The Crypto Industry Wants To Go Green – It’s Easier Said Than Done

BODEN, Sweden – Nestled in snowy Swedish Lapland is a modern gold mine. But instead of picks and shovels, it’s filled with thousands of computers.

These machines, known as mining rigs, work around the clock to find new units of cryptocurrency – in this case, Ethereum, the second largest token in the world.

To do this, they must compete with others around the world to find the answer to a complex mathematical puzzle, which becomes increasingly difficult as more and more computers, called “miners”, join the network. The goal is to ensure system security and prevent fraud.

This Ethereum mining facility is operated by Hive Blockchain, a company that focuses on using clean energy to mine crypto.

Benjamin Room | CNBC

The whole process is underpinned by what is known as “proof of work”. And that consumes an incredibly large amount of energy. Bitcoin, the largest digital currency in the world, also uses this framework. Today it consumes as much energy as entire countries.

Governments around the world are increasingly worried. Some countries, like China, have gone so far as to outright ban crypto mining.

Switch to renewable energy

The mine in question, a warehouse-like building in the military town of Boden, houses a total of 15,000 of these mining rigs. At 86,000 square feet, it’s larger than a standard football field.

The facility is operated by Hive Blockchain, a Canadian company that focuses on using green, renewable energy to mine crypto.

At 86,000 square feet, Sweden’s Hive mining facility is larger than a standard football pitch.

Benjamin Room | CNBC

Hive’s Swedish operation is powered by a local hydroelectric plant in Boden, in the north of the country. The region is renowned for its surplus of cheap and renewable electricity.

“In northern Sweden, 100% of the electricity is either hydroelectric or wind,” said Johan Eriksson, adviser at Hive. “It’s 100% renewable.”

Eriksson says crypto miners are using excess energy capacity that would otherwise have been wasted – in other words, it is not needed by households in the region.

But the large amount of power required to run operations like Hive’s has alarmed officials.

These machines, known as mining rigs, work around the clock to find new units of cryptocurrency.

Benjamin Room | CNBC

Finansinspektionen, Sweden’s financial watchdog, is calling on the European Union to ban crypto mining due to its huge energy consumption.

“Crypto-asset producers want to use more renewable energy and they are increasing their presence in the Nordic region,” the agency said in a statement last year.

“Sweden needs the renewable energy targeted by crypto-asset producers for the climate transition of our essential services, and increased use by miners threatens our ability to meet the Paris Agreement.”

Is decarbonization enough?

Edinburgh-based crypto firm Zumo is part of the Crypto Climate Accord, a business coalition that aims to achieve net zero emissions in the crypto industry by 2030.

Zumo climate policy adviser Kirsteen Harrison says the initiative is working on software that would be able to verify the energy source used in crypto mining as renewable.

“There are quite a few trials going on with it right now,” she said. “If this is successful, I hope it trickles down to the rest of the industry.”

According to some activists, simply decarbonizing cryptocurrency production may not be enough.

Greenpeace and other environmental groups are calling on the bitcoin community to replace its proof-of-work mechanism with one called “proof-of-stake.” This would remove the huge computational cost of verifying new crypto transactions.

Ethereum is currently in the midst of a long transition to proof-of-stake, a move that proponents believe would reduce its power consumption by more than 99%. And other cryptos, like cardano and solan, already operate on proof-of-stake networks.

But, as Harrison explains, steering a cryptocurrency like bitcoin away from proof-of-work is easier said than done.

“I don’t believe there is an option to remove proof of work, precisely because no actor has control of the system,” she says.

Not everyone is on board

Although Hive and other crypto companies are increasingly turning to green energy to power their operations, there are many others who are not yet on board with the switch to renewables.

Some deliberately use gas that would otherwise be burned to generate electricity for crypto mining, for example.

Ever since China banned crypto mining, Bitcoin proponents hoped it would make cryptocurrency greener.

But a peer-reviewed study published in February found that bitcoin mining only got dirtier in 2021, with miners actually flocking to regions more reliant on coal and other fossil fuels, including Kazakhstan and southern US states like Texas and Kentucky.

Part of the problem is the decentralized nature of cryptocurrencies like bitcoin. Although various groups now claim to represent the industry, bitcoin has no central authority and anyone can participate in the network.

About Catherine Wilson

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