With Regulatory Understanding, Bitcoin Mining Can Fuel Florida’s Energy Future
This is an opinion editorial by Byron Donalds, the U.S. representative for Florida’s 19th congressional district, and Perianne Boring, founder and CEO of the Chamber Of Digital Commerce.
There are many reasons that businesses relocate to Florida, the welcoming regulatory and tax environments and the skilled and ready workforce among them. And these are certainly some of the reasons that many companies in the digital asset ecosystem — including Blockchain.com, Okcoin, Borderless Capital and BlockTower Capital — have moved out of such traditional tech regions as California, New York and the Pacific Northwest, for the friendlier sunshine and incentives of Florida.
But there’s another reason digital asset firms are looking to Florida: the Sunshine State’s reliable energy grids and its increasing leadership in sustainable energy, from solar energy to biomass electricity to nuclear energy. This is because one of the building blocks for some of the most popular forms of digital assets, particularly bitcoin, is proof-of-work mining, which can be an energy-intensive process, and Florida can fuel the innovation that Bitcoin requires.
Proof of work was first introduced in the early 1990s as a means to reduce email spam. The idea was to require computers to perform a small amount of work before sending an email in order to verify the message’s authenticity and deter spam. This work would be minimal for someone sending one-off emails, but it requires a lot of computing power and resources for users sending mass spam emails. The thought is that, if there is a significant cost associated with sending millions of emails, it will deter spammers.
Proof of work is a necessary part of adding new blocks to the Bitcoin blockchain and the energy consumption required at Bitcoin mining data centers to validate blocks is crucial to ensure the security of the blockchain. It also ensures that block production remains decentralized. There is no inherent advantage for those who may have started mining Bitcoin earlier, as the difficulty adjustment ensures that Bitcoin miners who started 10 years ago still compete on equal footing with a new miner that joins today.
Is Bitcoin Mining Harmful To The Environment?
It’s estimated that Bitcoin mining uses 140 terawatt-hours (TWh) of power per year and consumes about 0.22% of global energy. There are some, particularly within the executive branch, calling for extensive limitations on mining, if not a total ban, suggesting that the large energy use is harmful to the environment. This is short-sighted and wrong. Eliminating all Bitcoin mining will not put a meaningful dent in carbon emissions, and it could actually slow progress in transitioning this country to more renewable energy.
Simply put, Bitcoin mining can be an asset for energy development and modernizing our energy infrastructure. At the start of 2021, over 50% of the Bitcoin network’s computing power, otherwise known as its hash rate, was located in China and 13% was in the United States. By July 2021, China had banned Bitcoin mining, and the United States’ share of the network’s hash rate grew to 35%. Today, Bitcoin mining in the United States continues to grow, predominantly in states with regulatory-friendly environments and excess renewable power. In 2021, the efficiency of Bitcoin mining globally improved by 53%, and the percentage of the industry primarily powered by sustainable power improved from 37% to 59%.
How Is Bitcoin Mining Modernizing Energy Resources?
Transitioning to greener energy sources requires significant investments in new energy technology. Proof-of-work miners serve as reliable base customers who provide consistent demand and revenue for utilities to build out clean energy infrastructure. An added benefit: They can power down to redeploy critical use of power elsewhere, almost instantly, something other high-demand industries simply cannot do.
For example, on occasions when customer demand spikes, Bitcoin miners can work cooperatively with utilities to curtail their demand. The power being used by proof-of-work miners flows back to the grid, giving retail consumers extra capacity in mere minutes with no adverse effects. No other industry that uses similar levels of energy — including other data centers, cloud service providers and manufacturing facilities — has the ability to do this.
An example of a state embracing these opportunities is Texas, where the electrical grid is operated by the Electric Reliability Council Of Texas, or ERCOT.
“Bitcoin miners have provided a valuable additional tool for ERCOT’s operators during tight supply conditions: a flexible load that can shut down so that needed electricity can flow to our most vulnerable customers,” said Brad Jones, ERCOT’s former CEO.
It’s also important to note that, even as Bitcoin mining has increased productivity over the past few years, the Bitcoin Mining Council has estimated that the global mining industry’s sustainable electricity mix is 58.5% and growing, making it one of the most sustainable industries in the world. This sustainability impact will only continue to grow over time as Bitcoin miners form partnerships with energy providers, utilities, communities and other groups to develop new energy capacities.
Florida is on the leading edge of the energy revolution. Our state’s solar industry is now in the top five in the nation, and our biomass electrical and nuclear energy industries continue to expand to meet consumer and business needs. Rather than studying the successes of Florida’s free market approach, the Biden administration, once again, is attempting to legislate through regulation and taxation. The executive branch, through offices like the White House Office of Science and Technology Policy Agencies, and its subordinate agencies, such as the U.S. Securities And Exchange Commission and the Commodity Futures Trading Commission (CFTC), are preparing to levy the heavy hand of the federal government in the name of “climate.”
Not only do many of these regulators lack the statutory authority to engage in environmental policymaking, but they are also ignoring the tremendous advancements the private industry has made and continues to make. Instead of stifling growth through burdensome regulation, we should let the market do what it does best: innovate.
This is a guest post by Byron Donalds and Perianne Boring. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
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