Zero-Carbon Footprint Mining New Growth Area for Investors

Bitcoin as a climate change accelerant has become a popular meme over the last year, with countless articles written about its energy-hungry nature of mining derailing goals. While some see a crisis, others see an opportunity to use North America’s abundance of hydroelectric power — some of it orphaned in abandoned industry towns — as a way to match hashrates with cheap, green energy. 

As more of the world’s hashing power moves to North America investors have taken interest in harnessing the continent’s hydroelectric grid as a source of energy for bitcoin mining. The continent is also home to plenty of orphaned power, products of economic shifts in the mature economies of the United States and Canada. People are migratory, boomtowns come and go but functional grids last for more than a lifetime. 

One example of a company capitalizing on the demand for carbon-friendly bitcoin is Gryphon Digital Mining, which recently closed a $14 million Series A round, which institutional investors bought nearly a third of. 

Gryphon boasts a “blue-chip” board that has poached talent from FANG as well as Disney and NASDAQ.

Not just green-washing

The company is sourcing power from upstate New York’s hydro grid. CEO Rob Chang told Blockworks that the company is likely in the top quartile globally for cheap electrical costs giving it a competitive edge for mining.

“We can provide a 100% carbon-free renewable energy source that can still competitively mine bitcoin,” he said. “We are 100% ESG-committed as opposed to one that happens to be in the right place and right time.”

Chang noted that there are bitcoin mining companies that have said they currently use green energy but haven’t necessarily committed to being that full time in the future, which implies if a natural gas opportunity shows up they may still take that. 

“We’ve decided that we will not even consider those sources,” Chang said, but noting the company is open to the “full gamut” of green power generation including solar, wind, geothermal and potentially nuclear. 

“We aren’t greenwashing,” added Brittany Kaiser, one of the company’s board members. “We aren’t using dirty power and then purchasing carbon credits or offsets in order to make up for what we’ve done. We’re going 100% clean from the beginning.”

Kaiser, a former Cambridge Analytica employee, and one of the subjects of the Netflix documentary The Great Hack, says her primary role is working with regulators and politicians to help them understand that the industry isn’t a threat to climate accords or carbon target policy.  

A number of states and counties with the US are looking at passing bills or other laws that encourage mining, Kaiser said, highlighting that some rural areas are pushing for tax incentives for mining to utilize their stranded power.

“We’re going to see a lot more hashing power come to the US because of it,” she said. 

From ghost town to bitcoin boom town

Stranded power isn’t just a concern in the US. It’s a phenomenon that’s equally present in Canada too. There are plenty of late twentieth century boom towns that dot the country’s landscape; once thriving communities based around resource extraction come and go as the economy shifts. 

Ocean Falls, British Columbia, is one example. Nestled on the northern coast of Canada’s pacific province, the village was once a company town centered around a mill owned by American pulp and paper conglomerate Crown Zellerbach.

Industry has been gone for decades, but Ocean Falls’ hydroelectric dam keeps running with most of the 14 megawatts it generates going to waste. 

“I read that the pulp mill had shut down in the 1980s, but the power plant to service the pulp mill was still there,” Ocean Falls CEO Kevin Day told Blockworks. “This is isolated power… maybe there’s an opportunity to set up a mining operation?”

After a rocky start in 2017 thanks to the ICO crash, the project kicked off in earnest in 2018 with hundreds of Bitmain Antminers arriving by the truckload and dozens of contractors descending on the village to convert an old paper mill to a mining facility. The construction of the facility was a minor boom for the town with every available hotel room being booked to house workers, and the only pub full after the working day was done. 

The facility is now in full operation, with its miners cooled by immersion cooling — placed in a non-conductive liquid which is then cooled by a heat exchange from the ocean. There’s not really a need for extensive energy-sucking air conditioning, Ocean Falls’ naturally chilly temperature does that naturally. 

Bitcoin’s record-breaking bull market means the facility is profitable and its executive team has sights on expanding operations to other towns and villages with similar predicaments. 

“We’ve become somewhat of an expert at identifying locations, given that Kevin has been doing this since 2015,” said COO Oded Orgil, a veteran of Canada’s Bay Street. “We’ve got visions of helping reinvigorate towns through some of the spinoffs that can come from a mining operation.”

The revolution has not yet been televised

Orgil says he’s a proud capitalist, wanting, like any other businessman, for his company to do well but he also wants to do good. Ocean Falls will never be a 5,000 person town like it was in its heyday, but Orgil is excited about seeing the town reinvigorated thanks to the commercial activity around servicing their growing operations.

Gryphon and Ocean Falls Blockchain are two of the many mining projects powered by renewable energy. As more institutional investors flock to bitcoin mining, the need to hit ESG targets will mean that more green dollars are deployed to similar projects.

Even though projects like this are coming online, and the Cambridge Center for Alternative Finance estimates that “bitcoin’s environmental footprint currently remains marginal at best” the digital asset still struggles with a reputational problem and plenty of scare headlines playing up its carbon footprint and energy consumption. 

But people like Kaiser are undeterred about allegations like the “dirty world of planet-heating NFTs.” 

“It’s really great for us to be entering the industry at a time where there’s massive FUD. Most people outside of the industry don’t understand how these technologies work so they are seeing headlines like the power draw of the bitcoin network equaling the power of pick-your-favorite country,” Kaiser said.

“They are just seeing us as a threat to the environment as opposed to the revolution in not just financial services, but the revolution in ownership and accessible capital at all levels.”