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Bitcoin Energy Consumption Could Drive Innovation, Says Research Associate

Bitcoin (BTC)–By now, most within and outside of the industry of cryptocurrency are familiar with the narrative surrounding Bitcoin energy usage. The argument goes that as Bitcoin becomes a more popular choice in terms of digital currency, the increase of miners looking to capitalize on transaction fees and reward payouts will increase, thereby also raising the hashing difficulty of the cryptocurrency.

The end result will be more rigs competing for the ultimate prize of the mined blocks–and also consuming a proportionally higher amount of energy. The debate has grown so large that environmentalists and other conservation oriented researchers and politicians have weighed in on cryptocurrency as “evil,” saying it promotes a type of waste that is not necessary in today’s digital age. Others have pointed to the overwhelming benefits of proof of work, and the associated electrical costs as a by-product of a maturing industry. In addition, many cryptocurrency projects have started to emerge that forego energy-intensive Proof of Work systems, while still providing the benefits of blockchain and secure digital payments.

Now, a researcher out of the University of Pittsburgh is weighing in with a bold claim: that energy consumption related to Bitcoin is being unnecessarily criticized by people who find Proof of Work to be a flaw for Bitcoin, when in reality it constitutes a usable feature. Dr. Katrina Kelly-Pitou, electrical and computer engineering research associate at the University of Pittsburgh, wrote an article for the outlet The Conversation in which she claims that the environmental conservation slant against Bitcoin is being used to spread false claims, in addition to being grossly oversimplified in terms of the impact of the technology. In particular, she uses the idea of Bitcoin’s energy crisis as a ‘red herring,’ that distracts people from pursuing a deeper understanding of digital currencies in favor of the knee-jerk reaction to mounting energy costs,

“I am a researcher who studies clean energy technology, specifically the transition toward decarbonized energy systems…New technologies – such as data centers, computers and before them trains, planes and automobiles – are often energy-intensive. Over time, all of these have become more efficient, a natural progression of any technology: Saving energy equates to saving costs.”

As Dr. Kelly-Pitou points out, technologies naturally follow a curve of becoming more resource efficient, which includes Bitcoin and miners finding a way to cut costs while still retaining the benefits of blockchain and reward payouts. Instead of focusing on how much energy Bitcoin mining consumes, Dr. Kelly-Pitou makes the argument that the technology should be focused on developing into a more efficient model, while the greater portion of society should look to renewable resources as a way to supply the power for advancing technological innovation.

Instead, the current narrative is one to shun the growth of a new industry–cryptocurrency being one of several technologies to draw the ire of environmental conservationists–thereby slowing down the overall progress of society as opposed to finding ways to merge technology with more efficient energy production. As she puts it, energy-focused conversations have the effect of keeping Bitcoin in a category of misunderstood, with people failing to go beyond a surface-level of understanding,

“Like many other aspects of the energy industry, bitcoin is not necessarily a ‘bad guy.’ It’s simply a new, and vaguely understood, industry. The discussion about energy consumption and bitcoin is, I believe, unfair without discussing the energy intensity of new technologies overall, specifically in data centers.”

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New York State Entices Crypto Miners to Negotiate Cheap Power

Cryptocurrency Mining–Despite the overwhelmingly negative image of crypto mining related electricity costs, from the impact they have on the environment to the rising rates of neighborhood power bills, the state of New York has approved a bid to increase the population of miners through cheaper electricity.

On Thursday, state regulators approved a motion that would create a new rate structure specifically for cryptocurrency miners looking to negotiate a better deal on electricity. Massena, a town in Upstate New York, will allow its municipal utility to review contracts on an individual and isolated basis for miners, thereby protecting other residents from an increase in rates from grid usage. This comes on the heels of an earlier decision related to crypto mining electricity costs, when the State cleared 36 municipalities in March to increase rates for individuals and firms mining cryptocurrency.

At the time of the filing, the New York Municipal Power Agency reported that some mining firms were responsible for 33% of grid usage, despite doing little to invest or promote the local economy. In addition to Quebec, China and Iceland, cryptocurrency miners have flocked to locations like New York for their hydro-rich electricity resources, thereby cutting costs to make the process of mining even more profitable. However, as Bloomberg reports, the draw to low-cost areas has locals up in arms over the drain on their grids–which can lead to increased rates across the board in addition to higher utility loads. In the interim, governments such as the state of New York have been forced to address the issue of crypto mining, which operates as a for-profit business despite the fact that most mining individuals and firms fail to qualify for the same benefits of traditional brick and border outlets consuming a disproportionate amount of municipal resources.

New York State Department of Public Service Chair John Rhodes commented on the drain that some miners put on local resources, while confirming that the state was interested in pursuing a mutual relationship with miners,

“We must ensure that business customers pay a fair price for the electricity that they consume. However, given the abundance of low-cost electricity in Upstate New York, there is an opportunity to serve the needs of existing customers and to encourage economic development in the region.”

While Quebec, a similarly hydro-rich area for electricity, has sought to repel the flood of crypto-miners by instituting a three-fold increase in rates specific to cryptocurrency, New York has seen the benefit in sharing its abundant natural resource. Compared to other areas of the country, where the national averages for residential electricity hover at 13 cents per kilowatt-hour, Massena is able to afford customers 3.9 cents per kw-h, in part due to the efficiency of hydroelectric dams.

As Bitcoin, and all of cryptocurrency prices begin to flounder, miners will be forced to find more profitable areas for their electricity-consuming business in an effort to lower costs and make up for the difference in declining value. Just yesterday Joseph Carson, the chief security scientist at Thycotic, cited the rising cost of crypto mining as being the primary cause for the inevitable death of Bitcoin, before making a prediction that BTC would fall to $43.

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