- Bitcoin mining may be shifting away from fossil fuels toward renewable energy.
- Bitcoin mining company Sazmining is taking advantage of low-cost clean energy in Paraguay.
- Sazmining, a ‘hosted mining’ company, says it differs from cloud mining companies by providing data so clients can audit their performance for accuracy.
Bitcoin miners have faced harsh criticism in recent years over the huge amount of energy they consume.
Critics say miners gorge themselves on low-cost, environmentally unfriendly power generated by burning fossil fuels, and put unnecessary strain on national power grids.
Up-to-date data on Bitcoin mining is sparse.
The Cambridge Centre for Alternative Finance, a research institute that typically maintains comprehensive Bitcoin mining data, has become a trusted source for this data in recent years.
In its latest calculation, the Institute estimated that Bitcoin mining alone accounted for annualised greenhouse gas emissions equivalent to 73.8 million tonnes of carbon dioxide in March 2021 — the same as the entire carbon output of Austria. Only 37% was green, according to its data.
But the landscape seems to be shifting. Price increases for environmentally unfriendly power coupled with access to surplus renewable energy may have encouraged gas-guzzling Bitcoin miners to clean up their act.
More than 50% of Bitcoin mining now green
“Bitcoin miners are motivated to find the cheapest power available, and, for a variety of reasons, that’s carbon-free power,” Kent Halliburton, president and COO of US-based Bitcoin mining company Sazmining, told DL News.
Sazmining announced Thursday that it is building a new mining facility at the Itaipu Dam in Paraguay, which is set to start operating on September 15.
Rather than putting a strain on Paraguay’s national power grid, Sazmining said it will utilise excess hydroelectric power generated at the dam to fuel 1,600 rigs which investors can purchase to mine Bitcoin.
“Clean energy often is variable or located in areas where it’s wasted or discarded. Bitcoin mining is location agnostic and can utilise this energy to profitably mine,” Halliburton said.
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And Sazmining may not be alone in its preference for clean energy Bitcoin mining.
According to Daniel Batten, an ESG analyst and co-founder of CH4 Capital, a fund that specialises in methane mitigation technologies, over 50% of Bitcoin mining now uses clean energy, compared to around 35% in 2021.
Bitcoin miners use mining rigs, which are powerful computers that solve the complex equations needed to validate transactions on the network.
When a rig successfully solves an equation, it receives a reward — currently 6.25 Bitcoin worth around $182,000 — for every block mined.
But mining rigs consume a lot of electricity and must be kept running 24/7 to maximise the chance of solving an equation.
Additionally, the more rigs compete to solve equations, the more difficult they become to solve. This dynamic is known as Bitcoin mining difficulty.
The difficulty currently stands at over 52 trillion, meaning that rigs are expected on average to process 52 million computations before finding the right one to solve the current equation and mine the next block.
Bitcoin mining has been a historically tumultuous industry.
During the crypto bull market of 2021, many companies took advantage of the high mining profitability to set up facilities across the globe. But when the Bitcoin price plummeted in 2022, many once-profitable businesses went bust.
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Halliburton said Sazmining’s new operation would still be profitable even if the Bitcoin price dropped by 50%.
He also said such a situation was “highly unlikely given the announcements of BlackRock and other large institutions signalling their approval of Bitcoin to institutional investors.”
At a cost of 4.7 cents per kilowatt hour, the Itaipu dam facility undercuts costs in popular Bitcoin mining meccas such as Kazakhstan, where, following a sharp hike in the country’s prices in January, electricity now costs around 6.5 cents per kilowatt hour. Bitcoin miners typically consider three to four cents per kilowatt hour competitive.
Many Chinese Bitcoin miners set up shop in Kazakhstan after the Chinese government cracked down on crypto mining in 2021.
But while Kazakhstan initially offered miners low electricity prices of less than a cent per kilowatt hour, the electricity was mainly produced in environmentally unfriendly coal fired power plants.
Cloud mining scams
Bitcoin “cloud mining” scams have also previously plagued the industry. Cloud mining refers to companies setting up mining rigs and then selling their use to investors, advertising them as a novel way to invest in Bitcoin.
However, many cloud mining operators set up companies, took investor money, then simply disappeared, while others charged large service fees and didn’t provide investors details on how much Bitcoin their rigs were generating.
Sazmining said it differs from cloud mining by providing rig serial numbers, data from mining pools, and verifiable transaction IDs so clients can audit their performance for accuracy.
When asked why Sazmining doesn’t use its rigs to mine Bitcoin for itself, Halliburton said he believes there’s “more long term value to be created in becoming the primary onboarding tool for Bitcoin acquisition than in mining directly.”
“In essence, our business model is a low-time preference bet on what will generate the most long term value for customers, employees, and investors.”
The more efficient Bitmain S19XP rigs Sazmining offers should generate approximately $6.80 of profit a day at the current mining difficulty and Bitcoin price, as per DL News calculations. The less efficient Whatsminer M30S++ should yield around $4.54.
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Halliburton said the rigs Sazmining sells in the Paraguay facility are “fully insured” and that it has an agreement with local operators for fixed rate power for the next three years with 95% uptime.
However, if a new wave of more powerful Bitcoin mining rigs enter the network en masse, Sazmining’s machines could be hard pressed to generate a profit, even at bargain basement electricity prices.
And with rigs costing thousands of dollars and a return on investment of over two years at current prices, investors may still be concerned about the viability of buying Sazmining’s operation, even if the company’s green credentials check out.
Do you have a tip about Sazmining, Bitcoin mining or another story? Don’t hesitate to reach out to me at tim@dlnews.com.
