Meet the company mining bitcoin using the flare gas from oil drilling – and drawing investment from Coinbase and the Winklevii

Bitcoin mining flare gas
One of Crusoe Energy’s flare-mitigation centres in Montana.

  • Crusoe Energy captures the energy from flare gas at oil patches and uses it to “mine” bitcoin.
  • The company is now one of the US’s biggest miners and has attracted investment from Coinbase.
  • The crypto world is increasingly focused on the climate, particularly after Elon Musk’s criticisms.
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Hunter Lowe, a 27-year-old electrician from Tennessee, was working for around $10 an hour in his home state and supporting a family of three when he decided to move to North Dakota and look for a new job.

He never expected to end up working in the bitcoin business.

But Lowe is now an electrician at Crusoe Energy, a company that captures the flare gas from oil patches and uses the energy to “mine” for bitcoin. It says its systems slash CO2-equivalent emissions from gas flaring by up to 63% and that each one has the equivalent effect of taking around 1,700 cars off the road.

Lowe describes it as “the best job I’ve ever had,” which pays “way more than fair.” And he says business has been good during 2021’s crypto boom. “We’re getting busier and busier every time another company finds out about us,” he told Insider.

Crusoe isn’t the only company in the business, with others including EZ Blockchain doing similar things. Yet it’s one of the biggest, and has attracted investment from the listed crypto exchange Coinbase and the Winklevii twins‘ Winklevoss Capital.

Crusoe mines bitcoin directly on site

So how does it work? When oil companies drill for the black stuff, they often hit natural gas too. Yet, most drillers lack the infrastructure to sell the gas and so burn it off in a process called flaring, creating the distinctive flames above oil sites.

This is where Crusoe comes in. It installs a piping system to divert the natural gas away from the flares and into generators. They produce electricity which is then used to power computers directly at the oil site.

The computers “mine” bitcoin – that is, they solve complex puzzles which help to secure the bitcoin network and create new coins. One bitcoin was worth around $39,000 on Thursday.

“We pay the operator for the gas that we use in our generators, providing them with an incremental revenue stream where they were previously flaring the gas for zero,” Crusoe’s president Cully Cavness told Insider.

He said Crusoe, which has deployed units in North Dakota, Colorado, and Montana among other states, is now one of the biggest bitcoin miners in North America.

The focus on bitcoin’s energy use has intensified

Yet, for some people, paying oil companies for their byproducts is simply propping up the fossil fuels industry. Others argue that bitcoin is socially useless and there are much better uses for energy.

New York University economist Nouriel Roubini has slammed cryptocurrencies as pointless and inefficient, for instance, saying that “the Flintstones had a better monetary system.”

Elon Musk, once the most prominent bitcoin evangelist, has halted payments for Tesla cars in the token and attacked its “insane” energy use. Bank of America analysts have estimated that each $1 billion of inflows into bitcoin uses the same amount of energy as 1.2 million cars.

Yet, Cavness says Crusoe “maintains an internal [environmental] standard to select projects only if they’re net reducers of greenhouse gasses.”

He also said Crusoe’s prices are such that “we don’t create an economic incentive to opt out of traditional midstream gas capture systems.”

And he says the company’s generators aren’t only focused on bitcoin, but are increasingly powering other energy-intensive processes such as cloud computing.

Investors are keen on the technology

Musk’s attacks on bitcoin’s energy consumption have shone a light on the issue and crypto companies are paying more attention to the climate than ever.

The green focus appears to be helping Crusoe, which recently raised $128 million to help expand its flare capture technology to more than 100 units, from around 40 currently. Investors included Valor Equity Partners, Bain Capital, and the Agnelli family’s Exor.

As someone who’s worked for Halliburton and natural gas companies, Lowe admits he was skeptical about “the whole green thing” in the past. Being at Crusoe has changed his mind, however, and he argues its work is “definitely for the better.”

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NY Senate approves lighter version of bill targeting emissions from bitcoin mining operations in the state

A view shows the data centre of BitRiver company providing services for cryptocurrency mining in the city of Bratsk in Irkutsk Region, Russia on March 2, 2021.

  • The New York Senate has passed a bill that will target crypto mining operations that use the proof-of-work method.
  • Proof-of-work is an energy-intensive method of validating transactions to mine new tokens.
  • The approved bill is the result of a watered-down version of an earlier that sought a total ban on mining in the state for three years.
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The New York Senate passed a bill on Tuesday that will target large-scale cryptocurrency mining operations.

The legislation would seek to ban the state from granting permits to new bitcoin mining operations that plug directly into the state’s carbon-emitting power plants. It now heads to the state Assembly for approval.

The bill singled out the magnitude of computing power required by the proof-of-work method, which it claimed consumes as much energy as an average American household uses in a month.

“The annual global energy use for proof-of-work authentication is equivalent to that of the country of Sweden and exceeds the energy consumption of all the global activity of major tech companies like Amazon, Google, and Facebook combined,” the bill said.

Proof-of-work is the foundation many cryptocurrencies are built on. The method is used to validate transactions and mine new tokens.

“Given that there are at least 15 other methods to validate transaction it is simultaneously completely unnecessary,” Assemblymember Anna Kelles said.

The bill is a watered-down version of an earlier proposal that aimed to halt bitcoin mining for three years until the state could assess its impact on the environment.

The senators also narrowed the scope to new projects and existing operations.

The bitcoin mining industry, the bill said, is expanding in the state of New York. Most of these operations are concentrated in retired fossil fuel power stations, including dormant peaker plants.

Among the mining centers active in the state is Greenidge Generation Holdings, a natural gas power plant in the Finger Lakes region, which can mine an average of 5.5 bitcoins every day, according to CoinDesk.

The facility was previously a coal-fired power plant but was converted to natural gas in 2017 and then to a bitcoin mining center in January 2020, according to its website.

Bitcoin mining has long been criticized due to its heavy energy use and environmental impact. Recently, Tesla CEO Elon Musk publicly expressed his concern about the rapidly increasing use of fossil fuels for bitcoin mining and transactions, sending shockwaves across the digital asset ecosystem.

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A massive cannabis farm raided by UK police turned out to be a bitcoin mine

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The bitcoin ‘mine’ uncovered during industrial unit raid in UK.

  • When UK police were getting ready to raid what they suspected was a cannabis farm, they discovered a crypto mine instead.
  • Police said the mine said was stealing thousands of pounds worth of electricity from the main supply.
  • “It’s certainly not what we were expecting,” the police said in a statement.
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When police in West Midlands, UK were getting ready to raid what they suspected was a cannabis farm on May 18, they instead discovered a cryptocurrency mine that was stealing thousands of pounds worth of electricity from the main supply.

“It’s certainly not what we were expecting,” Sandwell Police Sergeant Jennifer Griffin, said in a statement.

British police were alerted of numerous people visiting the location at different times of the day. Wiring and ventilation ducts that were visible and voluminous also raised concerns. Following these suspicions, the police flew a drone above the location, which picked up a considerable heat source from above.

“It had all the hallmarks of a cannabis cultivation set-up,” Griffin said.

But upon entry, they discovered a bank of around 100 computer units as part of what’s understood to be a bitcoin mining operation. Griffin said this is believed to be the only second such crypto mine British police have encountered in the region.

Crypto mine single unit WM_0
The bitcoin ‘mine’ uncovered during industrial unit raid in UK.

“We’ve seized the equipment and will be looking into permanently seizing it under the Proceeds of Crime Act,” Griffin said. “No one was at the unit at the time of the warrant and no arrests have been made – but we’ll be making enquiries with the unit’s owner.”

Cryptocurrency mining has long been criticized due to its heavy energy use and environmental impact. Various research, including a study from Cambridge University, has shown that bitcoin mining around the world uses more energy each year than some entire nations.

“My understanding is that mining for cryptocurrency is not itself illegal but clearly extracting electricity from the mains supply to power it is,” Griffin said.

Western Power, the electricity distribution operator for the Midlands, revealed that thousands of pounds worth of energy had been stolen to power the mine, bypassing the normal electric supply.

More and more governing bodies have raised concerns about the massive energy consumption needed to mine cryptocurrencies.

On May 26, Iran has banned cryptocurrency mining over the summer ahead of an anticipated surge in electricity demand.

China’s Inner Mongolia Autonomous Region on May 19 doubled down on its crypto-mining ban by setting up a hotline for the general public to report suspected activity.

In New York, a bill introduced in the State Senate is seeking to halt bitcoin mining for three years until the state has assessed its impact on the environment.

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Elon Musk says bitcoin can shake off its bad climate reputation if top miners prove they’re using green energy

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Tesla CEO, Elon Musk.

  • Elon Musk said crypto miners should post audits of the renewables they use to erase concerns over bitcoin’s energy use.
  • He was responding to Ark Invest’s research director who says bitcoin mining encourages green energy use.
  • Bitcoin fell sharply to near $30,000 earlier this week after Tesla suspended bitcoin payments.
  • See more stories on Insider’s business page.

Elon Musk said on Thursday top bitcoin miners should post audited data of the renewable energy they possibly use in order to ease concerns over the digital asset’s impact on the environment.

The billionaire was responding to a tweet from Ark Invest’s director of research, Brett Winton, about bitcoin mining encouraging the adoption of renewables. The investment firm has argued bitcoin mining presents an opportunity to move away from fossil fuel consumption towards greener technology.

“I agree that this can be done over time, but recent extreme energy usage growth could not possibly have been done so fast with renewables,” Musk said in a tweet. “This question is easily resolved if the top 10 hashing orgs just post audited numbers of renewable energy vs not.”

Screenshot 2021 05 21 at 08.24.05

Read More: 7 crypto heavyweights told us what’s behind the sudden sell-off that erased over $400 billion from the market in just 24 hours – and whether now is the time to ‘buy the dip’

He went on to say energy used through bitcoin mining is beginning to exceed that of medium-sized countries. “Almost impossible for small hashers to succeed without those massive economies of scale,” he added.

Bitcoin uses around 121.36 terawatt-hours (TWh) per year, according to Cambridge University research. For comparison, banking systems consume 263. 72 TWh, while gold mining takes up around 240.61 TWh. That shows the other two industries consume twice the energy of bitcoin mining.

Musk replied to another Twitter user who asked about the ideal consumption used in crypto mining, saying that even the less energy-intensive dogecoin had some room for improvement and that an ideal ratio would be 0.1 kWh “calculated as total energy used by system divided by max transaction rate.”

Screenshot 2021 05 21 at 08.37.45

Bitcoin recovered slightly to move back above $40,000, but it was last trading 2% lower around $39,650 on Friday. The coin’s value fell sharply to just above $30,000 on Wednesday after Tesla suspended bitcoin payments, and China announced that digital tokens cannot be used as a form of payment.

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Bitcoin must move away from its core proof-of-work technology to remain a dominant cryptocurrency, Ripple’s co-founder says

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Ripple co-founder, Chris Larsen.

  • Ripple’s cofounder thinks bitcoin developers should be concerned about its proof-of-work technology.
  • He suggested shifting to a more carbon-neutral method like proof-of-stake or federated consensus.
  • “Such a change is critically important for bitcoin to remain the world’s dominant cryptocurrency.”
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The conversation around bitcoin’s environmental threat seems to be escalating as more people call out its impact on the climate.

Chris Larsen, Ripple’s co-founder, has suggested bitcoin should surrender its core proof-of-work (PoW) technology that is used in the mining process. He said it should instead use other methods such as proof-of-stake (PoS), federated consensus, or another technology that is yet to be developed.

PoW is an algorithm in the blockchain technology used to confirm bitcoin transactions and produce new blocks on the chain. It is an energy-intensive process, and even a few transactions on the network can have as much of a carbon footprint as driving a gas-powered sedan for 1,000 kilometers.

Bitcoin running on the PoW algorithm has led it to consume an average of 113.8 terawatts per hour, roughly equivalent to energy consumed by 12 million US homes, and release an estimated 63 million tons of CO2 annually, Larsen said in a blog post this week.

The PoS network, that Ethereum 2.0 runs on, is more energy-efficient as it uses less computing power to secure the blockchain. Larsen thinks Binance Coin and Ethereum, which both operate on PoS, should be commended for their efforts on sustainability.

“I know this is a bold proposal, but it is worth a serious discussion given what the world looks like today (in comparison to when Bitcoin was launched in 2009),” Larsen said. “While there are passionate debates about PoW versus other validation methods, we now have almost a decade of data to review.”

Ripple’s XRP has been using federated consensus, which allows multiple entities to take charge of the network, for nine years. Larsen said that is indicative of a carbon-neutral network, equivalent to the energy consumption of only 50 US homes per year.

“Today, non-PoW-based coins (including Ethereum’s anticipated switch) make up 43% of all cryptocurrencies by market cap, and the majority of new cryptocurrencies introduced today choose to eschew PoW. It’s clear which way the trend is moving.”

“I would argue that such a change is critically important for Bitcoin to remain the world’s dominant cryptocurrency.”

Larsen warned that while bitcoin gains institutional and retail prominence, many of its advocates are turning a blind eye or attempt to greenwash its problem.

He also said Tesla’s $1.5 billion investment in bitcoin goes against its purpose of being an electric-vehicle maker. The purchase wiped out the automaker’s entire annual C02 savings, he said.

“As companies begin to understand this troubling connection, they would rightfully have concerns investing. Bitcoin advocates should see this as a significant threat.”

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Bitcoin’s energy consumption has jumped 80% since the beginning of 2020, according to a study from Cambridge

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The bitcoin price broke past the vaunted $50,000 mark for the first time on Tuesday

  • Bitcoin now uses 80% more energy than it did at the beginning of 2020.
  • Bitcoin uses 128 terawatt-hours annually, according to estimates from Cambridge.
  • The cryptocurrency is responsible for 0.59% of total worldwide energy consumption.
  • See more stories on Insider’s business page.

Bitcoin’s energy consumption has jumped 80% since the beginning of 2020 amid a meteoric rise for the digital currency.

According to Cambridge’s Centre for Alternative Finance, the cryptocurrency’s estimated annualized electricity consumption at the beginning of 2020 was 71.07 terawatt-hours. On March 11 of this year, that figure hit 128 terawatt-hours.

For reference, in all of 2019, Australia’s main electric grid used only 192 terawatt-hours. And the entire country of Argentina uses just 125 terawatt-hours annually.

Bitcoin now represents 0.59% of total worldwide energy consumption, according to Cambridge, and if you were to rank every country in terms of their total energy consumption including bitcoin, the digital asset would be the 29th largest consumer of power on the planet.

Bitcoin’s excessive energy use and climate change impact have been under scrutiny from all sides lately. Experts have repeatedly warned about the “staggering” amount of energy required to mine the digital currency.

Even Bill Gates has critiqued bitcoin for its environmental impact.

“Bitcoin uses more electricity per transaction than any other method known to mankind,” Gates said in a Clubhouse interview with New York Times reporter and CNBC co-anchor Andrew Ross. “It’s not a great climate thing.”

On the other hand, some experts say bitcoin’s energy use isn’t an issue as long as the energy comes from green sources, and it appears there has been a transition to using more green energy for digital currencies.

In September of last year the 3rd Global Cryptoasset Benchmarking Study, also from the University of Cambridge, showed 39% of the energy consumed by cryptocurrencies comes from renewable energy sources.

That’s a significant improvement from the 2nd Global Cryptoasset Benchmarking Study, which revealed that just 28% of the total energy consumed by crypto mining came from renewable sources.

Still, many experts contend cryptocurrencies have a long way to go if they want to silence critics of the coin’s climate change effects.

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Bitcoin’s energy use is ‘staggering’ and a worry for big investors, Kleinwort investment chief says

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Bitcoin mining uses vast amounts of electricity.

  • Bitcoin uses a “staggering” amount of energy each year, the chief investment officer of Societe Generale’s UK private bank said.
  • Fahad Kamal said it means bitcoin clashes with the new focus on environmental investing.
  • Yet advocates say that bitcoin mining can be powered by renewable energy.
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The energy use of bitcoin is a key factor that makes the cryptocurrency unattractive to institutional investors, the chief investment officer of Société Générale’s UK private bank has said.

“We are very alarmed, I’m sure as others are, by the environmental aspects of bitcoin,” Fahad Kamal, the investment boss at SocGen’s Kleinwort Hambros bank, told Insider. He said the energy it used was “staggering.”

Estimates from the University of Cambridge suggest that bitcoin uses more electricity each year than Argentina and Ukraine, due to the energy-intensive mining process.

As the price of bitcoin has soared in recent months, a number of investors have raised questions over bitcoin’s energy consumption. Yet others argue that bitcoin increasingly uses renewable energy – and will do so more in the future.

Bill Gates told CNBC’s Andrew Sorkin in a live-streamed Clubhouse session last week that the currency “uses more electricity per transaction than any other method known to mankind.”

Kamal said bitcoin’s energy use means it clashes with environmental, social and governance investing, which is becoming increasingly important in the financial world.

“If you think about various trends that are occurring in the market, right now, bitcoin is one but ESG is a much bigger one.”

The issue of bitcoin’s energy use has come to the fore in recent weeks, after Elon Musk’s electric car company Tesla announced it had bought $1.5 billion of the currency in January.

Bitcoin is “mined” when computers are hooked up to the cryptocurrency’s network to verify transactions. As a reward for this work, which involves solving puzzles, miners can sometimes receive small amounts of bitcoin.

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Some miners have hooked up whole warehouses of computers to try to get more bitcoin, using vast amounts of electricity.

Yet Matt Blom, head of trading at Nasdaq-listed crypto exchange group Diginex, said fears about bitcoin’s environmental impact were overblown, because in the future almost all mining could be done through renewable energy.

“As time goes by I think that is the way things are going to be,” he told Insider.

A report from Cambridge University in September 2020 estimated that 39% of proof-of-work mining is powered by renewable energy, primarily hydroelectric. And it said more than 70% of miners used renewables as part of their energy mix.

Kamal said: “You can imagine that bitcoin gets environmentally friendly too and is only mined using solar power, but we’re not there yet.

“As of right now, it’s a huge consumption of electricity used to mine it. And that electricity is produced in very dirty ways.

“And for us, that is a big factor,” he said. “The fact that bitcoin is dirty, relatively speaking, is a pretty big issue.”

However, Kamal said Kleinwort Hambros – which is part of SocGen’s €119 billion ($145 billion) private banking network – does not have a “black and white view” of cryptocurrencies.

“There’s obviously some really positive aspects to it, and some not.” He said many of bitcoin’s problems, such as high volatility, would become less serious if more people adopted the cryptocurrency.

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