This article is a writeup of the first episode of CRYPTOLAND, Motherboard’s documentary series about how cryptocurrency is affecting culture, politics, the environment, and our shared future. Watch it on Motherboard’s YouTube
At the border of Texas and Louisiana, an oil rig sits on a grassless patch, tucked between lush forest. In oil-heavy Texas, where regulations on the industry are notably lax, rigs like this one can often be found flaring—burning off surplus natural gas that’s extracted alongside oil stores. Shooting flames into the sky, those blazes are usually burning methane, a greenhouse gas, and a cocktail of carcinogens like benzene, toluene, ethylbenzene, and xylene, for starters.
At this particular oil rig, though, you won’t find any flares. That’s because the stranded natural gas it produces isn’t being burned off at all. It’s being used to generate energy to power a Bitcoin mine.
Motherboard visited Giga Energy Solutions in east Texas for the latest episode of CRYPTOLAND, an eight-part documentary series on how cryptocurrency is affecting our world.
Mines like Giga’s are at the center of heated debate over cryptocurrency’s environmental impact. To critics, turning natural gas into bitcoins is emblematic of everything wrong with the growing industry. To Giga Energy co-founders Brent Whitehead and Matt Lohstroh, though, they’re undertaking an environmental service—generating virtual currency using harmful gas that would otherwise be sent into the atmosphere. Instead of combusting surplus natural gas from an oil rig, they’re diverting it into a generator, which converts it into electricity to power computers that mine for bitcoin. This process still comes with greenhouse gas emissions, but reports from similar operations claim they’re lower than they’d otherwise be if the gas was flared or simply released into the air.
“I think it’s a perfect alignment,” Whitehead said of the relationship between cryptocurrency and oil and gas operations.
“This gas is unable to be sold to a pipeline, so otherwise they’re either venting or flaring the gas. If you are venting the gas you’re just literally venting the methane into the atmosphere,” he said. “It’s really bad. We can come in and we can add the benefit of lowering emissions, while also adding revenue to the community. That’s a win-win for everybody.”
Texas legislators like Republican senator Ted Cruz have since sided publicly with miners like Whitehead. After a ban on mining in China led to an exodus of mining firms to the U.S., many set up shop in Texas due to its abundant energy, which includes fossil fuels but also a booming wind power industry. At the Texas Blockchain Summit in October, 2021, Cruz lauded Bitcoin miners’ potential to spur an energy transition and strengthen the state’s widely-criticized grid by going offline during times of strain.
“I think cryptocurrency is a net plus for the environment, and in fact, a big net plus for the environment,” he told Motherboard’s Alice Hines at the convention. “Being able to unlock a lot of renewables is really important for the environment. I think being able to take stranded natural gas and put it to productive use is a big positive for the environment.”
A number of crypto mines have also emerged in the last ten years that rely on renewable energy to generate coins—a process that takes place through brute force number-guessing on specialized computers called Application-Specific Integrated Circuits (ASICs). In places like British Columbia and San Jose, Costa Rica, that’s helped keep dying hydropower plants open and incentivized the buildout of affordable clean energy. (One Coinshares report from 2019 estimated that some 74 per cent of Bitcoin are generated using renewables.)
But Bitcoin has no allegiance to any particular source of energy. It just needs to be cheap. In many places, Bitcoin mining often relies on fossil fuels either directly or by pulling from the grid, along with whatever renewables are contributing to the regional power mix. It’s also led to the resuscitation and expansion of old fossil fuel-fired power plants that would otherwise have been on their last legs.
At facilities like Riot Whinstone, the largest bitcoin mine in the country, located in Rockdale, Texas, those energy volumes are gigantic. The 100-acre facility is home to between 95 and 100,000 ASICs, CEO Chad Harris told Hines. The facility only plans to scale up—here, the aim isn’t to reduce power use, but to multiply it with the aim of mining more coins.
Alex De Vries, a data scientist at the Netherlands’ central bank and founder of Bitcoin energy tracking project Digiconomist who spoke with Motherboard reporter Audrey Carleton as well as Hines and CRYPTOLAND host Krishna Andavolu, says Bitcoin’s reliance on the fossil fuel sector is making vast and irreversible contributions to climate change, however. It’s an argument that has found significant traction among critics of Bitcoin and all proof-of-work cryptocurrencies, which use the cost of real-world energy to verify transactions and secure a digital ledger by making it far too expensive for malicious actors to alter. While Bitcoiners see the energy expenditure of the system as a whole as being necessary for its security, critics look at all those machines using up energy without minting a coin and see waste.
“This network, which consists of roughly 2.9-million devices all around the world consumes as much electrical energy as a country like Argentina in total,” De Vries said. “It’s more than half a percent of our global electricity consumption. It’s the world’s most environmentally expensive game of ‘guess the number.’”
De Vries puts more faith in new models of cryptocurrency mining, like proof-of-stake, which affords the ability to generate new coins to miners based on the number of coins they already own, rather than forcing all miners to duke it out, as in proof-of-work mining, which generates more energy than is truly needed for mining. However, critics see proof-of-stake as being essentially plutocratic, while proof-of-work is more decentralized and open.
Ethereum, the world’s second-largest cryptocurrency, anticipates that switching its own transaction validation mechanism to proof-of-stake would eliminate 99.95 percent of its energy use.
Even so, de Vries remains skeptical of the role that Bitcoin plays in society—and whether its existence, given its environmental drawbacks, is necessary at all.
“Most people are putting their money in Bitcoin simply because they expect the value of Bitcoin to go up,” he said. “If that’s the situation, where there is just not much possible practical use, but there is a very large energy impact, then my verdict would be that’s absolutely not worth it.”