Times of turmoil are filled with opportunity – and Canada’s energy industry has right ingredients to pivot into the growing demand for cleaner crypto mining.
The last year has caused dramatic shifts in our lives – and our world economy. Catalyzed by the COVID-19 pandemic, global business has rushed to adopt blockchain technology, including cryptocurrencies like Bitcoin, at a rate and scale that would have been unimaginable just a few short years ago.
Trillions of investment dollars have poured into Bitcoin, Ethereum and developing products and services to support this emerging market. However, with the environmental cost of crypto mining entering the public consciousness, the market is in flux, and in need of solutions – ones that Canada could provide.
For me, Canada’s potential as a mining hub has been a long-standing interest. While working in clean technology, I was first introduced to mining four years ago in Calgary while trying to find the highest and best use for an abundant source of sustainably reformed waste gas, stranded across remote well sites.
Only one application made economic sense – cryptocurrency mining. It seemed to have all the right elements, and I worked with a group to develop a plan for a network of mobile micro-mining facilities that would turn otherwise unusable energy into digital value – and create a new revenue stream for Alberta’s struggling oil and gas industry.
A few other companies at the time had the same idea, but with limited mainstream acceptance and BTC prices stagnating around US $5K, the market timing was not ideal, to say the least. In 2021, however, the landscape looks very different. The world’s biggest financial services companies like Paypal, Mastercard and major banks are rushing to offer crypto payments services, and despite the recent crash in the price of BTC and other digital currencies, many proponents are still optimistic.
According to Twitter and Square CEO Jack Dorsey, who believes that Bitcoin could become the “native currency of the internet”, cryptocurrency could propel the world towards vasta cleaner future – despite the massive energy consumption of proof-of-work mining.
Requiring vast networks of computers competing to solve increasingly challenging mathematical puzzles, high energy usage is an intrinsic part of the security of cryptos like BTC and Ethereum. Currently, the Bitcoin blockchain consumes around 110 Terawatt Hours annually, the rough equivalent of the country of Norway – and needs an urgent focus on sustainability.
Together with Ark Invest, one of the most prominent BTC bulls, Dorsey co-authored a whitepaper with an ambitious title – “Bitcoin is the Key to an Abundant Clean Energy Future”. The paper describes a model where mining could be a powerful incentive for the development of clean energy projects and create new value out of difficult to store energy, as with solar.
Bitcoin’s biggest advocates know that changes need to happen – and with many thousands of NFTs being created on Ethereum, each the energy equivalent of a 500-mile car trip, other cryptos are under equal scrutiny. Much like the push for sustainability across all industries, this is in large part being driven by public and investor sentiment.
According to Shark Tank star Kevin O’Leary, the boom in crypto investment happened in spite its poor ESG profile. In an interview with Coindesk, he noted that less than 1% of institutions hold crypto, and proof-of-work’s environmental impact is a main factor. He is actively seeking to fund sustainable mining, with the conviction that investors will soon require that their BTC comes from provably green sources of energy.
“That is what institutions want, and when that dam gets released the amount of capital that will come into bitcoin… it’ll be the reason it goes to a hundred thousand, two hundred thousand,” he told Coindesk.
It’s not surprising that the crypto market has reached this point – at a time where the majority of global industries and governments are announcing net-zero plans, the high energy consumption and emissions of mining is untenable without dramatic and widespread moves to cleaner electricity.
While this creates a compelling case for blockchain currencies and assets that don’t rely on mining, with the vast investments made in BTC, ETH and their infrastructure by the conventional financial services industry, there is strong motivation to make this greening succeed. This is where Canada’s strong regulatory environment and innovative energy sector offers a rare opportunity.
Driven by a mixed political and environmental agenda, in late May China shook the crypto markets with the announcement that it was cracking down on its thriving mining industry. Powering more than 65% the global market, the country’s large networks of miners, by some estimates, get 40% of their energy from coal.
This shift in the balance of power in the crypto sector will likely create a boom for Russian mining operations, most of which are powered by equally dirty sources of energy. But with some ingenuity, Canada, with our high ESG standards and world-leading 67% renewably generated electricity, could be a top contender for fulfilling investor demand for cleaner crypto mining.
The key is greater integration with our energy industry, and distributed mining operations that leverage Canada’s green sources like hydroelectric, sustainable natural gas, hydrogen and solar. Many Canadian miners, including Bitfarms, Hut 8 and Argo, already use at least some clean energy – but to move the overall impact of currency like BTC, this needs to scale massively.
Success will take the unification of these two industries – blockchain and energy – through greater collaboration on new projects and technologies, and a coordinated effort to pool their collective hashing power towards green Bitcoin products for an eager global market.
Our critical differentiator would be the creation of branded, certified low-impact BTC financial funds – an opportunity to attract new investment and build a strong, job-creating crypto economy. Canada is also well-positioned to be a leader in inclusion, with the many talented women in our blockchain industry, an essential requirement for many investors.
We are at a challenging inflection point where is no dismissing the growing concerns over proof-of-work’s environmental impact – but rather than abandoning cryptocurrencies like Bitcoin, a powerful wave of investor demand is moving towards cleaner mining. Opportunity is taking shape from the volatile crypto market’s turmoil.
By bringing our country’s strong blockchain ecosystem together with our energy producers, we can build sustainable mining operations embedded across our rapidly accelerating clean energy production, and Canada can be pivotal force in the greening of the global cryptocurrency sector.
“The bitcoin and energy markets are converging and we believe the energy asset owners of today will likely become the miners of tomorrow.”
-Square, “Bitcoin is Key to an Abundant, Clean Energy Future” (2021)
About Alexis Pappas
Alexis Pappas is a technology strategist and writer with diverse experience in blockchain and energy innovation. Committed to values of inclusion and collaboration, she is the Executive Director of the Canadian Blockchain Association for Women and a Director of the Canadian Blockchain Consortium.