This is an opinion editorial by Byron Donalds, U.S. Representative for Florida’s 19th Congressional District, and Perianne Boring, founder and CEO of the Digital Chamber of Commerce.
There are many reasons businesses relocate to Florida, the welcoming regulatory and tax environments and the skilled and willing workforce among them. And these are certainly some of the reasons many companies in the digital asset ecosystem – including Blockchain.com, Okcoin, Borderless Capital and BlockTower Capital – have left such traditional tech regions as California, New York and the Pacific Northwest for the sunshine and friendlier incentives of Florida.
But there’s another reason digital asset firms are looking to Florida: the Sunshine State’s reliable power grids and its growing leadership in sustainable energy, from solar power to biomass electricity to nuclear power. That’s because one of the building blocks for some of the most popular forms of digital assets, especially bitcoin, is proof-of-work mining, which can be an energy-intensive process, and Florida could foster the innovation that Bitcoin requires.
Proof of work was first introduced in the early 1990s as a means of reducing email spam. The idea was to ask computers to do a small amount of work before sending an email in order to verify the authenticity of the message and prevent spam. This work would be minimal for someone who sends one-off emails, but requires a lot of computing power and resources for users who send mass spam emails. The thinking is that, if there is a significant cost associated with sending millions of emails, it will discourage email senders.
Proof of work is a necessary part of adding new blocks to the Bitcoin blockchain, and the energy consumption required in Bitcoin mining data centers to validate blocks is essential to ensure the security of the blockchain. It also ensures that block production remains decentralized. There is no inherent advantage to those who may have started mining Bitcoin earlier, as the difficulty adjustment ensures that Bitcoin miners who started 10 years ago still compete on an equal footing with a new miner joining today.
Is Bitcoin mining bad for the environment?
It is estimated that Bitcoin mining uses 140 terawatt-hours (TWh) of energy per year and consumes about 0.22% of global energy. There are some, particularly within the executive branch, who are calling for broad restrictions on mining, if not a total ban, suggesting that heavy use of energy is harmful to the environment. This is short sighted and wrong. Eliminating all Bitcoin mining will not make a significant dent in carbon emissions and may actually slow progress in this country’s transition to more renewable energy.
Simply put, Bitcoin mining can be an asset to energy development and the modernization of our energy infrastructure. At the beginning of 2021, over 50% of the Bitcoin network’s computing power, otherwise known as the 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 hashrate increased to 35%. Today, Bitcoin mining in the United States continues to grow, primarily in states with regulatory-friendly environments and abundant renewable energy. In 2021, Bitcoin mining efficiency improved globally by 53%, and the percentage of the industry powered primarily by sustainable energy improved from 37% to 59%.
How is Bitcoin mining modernizing energy sources?
The transition to greener energy sources requires significant investment in new energy technology. Proof-of-work miners serve as reliable core customers that provide demand and sustainable revenue for companies to build clean energy infrastructure. An added benefit: They can rest to reallocate critical energy use elsewhere almost instantly, something other high-demand industries simply can’t do.
For example, in cases where customer demand increases, Bitcoin miners can work in cooperation with utilities to reduce their demand. The power used by the proof-of-work miners is fed back into the grid, giving retail customers additional capacity in minutes with no negative 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 that embraces these possibilities is Texas, where the electric grid is operated by the Electric Reliability Council of Texas, or ERCOT.
“Bitcoin miners have provided a valuable additional tool for ERCOT operators during difficult supply conditions: a flexible load that can be shut down so that needed electricity can flow to our most vulnerable customers,” said Brad Jones, former CEO of ERCOT.
It is also important to note that, although Bitcoin mining has increased productivity over the past few years, the Bitcoin Mining Council has estimated that the sustainable electricity mix of the global mining industry is 58.5% and rising, 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 capacity.
Florida is on the cutting edge of the energy revolution. Our state’s solar industry is now in the top five in the nation, and our biomass electric and nuclear industries continue to expand to meet consumer and business needs. Instead of studying the successes of Florida’s free market approach, the Biden administration is, once again, trying 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 like the US Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC), are preparing to bring the heavy hand of the federal government to bear in the name of “climate.”
Not only do many of these regulators lack the legal authority to engage in environmental policymaking, but they are also ignoring the tremendous advances that private industry has made and continues to make. Instead of stifling growth through heavy-handed regulations, 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.