How Bitcoin mining devastated this New York town

Economist Matteo Benetton, co-author of the paper and professor at the Haas School of Business at the University of California, Berkeley, says crypto mining can stifle local economies. In places with a fixed power supply, the operation reduces the capacity of the grid, potentially leading to supply shortages, rationing and blackouts. Even in places with adequate access to power, such as upstate New York, mining can crowd out other potential industries that may employ more people. “While there are private benefits, through the electricity market, there are social costs,” Benetton says.

The effect is now being felt across the country. Benetton says there are strong profit incentives to keep as many servers as possible, and he now calls for greater transparency in the energy consumption of these companies. It is not a popular opinion in the industry. But, Benetton says, “If you’re doing really well, you shouldn’t be afraid to disclose data.”

The federal government does not currently monitor the energy consumption of cryptocurrencies, but Gary Gansler, chairman of the Securities and Exchange Commission, acknowledges that there are loopholes in regulation. In his 2021 speech at the Aspen Security Forum, he referred to the industry as “Wild West”.

As long as mining is so profitable, read the warnings, crypto restrictions only hurt new locations. When China banned crypto mining in 2021 to achieve its carbon reduction goals, operations increased in places like Kazakhstan, where electricity comes mainly from coal. As a result, a recent study found that between 2020 and 2021, Bitcoin’s renewable energy use dropped by almost half to 25%.

Even when the industry invests in renewable energy, its full consumption makes it a significant contributor to carbon emissions.

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Reed rejects promises that green investment or greater efficiency could solve the problem. In a recent working paper, he noted that the energy consumption of cryptocurrencies would increase by a further 30% by the end of the decade કરશે producing an additional 32.5 million metric tons of carbon dioxide per year. As long as the price of Bitcoin goes up, so do the rewards of mining, which accelerates the use of energy, he says. He describes the situation as a “bitcoin dilemma”.

That 32 million metric tons of carbon dioxide would exacerbate the climate crisis, whether the emissions come from upstate New York or Kazakhstan. “We all suffer the consequences,” says Reed.

Lois Parsley is an investigative science journalist,

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