Welcome to Chain Letter! Great to have you. On Thursdays we take a closer look at one key concept in the world of blockchains and cryptocurrencies. Feel free to suggest topics you think we should discuss in the future. | |  | It’s undeniable: Bitcoin’s energy guzzling is a growing environmental problem. It’s been estimated that the network uses nearly as much electricity as all of Ireland, raising alarms about its carbon footprint. In theory, though, it doesn’t have to be guzzling nearly as much fossil fuel-based power as it does today—and a new renewable energy company has an ambitious plan to prove it.
The firm, called Soluna, has acquired a 37,000-acre wind farm site in Morocco, which it says has the potential to host up to 900 megawatts of power generating capacity. (A recent estimate (PDF) suggests that the Bitcoin network requires 2.55 gigawatts.) Development of the site began nine years ago, but progress stalled under its previous owners. Soluna, which has teamed with the German wind power developer ALTUS AG, aims to build at least 36 megawatts of capacity by 2020, and complete the entire 900 megawatts in five years. The wind power will then supply cheap electricity to a high-density computing center for “mining” Bitcoin and other cryptocurrencies.
Soluna will use the money it makes from mining to further develop the wind farm, says CEO John Belizaire, who adds that it will also be able to make money selling power to the Moroccan grid. He believes Soluna’s “vertically integrated” mining model represents not only a cleaner way to maintain Bitcoin’s and other blockchain networks, but also a new way to fund renewable energy resource development.
Mining—the algorithmic process by which the network’s participants agree that new Bitcoin transactions are valid—is what makes the network so energy-intensive. Miners compete to add sets of new transactions, called blocks, to the accounting ledger. This requires performing a complex calculation many times repeatedly in attempt to guess a unique number that cryptographically links the new block to the previous one. The process stores the data in a way that makes it extremely difficult—and expensive—to tamper with, since changing data in one block requires changing all of the previous ones as well. (see “How secure is blockchain, really?”)
Electricity is the largest variable cost to miners, who can profit as long as that cost is smaller than the value of the bitcoins they mint as reward for maintaining the ledger. That’s a big reason why so many mining operations are based in China, where in some regions it is possible to purchase extremely cheap coal-fired power—as low as $0.03 per kilowatt-hour. (For comparison, the average residential rate in the US in May of this year was just over $0.13 per kilowatt-hour.)
Soluna projects (PDF) that it will be able to generate power at its Moroccan wind farm that is as cheap as the cheapest Chinese coal power. Belizaire believes his company is the first one aiming to develop and use its own energy resource for crypto-mining. “Assuming you can develop the power at the lowest cost, you by definition will always have the lowest cost because no one is going to change your power price,” he says. The company “anticipates that it can profitably mine in almost any foreseeable cryptocurrency price environment,” according to a whitepaper (PDF). Belizaire says it will also be possible to take this business model to other parts of the world, where Soluna can use it to develop “similarly rich” clean power resources.
The company has, in effect, taken a long position on blockchain technology. The bet is that blockchain technology is in its “early early days,” and is poised, Belizaire says, to usher in “a new internet, if you will”—one based on distributed computing. Even if more energy-efficient consensus mechanisms emerge to replace Bitcoin’s mining process, such a global “blockchain ecosystem” will still require lots of energy—and it ought to be supplied by renewable resources, he says. | | Loose Change Fill your pockets with these newsy tidbits. | | | The SEC has rejected nine more Bitcoin-based exchange-traded funds. (Reuters) | | | | Blockchain and cryptocurrency-focused accounts in China have been banned on WeChat. ( CoinDesk) | | | | US Representative Tulsi Gabbard, Democrat from Hawaii, has disclosed that she bought between $1,001 and $15,000 of Ether and Litecoin in December of 2017. (Bloomberg) | | | | High-profile decentralized applications like Cryptokitties and Augur are struggling to keep users engaged. (Fortune) | | | | The World Bank has priced its first blockchain-based bond at $73 million; the two-year bond will yield 2.25 percent. ( Reuters) | | | The Money Quote “It may be a stunt, but a stunt that is working.’” —Dickie Armour from the ICO consultancy Corre Innovation, on Venezuela’s supposed new cryptocurrency, the Petro. The problem is that it’s not clear who it is working for, other than President Nicolás Maduro “and his cohorts,” Armour told Wired. | | | |
