Breaking down the Executive Order to lower energy consumption and emissions from bitcoin mining

Date Published

06/03/2022

The Biden administration is reportedly crafting policies intended to lower energy consumption and emissions from bitcoin mining. According to the White House, if cryptocurrency is going to be part of our financial system in any meaningful way, it must be developed responsibly and must minimize total emissions.

To that end, the White House tasked its Office of Science and Technology Policy (OSTP) to put together a report – expected to be released in August – detailing the climate impact and other governing concerns of crypto mining. As the OSTP conducts this examination, it has invited comments from interested stakeholders, including the public.

Here is a breakdown of the information requested to help inform the report, along with some insight into what each topic area entails. Any resulting policies would likely follow the format and structure of the key topics included in the request and laid out below – so let’s take a look.

Topic 1: Protocols

This topic centers on the climate impact of the protocols used by digital assets, such as Proof-of-Work and Proof-of-Stake, to name a couple.

This includes:

  • The effect of cryptocurrencies’ consensus mechanisms on energy usage
  • Potential mitigating measures and alternative consensus mechanisms and the design tradeoff those may entail

Many digital assets – including those that make use of smart contracts – use or are looking into using less energy-intensive mechanisms than Proof-of-Work, which currently requires a tremendous amount of power to perform. The OSTP is in the process of gathering information on the benefits and drawbacks of those alternative mechanisms and their different energy consumption profiles.

Topic 2: Hardware

Topic 2 focuses on the climate impact of mining hardware – the physical components that run the protocols for digital assets.

This includes:

  • Embodied emissions of specialized hardware and cooling equipment used to mine certain cryptocurrencies
  • Waste generated from equipment needing to be replaced frequently due to rapidly improving mining equipment
  • The potential mitigating measures and technology improvements used to reduce the environmental impact of hardware usage

Based on the information included in the request, we may see regulations that could limit the use of older devices like the Bitmain Antminer S9 while promoting the adoption of newer and more efficient miners like the Bitmain Antminer S19.

Topic 3: Resources

Topic 3 looks into the resources used to sustain and power digital assets.

This includes:

  • Electricity that powers mining rigs
  • Water used to cool those operations
  • Potential mitigating measures to reduce the amount of electricity and water used for mining
  • Quantitative estimates of the total amounts of resources used by particular types of digital assets or by the digital asset ecosystem at large
  • Information on whether the costs of resources used are borne equitably across or society are disproportionately borne by historically disadvantaged communities

Topic 4: Economics

In dealing with the economic impact of mining, the report will look at how the energy usage of digital assets is affected by the value of, demand for, and supply of particular digital assets or their underlying infrastructure.

This includes:

  • Environmental and infrastructural effects from cryptocurrency miners moving to areas with cheaper electricity
  • Incentives that exist for cryptocurrency miners to use renewable energy sources for mining (such as RECs or VPPAs)
  • Mining’s impact on the electric grid
  • Information on the need for potential incremental grid investments
  • Mining’s impact on electricity bills for customers near or in affected service territories

Topic 5: Past or ongoing mitigation attempts

Topic 5 centers on past or ongoing attempts to mitigate negative climate impacts of digital assets.

This includes:

  • Voluntary industry efforts to mitigate negative climate impacts
  • Cryptocurrencies changing their consensus mechanism in order to reduce their energy usage
  • Climate-focused and energy efficiency regulation or standards efforts by State, local, territorial, tribal, federal, or foreign governments

Topic 6: Potential energy or climate benefits

The report will also look into how digital assets can potentially yield positive energy or climate impacts.

This includes:

  • Potential uses of blockchain that could support monitoring or mitigating technologies to climate impacts, such as opportunities for natural asset or emissions accounting, as well as the exchanging of liabilities for greenhouse gas emissions, water, and other natural or environmental assets
  • Specific approaches to increase the likelihood of direct climate or emissions benefits from digital assets, or associated grid services that indirectly lead to climate or emissions benefits

The OSTP is in need of information either supporting or rebutting claims made by some proponents of cryptocurrencies that the energy used by mining cryptocurrencies is a net climate positive, either because it occurs during demand lulls or because it increases demand for renewable electricity sources.

Topic 7: Likely future developments or industry trajectories

The OSTP is also interested in likely future developments or industry trajectories that would have implications for the future climate impact of digital assets.

This includes:

  • Expected future developments in:
    • Protocols
    • Hardware
    • Resources
    • Economics

Topic 8: Implications for U.S. policy

Topic 8 delves into how the climate impact of digital assets might have implications for U.S. policy.

This includes:

  • Implications for energy policy, including as it relates to:
    • Grid management and reliability
    • Energy efficiency incentives and standards
    • Sources of energy supply
    • Greenhouse gas intensity
    • Transition to a net-zero emissions economy by 2050

The OSTP has stated it will keep an open mind as it collects evidence on the above, considering appropriate policy responses under a world that has either shifted to Proof-of Stake or that utilizes a mix of it with Proof-of-Work.

The team will also study claims made in recent months that data centers could provide grid operators with flexibility by temporarily shut down during times of peak demand – an approach known as demand response.

Compute North and the TIER 0™ model

The Compute North TIER 0™ data center model plays a key role in the transition to renewable energy due to its ability to operate efficiently, scale quickly, and serve compute-intensive workloads. The type of compute work performed in these facilities is fully interruptible around the clock and can be curtailed by grid operators, unlike traditional data centers.

The increase in demand for flexible energy supply coincides with our ability to act as valuable partners to energy companies and grid operators rather than as passive consumers of power.

Compute North has demand response programs with select energy suppliers, allowing operations to be curtailed when necessary to align with periods of low supply or peak demand. Our TIER 0™ data center design creates the ability to throttle power at each facility as required and to dynamically manage power usage – helping to manage costs, accelerate adoption of renewable energy across the county, and improve stability and resiliency of the grid.

Date Published

06/03/2022

Author

First Scribe

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