Sunday, November 27, 2022

Unintended Consequences

 At WUWT, New York State Cracks Down on Bitcoin Miners Buying Old Coal Plants

As ordinary people suffer electricity blackouts and price hikes, Bitcoin miners have been restarting unwanted old coal plants, to produce the vast quantities of cheap, reliable energy needed to mint new bitcoins.
New York cracks down on carbon fuel-based crypto-mining operations

Two-year ban comes as state attempts to reduce emissions by 85%

Richard Currie
Wed 23 Nov 2022 // 17:01 UTC

New York State has banned a practice becoming more common in the crypto-mining industry – the rescuing and repurposing of mothballed fossil fuel plants to exclusively provide energy for mining digital currency.

Governor Kathy Hochul yesterday enacted a bill in the works since May 2021 that establishes a two-year moratorium on applications or permits for “an electricity generating facility that utilizes a carbon-based fuel and that provides, in whole or in part, behind-the-meter electric energy consumed or utilized by cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions.” This includes applications to renew such permits.

The bill cites the contribution to climate change of dirty fuel plants at a time when the state has committed to reduce greenhouse gas emissions by 85 percent by 2050, with “net zero emissions in all sectors of the economy by that time.”

Though it notes that the industry is growing in New York, the bill says: “The continued and expanded operation of cryptocurrency mining operations running proof-of-work authentication methods to validate blockchain transactions will greatly increase the amount of energy usage in the state of New York, and impact compliance with the Climate Leadership and Community Protection Act.”

…Read more:
I love this story, because it makes a complete mockery of claims coal is too expensive or unreliable.

Bitcoin mining, despite the glamour, is a marginal business. Making a profit requires a gargantuan supply of reliable but very cheap energy.

To “mine” bitcoin, mining computers must provide “Proof of work”, the solution to a difficult cryptographic math puzzle. The puzzle is not mathematically complex, the difficulty is the trillions of attempts which are required to find the missing key, to create a valid solution – kindof like brute force code breaking with a computer, trying different keys until you find one which works. Each solution cryptographically secures not only the latest transactions, but all previous transactions, so solving these difficult equations helps secure the bitcoin ledger against tampering and theft. The difficulty of solving the puzzle, and lots of independent copies of the ledger, creates a near insurmountable impediment to tampering with past transactions. People who contribute to the Bitcoin community by helping to secure the ledger of transactions against tampering, by solving these immensely difficult “proof of work” cryptographic puzzles, are rewarded with newly minted bitcoins.

The specialised computers required to solve this cryptographic puzzle and find the missing key in a reasonable time are expensive, but the real killer cost is the cost of the electricity required to run those expensive computers.

It's my understanding (which may be wrong) that in the early days of Bitcoin, the computations required to mine it and keep the ledgers was much lower, and people with ordinary desktop computers could do it and a make a coin or so. The fact that it now requires whole powerplants to supply the electricity just to keep the books seems unsustainable. Does this apply to other forms of cryptocurrency too? Did the Bitcoin founders foresee this?

Another unintended consequence is people finding a use for coal-fired power plant idled, not because they are economically worthwhile, but for political purposes. A usable asset will alway find people willing to use it.

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