Bitcoin Mining Has Tangible Negative Effects for Taxpayers and the Environment

Pardon the repetition, but once more I’d like to rant about the perils of cryptocurrency mining. In case you don’t know what crypto mining is, a quick explainer: In order to “win” a newly minted bitcoin, a very complex math problem has to be solved and that requires a ton of computational power. The surge in crypto popularity means professional mining operations run vast grids of computers, operating 24/7. 

How much power is involved? Well, according to Digiconomist, as of March 22, bitcoin mining consumes 57.2 terawatt hours (TWh) of energy, and the publication’s Bitcoin Energy Consumption Index, which tracks such things, has been rising at a hard 45-degree angle over the last six months. 

To put it into context, it requires more energy to mine bitcoins than it does to power Greece, which has the 46th highest energy consumption in the world by country. And a little bit more perspective: Mining for one bitcoin consumes 847 kilowatt hours (kWh); processing 100,000 Visa transactions consumes 169 kWh. And the carbon footprint of bitcoin mining is terrible because, according to Digiconomist, “the [bitcoin] network is mostly fueled by coal-fired power plants in China,” and produces 415.14 kilograms of carbon dioxide per transaction. 

Have I made the point that this is more than just Internet funny money? OK. Well, how about a little real-world example of its dangers to actual American taxpayers?

Home Sweet Home

I graduated from Plattsburgh State University, which resides in a city nestled in the northern part of New York, bordering Vermont and Canada. The Moses-Saunders Power Dam—a hydroelectric dam on the St. Lawrence River—is nearby, and, according to Gizmodo, while the national average cost for electricity is just over 10 cents per kWh, Plattsburgh residents pay 4.5 cents, and industrial operations pay 2 cents per kWh. 

But then two bitcoin-mining operations moved in, looking to take advantage of the cheaper energy costs. What resulted, because of the addition of these miners, is that the city hit its allotment of megawatt-hours (mWh) early, thus forcing it to buy energy on the open market, which is far more expensive. 

From Plattsburgh’s local paper, The Press Republican:

The city gets an allotment of inexpensive hydropower from the New York Power Authority, which allows for MLD to charge low rates. But when MLD goes over its allotment, it must buy more expensive power on the ‘spot’ market. The mayor said that money can be 50 to 100 times as costly.

The city exceeded its hydro allotment twice this winter, causing residential bills to balloon. And a significantly cold December and January also added to higher bills. … Tom Recny, CFO of Mold Rite, which employs nearly 500 workers in the city, said their bill went up $22,000 last month.”

Recny told Vice that if these bill hikes persisted, they’d have to lay off workers.

As a result, City of Plattsburgh councilors voted unanimously to impose an 18-month moratorium on any new crypto-mining operations, though current bitcoin-mining companies can continue operating. (That Vice article has an excellent deep-dive into Plattsburgh’s specific situation.) According to The Press Republican, some of the people who attended the council meeting were opposed to the moratorium because they believed that this might turn away other tech companies from coming to Plattsburgh, affecting jobs.

But those in opposition should keep this in mind: Coinmint LLC, which is based out of Puerto Rico, operates by far the largest mining company in the town. At the council meeting, Coinmint spokesperson Kyle Carlton said the company employs only about 40 people globally, and he was unsure how many are currently working at the Plattsburgh sites. Forty people globally, but can’t say for sure how many people work in the tiny city of Plattsburgh. Right…

Plattsburgh is not alone in this. Towns in Montana, Wyoming and Washington are facing similar dilemmas. 

People must ask themselves: Is it responsible to be using so much energy to mine a digital currency? Over 500 million households in the US could be powered by the energy it takes to mine bitcoin. Is it wise to invest in firms and portfolios that invest in bitcoin futures and, eventually, listed products? If you care about environmental, social and governance (ESG) issues, the answer should be no.

Do you want to make a buck and worry about the consequences later? If so, be honest with yourself about it. And perhaps put a bit of the profit aside to pay for your power bill next year. 

(For more on this subject, listen to the Waters Wavelength Podcast.)