Bitcoin and other cryptocurrencies have been making news lately for their wild price swings and their disruptive economic impacts. But one aspect of these cryptocurrencies has recently come to light: Their energy-intensive mining process.
Mining Bitcoin and other cryptocurrencies, such as Ethereum and Dogecoin, takes a lot of energy, and solar power has become a pivotal energy source for cryptocurrency mining. So how does solar power Bitcoin mining?
WHAT IS BITCOIN?
Bitcoin is a digital cryptocurrency first created in 2009. Because it’s a cryptocurrency, Bitcoin does not exist as a physical form of currency. Bitcoin balances and transactions are tracked through a blockchain, which is a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.
Bitcoins are not issued or backed by any banks or governments, and the cryptocurrency is not legal tender. Instead, Bitcoins are generated through a process called mining, which requires the solving of computational puzzles that help build the blockchain network. For helping solve these complex puzzles and building the blockchain network, Bitcoin miners are rewarded with several Bitcoins.
And while the price of Bitcoin is highly volatile, seeing a high of $63,000 per Bitcoin in April 2021 but swinging wildly month-by-month, the cryptocurrency is still very valuable and worth the computing power for many miners.
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BITCOIN MINING REQUIRES LOTS OF ENERGY
Solving the complex computational puzzles that create Bitcoins is a very energy intensive process. It requires computers or rigs setup with equipment such as computer chips and advanced processing units, like Graphic Processing Units (GPUs).
These computers solve the puzzles, and those computers that solve the puzzle fastest and most accurately are rewarded with Bitcoins. So, the faster and more efficient the computer, the more potential Bitcoins it can mine.
As you might imagine, this competition for Bitcoins pushes miners to invest in faster and faster computers and better processing power. This creates a huge demand for energy.
In fact, a Princeton University computer scientist calculated that Bitcoin mining accounts for nearly 1% of the world’s energy use, slightly more than the energy used by all of Ohio.
HOW SOLAR POWERS BITCOIN MINING
As described, Bitcoin mining is a very energy intensive process. According to The Cambridge Center for Alternative Finance, Bitcoin mining consumes a whopping 129 TWh per year, eclipsing the entire annual energy consumption of Norway.
The cost of paying the utility for this amount of energy is extraordinarily high, so many Bitcoin miners turn to solar energy to power their massive Bitcoin mining operations.
With solar, bitcoin miners can produce their own electricity to power their mining operations while greatly reducing their costs. This not only allows them to minimize the operating costs of mining, it also frees up capital they can then invest in a greater number of computers or more powerful mining equipment.
SOLAR + STORAGE OFFERS HUGE OPPORTUNITIES FOR BITCOIN MINERS
The addition of energy storage in the form of batteries can also greatly benefit Bitcoin mining operations. Because Bitcoin mining is a 24/7 operation, energy demand is constant. And every minute counts when competing for Bitcoins.
Unfortunately, solar is an intermittent source of power and does not produce energy well during cloudy weather or at night. And solar alone cannot power a Bitcoin mine during a power outage.
By adding batteries to a solar panel system, Bitcoin miners can store solar energy they orverproduce during the day and use that energy to power their mining operations at night (when energy is most expensive), in cloudy weather (when solar doesn’t produce well), or during a power outage (when solar panels cannot produce energy).
By having energy storage, Bitcoin miners can not only reduce their prices further by using stored energy during peak energy cost hours in the evening, they can also ensure their Bitcoin mines can keep operating on cheap power during cloudy days or during a power outage.
THE FUTURE OF BITCOIN AND SOLAR + STORAGE
Although Bitcoin and other cryptocurrencies have only been around for a decade or less, they have made a huge impact on traditional financial systems and the economy. But looking ahead, they could also bring about a transformation in the nation’s energy infrastructure as well.
As many Bitcoin mining operations move to install solar energy and batteries, the impacts on utility grids and energy balancing could be huge. That’s because Bitcoin mines could act as small power plants and battery storage facilities that could be used in conjunction with the broader energy grid.
When a utility company needs to boost energy output during high demand, it could call on Bitcoin mining facilities to pull from their solar production or battery reserves to meet that demand. In return for curtailing their mining operations, Bitcoin miners would be compensated for their energy and downtime.
The same thing is true in cases of emergency. During a power outage, solar production or energy storage from Bitcoin mines could be called upon to provide energy for emergency services, such as hospitals and other rescue facilities.
And because the rate paid by the utility is guaranteed, while the amount and value of Bitcoin being mined is not, providing energy to the grid could be a wise move in terms of profit.
COULD SOLAR HELP YOUR BITCOIN MINING?
As explained above, Bitcoin mining and the mining of other cryptocurrencies is a very energy-intensive process. These energy needs many times can be met by solar and battery storage. Plus, the savings from producing their own energy could be reinvested into greater mining potential.
To learn more about how solar energy and energy storage could power your Bitcoin mining operation, or if you would like to know if solar could power your home or business, contact Green Ridge Solar today.
We are Oregon’s local solar company, and we are dedicated to providing free solar analysis and answering all your solar energy questions. Contact us today!