I recently wrote about the potential role of NFTs in the energy industry. Recently, and in much the same vein, there’s been news recently of Bitcoin applications, especially Bitcoin mining, in the energy industry.
Bitcoin is tangentially related to NFTs. It uses the same sort of digital ledger to determine who owns what, and the Bitcoin ledger is built on a blockchain, meaning the records of transactions and ownership are decentralized. The Bitcoin blockchain is also incredibly resistant to non-authorized modifications. The cost of verifying that Bitcoin transactions are authorized is that nodes, more or less computers in the network, have to take part in every transaction. These nodes solve mathematical puzzles that verify that the transactions that took place are legitimate. To entice nodes to solve these puzzles, which all said is a fairly demanding task, the first node to solve a puzzle receives a small monetary gain as a reward. This process is also how new Bitcoins are minted.
If my explanation of Bitcoin leaves something to be desired, don’t worry, there are articles dedicated to explaining what Bitcoin is and does. For example, this Forbes article: What Is Bitcoin And How Does It Work? – Forbes Advisor
The demand for nodes to solve Bitcoin puzzles results in an equivalent demand for energy. Since being the first node to solve a puzzle results in some monetary gain, owning multiple nodes increases potential gains. This is called Bitcoin mining and it nets a huge energy cost. It’s why The New Yorker wrote that Bitcoin is bad for the environment: Why Bitcoin Is Bad for the Environment | The New Yorker
The silver lining is that there are plenty of sources of unmet energy supply that could be used to mine Bitcoin. One example is the discovery of natural gas when drilling for oil. Because natural gas needs further processing before it can be shipped out from a drilling site, it’s often seen as a byproduct of drilling operations and is burned off or flared for the same reason. By using this unmet supply of energy, Bitcoin mining could become more sustainable. It would be making the most of a less-than-ideal situation.
A few companies have begun exploring opportunities in natural gas bitcoin mining using the byproduct of oil drilling operations. Upstream Data out of Alberta, Canada, and Giga Energy out of Texas, USA, are two such companies. They bring mobile rigs that use natural gas to power Bitcoin mining operations. This means that the gas can be used without needing to be flared and wasted, and it enables Bitcoin mining without drawing from the rest of the power grid. It’s a win-win for both the companies involved and the planet. On the supply side of things, oil and gas operators like ConocoPhilips have recently begun selling their extra gas to Bitcoin miners.
The digital age continues to give organizations opportunities to meet supply where it exists. Through innovative collaboration, there’s no doubt that we can solve many of the issues that the energy sector faces today.