- The Bitcoin industry has railed against a letter signed by nearly two dozen members of Congress requesting the EPA closely regulate crypto mining
- Crypto proponents cite flaws in critics’ data and a misunderstanding of the industry’s future energy demands
Bitcoin industry advocates responded this week to a letter submitted to the Environmental Protection Agency by Rep. Jared Huffman, D-Calif., and signed by a total of 23 Democratic members of Congress.
The extensive rebuttal sent by the Bitcoin Mining Council, a group representing bitcoin miners, is co-signed by nearly 50 industry figures, including Castle Island Ventures’ Nic Carter — who contributed much of the essay — as well as Block’s Jack Dorsey and Galaxy Digital’s Mike Novogratz.
“I had wanted to write a response, there were a whole bunch of key stakeholders who thought a response was warranted based on how misleading the Huffman letter was and how critical it could be,” Carter told Blockworks, noting the EPA could make it more difficult for crypto mining companies to acquire their own energy-production sources.
“If you have 23 members of Congress signed onto this thing, it could get messy.”
Carter claimed the original Huffman letter held several inaccuracies. For one, he noted Huffman highlighted the EPA’s denial of a Greenidge application to keep open its coal ash ponds — large dirt ditches used to dispose of harmful coal byproducts that are not biodegradable.
But Greenidge is now a gas-only operation that mines bitcoin. The firm uses those ponds to continue mitigating waste associated with its past life as a coal plant. So celebrating the EPA’s move against Greenidge’s coal ash ponds isn’t at all relevant to crypto mining, Carter said.
Another sticking point was Huffman’s claim that “a single Bitcoin transaction could power the average US household for a month.” This calculation relies on taking average transaction counts and simply dividing it by the estimated energy usage of the network.
The Bitcoin Mining Council’s response labeled the per-transaction energy cost analysis as a “deeply flawed way to reason about Bitcoin, since projecting future energy growth is not a function of transaction count, but instead of value of Bitcoin issuance (which is a function of price and supply growth), together with the fees users are willing to pay to transact.”
The crux of Carter’s response sought to separate data centers (read: crypto mining farms) from their energy sources. To Carter, crypto miners are just another flavor of data center such as those run by Microsoft and Amazon: large warehouses packed with servers in support of our modern internet infrastructure.
“It’s not really the EPA’s mandate to say what you’re doing with this data center is environmentally damaging, because it’s not the data center activity causing damage, it’s the generation of power and that’s already regulated,” Carter said.
He noted that some vertically-integrated crypto mining operations — those that control the data center and its energy source — are already sanctioned by the EPA and some state regulators. Just 2% of Bitcoin’s hashrate comes from such mining operations, according to the council’s response to the EPA.
“It’s a myth to say that the EPA is not aware of these things. They’re very much aware of them, and in some cases they’re supported,” Carter added. However, he did note that noise pollution caused by bitcoin miners is unnecessary, and that he’d actively discourage industry participants from setting up in residential areas.
Bitcoin runs on a global secondary market for ASICs
Bitcoin is mined using a proof-of-work (PoW) algorithm, which is often criticized for its energy usage and electronic waste — it has been suggested that mining rigs last on average just 1.29 years before being discarded.
Carter questioned whether environmentalists are interested in the truth or whether they’re simply using the concept as a cudgel to attack Bitcoin.
Veteran mining consultant and proofofwork.energy founder Alejandro de la Torre agreed. Having spent the past five years assisting and building mining operations around the world, he expressed disbelief that any industry participant would simply discard miners after less than two years of use.
He explained that in his experience, once a machine has some sort of error — say a board burns or a part is faulty — miners almost always fix it rather than pay for a brand new rig. In fact, the entire crypto mining industry relies heavily on a lively secondary market for used ASICs, computers specifically designed to mine cryptocurrency.
De la Torre described a global market for ASICs that allowed smaller mining outfits to acquire used rigs from more established mining powerhouses. Richer crypto mining companies know they can eventually sell their top-of-the-line mining rigs as more efficient tech develops.
This creates a symbiotic relationship between small and large operations that benefits both sides: Smaller ones can buy cheaper hardware from bigger ones looking to offset costs associated with state-of-the-art machines. Every mining operation in the ecosystem makes use of this secondary market, De la Torre said.
“Right now, there’s miners all over who are paying next to nothing for their electricity, sometimes even zero,” De la Torre told Blockworks. “Those in Venezuela, or off-grid miners who own their own hydroplants and those that use flared gas.
“They don’t mind buying a machine that’s four years old because they have free electricity — so they run their machines until they die.”
Once ASICs finally fail — often after multiple repairs and numerous owners — they can be repurposed. Much of the circuitry and aluminum can be sold for scrap and otherwise recycled. De la Torre estimated the average lifespan of an ASIC is closer to six years, far longer than the 1.29 years often cited by environmentalists.
“That’s why the economics of bitcoin mining work so well,” De la Torre said. “You buy a machine for, as an example, $10,000. You run it for two years, then you sell it for $6,000. You’ve only lost $4,000 on the machine, while you’ve generated lots of bitcoin with it.”