Late last week, New York’s Senate passed a moratorium impacting bitcoin mining in the state. It’s not a ban of proof-of-work mining per se, but instead a two-year freeze on starting up new bitcoin mining facilities that rely on carbon-based fuel.
That bill, having cleared two legislative bodies, will now have to be signed into law by Gov. Kathy Hochul. Whether it passes or not, mining at home or starting new industrial plants that use renewable sources of energy would still be allowed.
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Although the moratorium, limited as it is, will likely discourage bitcoin miners from setting up shop in the state, it could be seen as an opportunity. During the two-year freeze, active bitcoin miners and even new businesses looking to hang their shingle can proactively go green.
New York will also study the environmental impact of proof-of-work mining during the moratorium. The bill's sponsors said they are primarily concerned with the trend of bitcoin miners reopening decommissioned carbon-based power plants, like Greenidge Generation in Dresden, New York.
Bitcoin mining is not a black box. The open network provides a large amount of data related to its operations. We have a decent understanding of who is mining bitcoin, and how many people use it. (According to a recent Federal Reserve survey, about 6 million Americans used crypto for payments with about 60% having annual incomes lower than $50,000.)
It’s also highly adaptable to sudden changes – for instance, after China tried to totally curtail all crypto activities in the country, many miners simply packed up their ASICs and shifted to Kazakhstan and the United States (including New York).
Although the bitcoin mining industry has become highly corporatized, and those businesses may be resistant to finding alternative energy sources, speaking optimistically it’s possible for the network to go green.
To mine bitcoin you need specialized computer chips, the bitcoin software and an energy stream. That’s why we’ve seen operations spring up in far-flung places, like miners that capture otherwise wasted energy from flared gas in, say, Siberia.
Bitcoin miners in New York should take the first move to build out renewable infrastructure or increase demand for greener utilities in the state. It’s not an alien idea: Prominent bitcoin advocates, including Twitter co-founder Jack Dorsey, have argued that bitcoin mining could incentivize the build-out of wind and solar farms.
Indeed, it’s not out of the question that the Bitcoin network becomes an integral part of the global renewable industry. Mining facilities could bring in revenues for energy producers and also turn on or off depending on demand. (In Texas, for instance, miners have been responsive to grid load and have dialed down during times of peak demand.)
Bitcoin’s economic prospects are at least part of the reason why so many have opposed New York’s moratorium. Sen. Jeremy Cooney (D-Rochester) opposed the bill. The crypto miner Foundry is based in his district. (Disclosure: Foundry is owned by CoinDesk parent Digital Currency Group.)
Moreover, earlier this year, chair of the Senate Environmental Conservation Committee and the author of New York's Climate Leadership and Community Protection Act, Todd Kaminsky, which requires the state to get to net-zero electricity by 2040, spoke out against the bill. Likewise, the International Brotherhood of Electrical Workers (IBEW) also wrote a memorandum of opposition to an earlier draft last year.
Further, you can ban bitcoin to meet misguided environmental goals, but the activity will only shift elsewhere. Venture capitalist Nic Carter drew a comparison to the U.S. federal ban on gold
in the 20th century, which only caused a boost in production and the price of the asset. New Yorkers may not want a miner in their backyard, but if these facilities are drawing on renewables that’s clearly better than having ASICs shipped over to less sustainable regions.
True, the challenge is weighing the concerns of environmentalists like Kaminsky, politicians like Cooney and unions like the IBEW over other constituents. Some residents near Greenidge have raised concerns that the reactivated plant is warming Seneca Lake.
And then, even within the crypto industry, there are players who want to change Bitcoin at a protocol level – shifting from the energy-intensive proof-of-work algorithm to proof-of-stake. Although backed by some powerful groups, including Greenpeace, this plan is unworkable given that nobody controls Bitcoin and reaching consensus on changes to the network is hard to achieve.
Proof-of-work is energy-intensive, but it’s also precisely what gives bitcoin its value. That’s a complicated debate, but suffice it to say that although the Bitcoin network has been updated at the end of the day, whatever bitcoin is is what the community says. And so, bitcoin’s users demand proof-of-work.
But you don’t have to change the code if you can change the situation on the ground. Two years is a long time in the 13-year-old system’s history, and Bitcoin could reinvent itself. But first, it has to invest in going green because this issue is not going away.