Find out why the emerging cryptocurrency mining and energy industries are so intertwined and why they matter for ESG going forward.
In its most basic terms, what is Bitcoin?
Dusek: Cryptocurrency like Bitcoin is an alternative currency that offers anonymity while reducing transaction costs. It is decentralized and inflation resistant. It has the potential to end poverty all over the world. Politicians hate it and governments fear it.
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ligon: As stated in the Bitcoin whitepaper by anonymous creator Satoshi Nakamoto, Bitcoin is a decentralized, peer-to-peer version of electronic money that allows online payments to be sent directly from one party to another without going through a financial institution. Since Bitcoin’s launch in 2009, many other competing cryptocurrencies have been created, including Ethereum and a host of others, but Bitcoin remains the most widely adopted and is valued for its pseudonymous transaction capabilities and network security. . New bitcoins are “mined” with specialized computers that compete to guess a complex string of numbers. The winner is rewarded with a “block” of Bitcoin, and the process (called the proof-of-work consensus mechanism) is what creates the Bitcoin blockchain and validates other users’ transactions.
Do you think the relationship between oil and gas producers and crypto miners is here to stay? Is it sustainable in the long term?
Dusek: Right now it’s a great relationship, but we’re still in the honeymoon phase. As the margins narrow (for various reasons), we will see new variants evolve. Just as fracking has changed the way we produce energy; Bitcoin miners will be the key to the next generation of energy development.
ligon: I think bitcoin miners will have the longest relationships with off-grid power sources and smaller oil and gas producers, but we are already seeing large producers like ExxonMobil running pilot projects to test usage flared gas for Bitcoin mining.
Crypto miners sourcing natural gas from oil and gas producers that would otherwise be burned to power their power-hungry supercomputers and servers seems like a logical partnership with oil companies facing growing pressure from governments and agencies to reduce their greenhouse gas (GHG) emissions. How is ESG interwoven into this partnership and what role will it play for both parties in the future?
Dusek: At present, the consumer of 100% renewable energy does not exist. You may be paying for it, but it’s just as clean as your neighbor. Until the world uses 100% renewable energy, reducing GHG emissions is more of a board game. Producing or acquiring revolving credits is the fastest way to meet the standards. That being said, crypto miners have the potential to be the only exception to the rule.
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ligon: While cheap energy is the main driver for Bitcoin miners trying to partner with oil and gas producers, the ESG implications are why we see these same producers accepting them with open arms. There are many proofs of concept that describe the potential for carbon-neutral crypto mining, bitcoin mining reducing GHG emissions compared to flaring and venting, and other “greener” options compared to practices. current.