is the background: somewhere in Guatemala, villagers do their cooking with oil then throw it away and it ends up in a nearby lake. LakeBitcoin had the idea of collecting the used cooking oil, burn it and power a home-made bitcoin mining mini-op.

  • Check out the full story.

  • watch this video: we are far from the huge clean mining data centres from Texas, which makes it even more cool.


3.5 More resources


“Bitcoin mining is the only economic incentive on the planet to reduce your energy waste and reduce your emissions that is not funded by government subsidies."

(Benjamin Gagnon from Bitfarms)


4. Reduce heating bills


ASICs dissipate heat and it’s usually a major problem that miners tackle with noisy fans, immersion cooling or cold climates. But heat can also be a feature.

An ASIC is a specialised hardware designed to spit out SHA256 all day. But from an electrical point of view, it’s just a fancy resistor. We can assume that 1kW sent through an ASIC generates about as much heat as 1kW sent through an electric heater (minus some energy dissipated as electromagnetic radiation).


In winter, the opportunity is obvious. Even if electricity prices are too high to make mining profitable, the net result is a reduced electricity bill.


Home heating


Space heaters: when everyone in Europe is moaning about winter heating costs, this is the first application that comes to mind. Today a number of companies sell home air heaters that can realistically compete with Dyson in terms of price.

  • Austrian company 21Energy ships a 1000W heater for €2090. I am still using one of their earlier models, the Ofen (800W, €990) that could pass as a coffee table and is great to defrost steaks. When running at 500W, I find it reasonably quiet. 21Energy ships to Europe very quickly.

  • US-based Heatbit sells two models: the 400W Trio for $999 and the 1500W Maxi for $1499. I use the Trio and it is quiet enough for my bedroom. Heatbit can have very long shipping times.

Of course, bitcoin heaters are more expensive than regular heaters. But let's face it: they're infinitely more cool. Since they are not costing more in terms of electricity bill, there is no need to sell the sats immediately. We are talking about non-KYC history-free bitcoin here. You should keep them for your old days, your kid's education or so that your grand-kids don't need to work at all.

  • Hestiia is a company based in France that makes the myEko, an elegant wall unit. I have been following them for a while and they've come a long way. They are now marketing a bitcoin heater without ever using the word "bitcoin" on their website. Indeed they target the French market where the terms "waste heat recovery", "inference calculations for artificial intelligence models" and "reduce needs for primary energy" make it easier to obtain all sorts of environmental certifications. Also, marketing to homeowners makes sense: if I had tenants, I would love them to mine bitcoin for me while they pay for the electricity bill.

  • For larger homes or warehouses, both 21Energy and RY3T also make massive industrial heating devices.


Water boilers: the same principle can be applied to water heating. For instance, HeatCore makes water boilers of difference sizes, starting with the HS20 that is suitable for home central heating. I was told this one costs less than USD3000.



It used to be a niche DIY thing but now you can find a variety of solutions that are easy to install with a reasonable upfront cost. Today if you are still using electricity for heat (air or water) without mining, you are missing out.


Industrial Heating


Because Bitcoin mining scales so well, the case for industrial heating makes even more sense. Greenhouses need heat. Buildings need heat. Entire districts where people live, need heat. Why use expensive fuel when you can use electricity with a bitcoin discount? Check out Jaran Mellerud's comments on heat re-use.


  • District heating: instead of burning gas, fuel or wood, municipalities in cold countries re-use heat from bitcoin miners to reduce their carbon footprint. In Finland, Marathon Digital helped power two sites in Satakunta and Seinäjoki with hydro-cooled mining equipment. So did Hashlabs in a small town with 1.5MW of heat, whilst also offering hosting services. In Canada, Mintgreen equips mechanical rooms with big (400kW) and small (14kW) digital boilers.

  • Desalination plants: in the UAE, desalination plants produce fresh water and require energy in the form of heat. In the Emirates, those plants use gas and there are plans to migrate to solar. Solar generates energy surplus → Surplus is monetised with mining → Mining heat is re-used by desalination plant. Nothing goes to waste 🐿️.

  • Agriculture heating + district heating in the US with liquid cooling boilers built by Sai Tech.

  • Dried fruits: in Africa there is an industry around the preparation of dried fruits which requires the production of hot air. Sebastien Gouspillou explains how BBGS works on a project in Congo looking at using the heat produced by ASICs to dry up fruits. This is cheaper than using diesel generators. Latest update on this topic from Surfin Bitcoin 2023 (in French).

  • Shrimp farming: heat is re-used to keep water warm as explained by Fred Thiel from Marathon Digital.

  • Greenhouse heating: example of flowers in the Netherlands

  • Warehouse heating: a warehouse heated by Bitcoin Brabant in the Netherlands.

  • Hotels: hotel rooms heated by DCX Immersion Mining

  • Spas: a spa in New York heats up its water pools with mining equipment. Check out some pictures here.

  • Whisky: a whisky distillery in Canada uses a custom-made whisky tumbler made by Mintgreen. Check out a video of this special boiler here.



Non-Sustainable Uses


Some situations are not so Disneyland. But with time they should eliminate themselves because they're not viable economically.

1. Compete with residential users for subsidised prices


  • A number of countries (Kazakhstan, Kosovo, Iran, Paraguay, China, Russia, Kyrgyzstan, Kuwait, Angola, Venezuela, Sweden, Norway) have either banned or imposed moratoria on bitcoin mining. In almost all situations, electricity prices were subsidised by governments. Governments therefore had to step in to prevent miners from taking advantage of artificially low prices.

  • In a true free-market energy environment, such direct competition would be self-limiting. If Bitcoin miners drive up demand, electricity prices would rise accordingly – miners, being highly cost-sensitive, would see profit margins shrink and many would shut off once power is too expensive. In other words, market-driven pricing naturally curbs mining when supply is tight, allocating electricity to those who value it most or encouraging new supply.


2. Use fossil fuels


Currently, fossil fuels account for a small portion of the energy sources used for generating the electricity required for bitcoin mining worldwide.

  • Depending on the sources and methodologies, energy mix is 54.5% sustainable according to a January 2024 estimate by Daniel Batten, 52.4% sustainable according to a 2025 Cambridge report.

  • It's also interesting to look at the breakdown of the energy mix by Daniel Batten. You can see that coal was still the number two energy source at 22.92% (March 2023). It used to be number one at the time when mining was happening in China. The 2025 Cambridge report shows coal being down to 8.9%.


In theory fossil miners should be the first to turn off their ASICs when the bitcoin price is too low or the network difficulty is too high and therefore will disappear over time as explained by Sebastien Gouspillou here and here. As a miner, you want to be the "last man standing".

  • Mining with fossil can’t be profitable in the long term because of rising oil and gas prices.

  • Fossil fuels are normally the most expensive part of an energy distribution stack and are typically used in peaker plants (power plants that activate only at peak times, when demand is too high and cannot be met by the other cheaper sources).

  • Coal/fuel/gas are controllable sources therefore do not offer the same opportunities as intermittent sources:

    • no excess energy to negotiate down the price

    • no demand/response programs

  • depending on the jurisdiction, there is political pressure to get away from non renewables (regulation, fines, extra taxes, moratoriums, bans).


Clearly using fossil is not a great strategy for bitcoin mining, unless we're talking about:

  • methane escaping from oil drilling sites

  • methane that escapes naturally (yep, that also happens)

  • methane captured from landfill

  • gas captured from farm waste.


In some countries, such as the UAE, there can be situations where gas is turned into electricity anyway despite low demand. In Pakistan, coal is burned anyway because of the fixed price structure of electricity contracts. In both situations there is energy surplus and therefore an opportunity for mining.


Why use so much energy anyway?


“Bitcoin mining” is the process of timestamping validated transactions in batches. Proof-of-Work is the mechanism that makes this timestamping fraud-proof.


Why timestamp? 


If we know the sequence of transactions then we can't double-spend.


Why proof-of-work? 


To make it too expensive to fraudulently modify past timestamps.


To be allowed to broadcast a block of transactions, a Bitcoin node has to complete a proof-of-work challenge: find a value that, when run through a SHA256 hash function, gives an output below a given target. A hash function takes any piece of data as input and computes a fixed-size fingerprint. There is no way to know the input data from the fingerprint. The only way to guess such a value is to try all possible numbers at random from 0 to 2^32 until one gives a result below the target.


For a much better explanation of bitcoin mining, take the time to go through the Mining and consensus chapter in Andreas' book.


All Bitcoin nodes validate and forward transactions. A subset of those nodes are mining nodes: they broadcast blocks. Blocks are batches of timestamped transactions.

  • More about node types here. 

  • More about the topology of the Bitcoin network here.


The actual broadcasting of a block is usually done by the node managing a mining pool. This is a machine running a Bitcoin client (most of the time this client is Bitcoin core). It is not the machine computing the hashes, although it used to be at the beginning during the first few years of the network. The expensive computations are delegated to ASICs that remotely connect to the pool node to communicate the result of their attempts.


This technical detail hides an important point: ASICs don’t have to be co-located with their pool node and they can sit absolutely anywhere: in a container under a dam in Congo, in a greenhouse in Holland, in a whisky mill in Norway, outside a solar plant in a desert in Texas, at the back of a coal power station in Kazakstan… Usually ASICs are located as close as physically possible to a power source to bring down electricity costs.


Those machines collectively use an estimated 138 TWh every year (0.54% of world's total energy consumption).


Sounds wasteful? Only if you fail to consider that this mechanism is the foundation for the most resilient and neutral payment network on the planet. We have been using various forms of money for roughly 5000 years and have always been facing the same problem: whoever controls the issuance of money cannot help creating some for themselves. The existence of inflation-proof money brings something new: for the first time in human history, anyone has a way to save for the long term without having to resort to real-estate on 30-year mortgages or complex balanced portfolios of stocks/gold/bonds. Citizens of any country have a new option to protect their savings from bank runs, currency devaluations, hyperinflations, government seizures, regime changes, wars, floods, fires and earthquakes.


This is well worth 0.54% share of global energy consumption.


Actually one would wish that this energy usage was even higher: indeed electricity grids are currently producing large amounts of energy that cannot be sold, that has to be thrown away and that nobody uses. This is a pure loss if not monetised.


Conclusion


Weird isn't it? You usually can’t rely on economic incentives alone for an industry to do good. Relying only on the predictable tendency of individuals to maximise their gains does not always turn out for the best. For instance:

  • The pharmaceutical industry benefits from people getting sick.

  • The food industry has an incentive to over-process to cut costs and rely on sugar to increase addiction.

  • The banking industry has an incentive to take risks with client deposits and lend more than it has.

Within the last decade, a new industry was born where economic incentives tend to align with positive outcomes for everyone. Unusual.


Initially Proof-of-work was supposed to be the mechanism that makes timestamping blocks strictly forward-only and non-repudiable. This was a requirement to make decentralised peer-to-peer cash possible. Back in 2009 no-one could have predicted that this security mechanism would grow into a new industry and how this industry would merge with the energy grid and even become an accidental actor in the human adaptation to climate change.




@CodingInLondon


All content on this blog is for education purposes only and should not be taken as professional financial advice or recommendation to buy or sell any asset. No guarantee is given regarding the accuracy of information on this blog.


Also I am not endorsing any company or product mentioned in this article and I am not paid by any company behind any of the products or websites mentioned.


The value of bitcoin is variable, can go up or down, cannot be guaranteed and can be highly volatile. The only guarantee by the C++ code of the Bitcoin network is the maximum number of units (21 million), and this is the whole point. Do your own research before making any investment decision. Past performance is not an indicator of future performance.


Disclaimer: 

- This site provides information and education on technical themes surrounding sound money.  

- This site does NOT provide any financial advice or recommendation to buy or sell any financial instrument.

- The value of any financial asset cannot be guaranteed and can be highly volatile. Do your own research before making any investment decision. 


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