A new Bitcoin Mining Council has been created to improve the crypto-currency’s sustainability, following a meeting of “leading” Bitcoin miners and Elon Musk.
The Tesla CEO tweeted the development was “potentially promising”.
It’s hoped the council will “promote energy usage transparency” and encourage miners to use renewable sources.
The process of creating Bitcoin consumes large amounts of electricity.
Its value fell earlier this month after Tesla withdrew its support of the crypto-currency, citing environmental concerns.
Bitcoin operates on the blockchain, a digital ledger of transactions.
Miners audit Bitcoin transactions in exchange for an opportunity to acquire the digital currency.
It requires enormous computing power, which in turn uses huge amounts of electricity.
According to a tweet by MicroStrategy CEO Michael Saylor, who convened the meeting of the group and Elon Musk, the council includes “the leading Bitcoin miners in North America”.
But research from a group of universities suggested that China accounted for more than 75% of Bitcoin mining as of April 2020. The authors estimated that 40% of China’s Bitcoin mines were powered by coal.
If anything represents free-market capitalism in its most naked form, it is Bitcoin.
It is unregulated, there is no central bank or government in charge of its workings – and some true believers in the crypto-currency are extreme libertarians who hope to see the traditional financial system and much of the infrastructure of the state just melting away.
So the idea now being promoted by Elon Musk of a Bitcoin Mining Council to promote sustainable energy use in the crypto-currency’s processes seems a touch bizarre.
The economics of Bitcoin mining demand that the miner seeks out the cheapest available electricity – that may be hydro-electric power in the United States, but has often been coal-fired power stations in China.
Even if the Chinese government succeeds in its clampdown on mining, it’s likely that miners in countries like Russia will continue to use electricity generated from fossil fuels. American miners may be sincere in wanting to slap a green energy label on their activities – but the wider Bitcoin market may make that either uneconomic or irrelevant.
Earlier this month, Tesla suspended vehicle purchases using Bitcoin, over concerns about its environmental impact. In February it revealed it had bought the equivalent of $1.5bn (£1bn) of the digital currency.
“We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” Elon Musk tweeted at the time.
But the group needs to do more than “disclosing and promoting the use of renewables”, Alex de Vries of the website Digiconomist told the BBC.
“Even if we had disclosure, that doesn’t change the natural incentive of these miners to search out the cheapest and most constant sources of power which typically comes down to (obsolete) fossil fuels,” he said.
“Kentucky even came up with a tax break for Bitcoin miners to come and use their obsolete coalfields. So, I’m not seeing this trend towards more renewables.”
However, council member Peter Wall, Chief Executive of Argo, argued that increasingly US Bitcoin miners were choosing renewable power. He felt the council could encourage change.
“It’s early days, it’s embryonic. There will be lots of discussions moving forward about the best way to promote sustainable Bitcoin mining and to do it not just in North America,” he said.