After several months of bull market carnival, the Bitcoin mining industry has suddenly fallen into a whirlpool of public opinion and regulatory waves recently, which has also brought more uncertainties to the encryption market.
In terms of supervision, the State Council of China and many local governments have made it clear that they want to crack down on Bitcoin mining, and some areas have already begun to clear Bitcoin mines. As a result, the "de-Sinicization" of Bitcoin's computing power has further accelerated.
In terms of supervision, the State Council of China and many local governments have made it clear that they want to crack down on Bitcoin mining, and some areas have already begun to clear Bitcoin mines. As a result, the "de-Sinicization" of Bitcoin's computing power has further accelerated.
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Author | Hu Tao
Carbon Neutrality and Bitcoin Mining
As we all know, the process of Bitcoin mining is the process of calculating mathematical problems, and this process requires the operation of specialized hardware and consumes a lot of energy. The more miners there are, the more intense the bookkeeping competition, the higher the energy consumption and carbon emissions .
Because of this, Bitcoin mining has been criticized by the outside world for a long time due to its large energy consumption. It is believed that while wasting energy, it has a relatively large negative impact on climate change. These criticisms have intensified as carbon-neutral strategies have gained global prominence.
The so-called carbon neutrality means that a specific country, enterprise, or organization calculates that within a certain period of time, it will offset its own direct or indirect carbon dioxide emissions through energy conservation and emission reduction, and achieve "zero emissions" of carbon dioxide. Simply put, it is to "break even" on carbon dioxide emissions.
In recent years, global climate change caused by carbon dioxide emissions has become more and more significant and is still under effective control. The United Nations Environment Program stated in the latest "Emissions Gap Report" in 2020 that although the new crown pneumonia epidemic has caused a short-term decline in carbon dioxide emissions, But the world is still heading towards a warming of more than 3°C by the end of the century, far beyond the goal of limiting global warming to 2°C and committing to 1.5°C, as stipulated in the Paris Agreement. "s level.
At the same time, the international community has significantly increased discussions on carbon neutrality strategies since last year. France and many other countries have proposed a clear timetable for carbon neutrality. Biden announced his return to the "Paris Agreement" on the first day of his inauguration as the US president , and plans to achieve carbon neutrality in 2050, and will invest 2 trillion US dollars to promote the research and development and use of clean energy.
In this context, the bitcoin mining industry, which is highly dependent on fossil fuels, bears the brunt of criticism from many environmentalists. According to previous research by Cambridge University's Center for Alternative Finance (CCAF), the total energy consumption of the Bitcoin network ranged from 40 to 445 terawatt hours (TWh), with a central value estimated at about 130 TWh, about the same as the electricity consumed by the entire country of Argentina. The amount is equivalent. At the same time, about two-thirds of the world's bitcoin miners are using fossil fuels for mining.
For a long time, the encryption industry has refuted external criticism of Bitcoin’s excessive energy consumption. For example, Galaxy Digital released a quantitative research report stating that the energy consumed by the traditional banking system is more than twice that of Bitcoin; Coinbase issued a document Whether the use of energy is considered to be reasonable depends to a large extent on the value obtained from the use of resources, and Bitcoin is much more efficient in the use of resources than many industries; encryption researcher Gianmarco Guazzo also wrote that Bitcoin’s The energy consumed is necessary to make the cryptocurrency safe from cyberattacks and tampering of data within the protocol.
However, most of these views are based on the recognition of the value of the Bitcoin network, and it is difficult for these researchers who originally questioned the value of Bitcoin to be established. With Musk defecting as a Bitcoin standard bearer and criticizing Bitcoin's energy consumption, the Bitcoin mining industry and even the encryption market have just re-examined this topic.
At present, the response of the encryption industry can be explained in two aspects. On the one hand, there are mining companies and miners who directly carry out mining activities. Since changing the mining energy will directly increase mining costs, and the recent Bitcoin price has continued to fluctuate, and it takes time to adopt clean energy, most mining companies have not directly expressed their views.
Among them, Mike Colyer, founder of Foundry, a mining company under Grayscale, has a clear negative view: "We haven't found anyone who is really willing to pay a premium for clean energy bitcoin. So, in my opinion, it's more of a marketing tool." .There is no point in mining Bitcoin with clean energy.”
However, under the organization of Musk and Michael Saylor, several major North American bitcoin mining companies such as Hive Blockchain, Hut 8 Mining, Marathon Digital and Riot Blockchain formed a Bitcoin Mining Committee and agreed to increase energy use globally Transparency to accelerate sustainable development plans.
At the same time, many mining companies have tried to use renewable energy such as water energy, solar energy, wind energy, and natural gas to mine in the past. The well-known mining company Argo Blockchain announced in March this year that it would launch a purely clean energy-driven Bitcoin mining pool Terra Pool, Neptune Digital Assets and Link Global also announced the same month that they would launch a bitcoin mining pool in Canada powered by solar, wind and natural gas.
On the other hand, many businesses using the Bitcoin network have indicated that they will purchase carbon credits or donate to carbon offsetting organizations to offset the carbon emissions generated by their business operations.
On May 20th, two major exchanges, FTX and BitMEX, successively announced their commitment to carbon neutrality. Among them, FTX stated that it would donate 1 million US dollars to offset the blockchain resources it uses, and BitMEX promised that every US$1 in blockchain fees generated That is donating $0.0026 to offset its carbon footprint.
In addition, companies such as OSL, Greenidge, and GSR announced the purchase of carbon credits. These products are mainly supported by specific energy improvement projects, and the funds paid for the purchase will be used for environmental protection projects. Take the carbon credit products purchased by OSL as an example, which are issued by Verra, a certification carbon standard development and management organization, and generated by the Ghani renewable solar project in India to replace the electricity generated by power plants using petroleum energy, thereby avoiding carbon dioxide emissions.
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Bitcoin computing power towards decentralization
Unlike other countries in the world, which are mainly criticized by public opinion, China has directly launched a severe crackdown on bitcoin mining. Since April, Xinjiang, Inner Mongolia, Yunnan and other provinces have issued clear policies to shut down bitcoin mines, reflecting the The Chinese government attaches great importance to the issue of Bitcoin mining, which is also behind the pressure of the carbon neutral strategy.
In late September 2020, China announced to the world for the first time that it will strive to achieve carbon peaking by 2030 and carbon neutrality by 2060. Since then, the Central Economic Work Conference held in December 2020 and the government work report of the two sessions this year will all Doing a good job in carbon peaking and carbon neutralization has been listed as a key task for this year.
On March 15 this year, General Secretary Xi also emphasized at the Ninth Meeting of the Central Finance and Economics Commission: "Achieving carbon peaking and carbon neutrality is an extensive and profound economic and social systemic change. Neutralization has been included in the overall layout of ecological civilization construction, and we have shown the strength to grasp the iron and traces, so as to achieve the goal of carbon peaking by 2030 and carbon neutrality by 2060 as scheduled.”
Under this goal, the Bitcoin mining industry is one of the main obstacles. Since China is the main place for Bitcoin mining activities in the world, and most of the mining activities in Xinjiang, Inner Mongolia and other regions use fossil fuels, China can be said to be the country that produces the most carbon emissions from Bitcoin mining.
At the beginning of April this year, a number of scholars from the University of Chinese Academy of Sciences, Tsinghua University and other universities published a paper in the sub-journal of Nature, stating that China’s energy consumption and carbon emissions related to Bitcoin mining are growing rapidly, based on a simulated carbon emissions According to the model, if it is not controlled, it is estimated that the energy consumption of Bitcoin mining in China will reach a peak of about 297 trillion watt-hours in 2024, and will generate about 130 million metric tons of carbon emissions. This figure exceeds the annual greenhouse gas emissions of all medium-sized European countries, such as Italy or the Czech Republic.
Therefore, the governments of many places in China have changed their ambiguous attitude towards bitcoin mines in the past, and have successively issued documents demanding the closure of bitcoin mines. Several Guarantee Measures for Objectives and Tasks (Draft for Solicitation of Comments)” stated that it plans to comprehensively clean up and shut down virtual currency mining projects, and withdraw them all by the end of April 2021. Since then, Xinjiang, Qinghai, Yunnan and other places have issued documents to explicitly shut down bitcoin mines. Sichuan Province, which only relies on hydropower energy, has not yet made a clear statement.
Against such a policy background, Bitcoin mines in the above-mentioned regions are facing a severe survival crisis. A large number of miners said that the mines where their mining machines are located have been shut down and plan to sell their mining machines. Some miners also said that they plan to transport their mining machines overseas. Keep digging. Affected by this, the daily average hash rate of the Bitcoin network fell to 114 EH/s on June 10, which has dropped by about 42% from the May high.
On the one hand, many companies such as Huobi, Renren Mine, and Mint Mining have announced that they will stop providing bitcoin computing power or mining machine hosting related services; on the other hand, many Chinese mining companies have recently announced intensive investment plans for overseas mines. On May 26, Shenzhen mining company Bit Mining invested US$9.33 million to build a mine in Kazakhstan. On June 5, Ninth City announced the acquisition of Canadian mine Montcrypto and invested in another mine, Skychain.
It is foreseeable that under the crackdown of local governments, the number of Bitcoin mines and miners in China will continue to shrink, and the proportion of its computing power in the world will also continue to decline. In the view of many Chinese miners, China is once again losing the dominance of Bitcoin computing power after losing the pricing power of Bitcoin.
However, for the Bitcoin network, this still has its special significance. Due to the low cost of electricity, China has long been the main gathering place for Bitcoin mining activities. More than 60% of the computing power of the Bitcoin network is located in China, which is considered to have a negative impact on the decentralization of the Bitcoin network.
With China's further crackdown on bitcoin mines and the rise of miners going overseas, the share of bitcoin computing power in China is bound to further decrease. In addition, many mining companies in the United States are increasing their investment. Decentralization is likely to be achieved indirectly.
In this process, the interests of some Chinese Bitcoin miners are sacrificed, but the narrative integrity and even the fundamentals of the entire Bitcoin network may benefit from it.
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