As the hype surrounding bitcoin has increased, bitcoin mining businesses have grown. Bitcoin mining is the process of generating and putting new bitcoin into circulation. It is an energy-intensive process. Cipher Mining Technologies, a U.S.-based bitcoin mining company, is one such industry player.
Merger with a SPAC
In mid-July, Cipher Mining announced that it would be merging with Good Works Acquisition Corp., a publicly-traded special purpose acquisition company (SPAC). Following the transaction, the value of Cipher Mining will be around $2 billion. The transaction is expected to close in the second quarter of 2021.
Upon the closing of the SPAC merger, Cipher Mining will list itself on the Nasdaq stock exchange. Jim Newsome, a previous chairman of the U.S. Commodity Futures Trading Commission (CFTC), will serve on Cipher Mining’s board of directors.
About Bitcoin Mining
Bitcoin mining involves operating power plants and purchasing high-speed equipment. The equipment uses specialized hardware called application-specific integrated circuit (ASIC) chips. The company is building up mining capacity in Texas. Unlike other U.S. states, Texas has a deregulated power grid. The company is also building up mining capacity in Ohio, a state with low power prices and low-carbon sources.
Cipher Mining Technologies Inc. is the U.S. arm of Netherlands-based Bitfury Holding. Bitfury specializes in providing bitcoin mining hardware and blockchain software and services. Although Cipher Mining is a relatively new company, Bitfury dates back to 2011. Since its founding, Bitfury has been responsible for mining more than 600,000 bitcoin. Being linked to Bitfury will enable Cipher Mining to leverage additional resources and scale.
Competitors include Riot Blockchain, Marathon Digital, Greenidge Generation, Bitfarms Technologies, and Hive Blockchain Technologies. These competitors also are attempting to mine bitcoin at an industrial scale. Cipher Mining aims to have mining capacity of 745 megawatts (MW) by the end of 2025.
Tyler Page, the CEO of Cipher Mining, hopes that the startup will become the leading U.S. blockchain mining company. Page is a graduate of the University of Michigan Law School and worked at various large financial institutions before venturing into the cryptocurrency industry.
Environmentally-Focused Bitcoin Mining
Around 65% of the world’s bitcoin mining takes place in China, according to recent statistics. Neighborhood Kazakhstan has also become a key bitcoin mining hub due to its cheaper energy prices. The cooler temperatures in Kazakhstan as well as the Chinese region of Xinjiang are also optimal to keep the mining equipment from overheating. A significant amount of the electric power capacity in these regions comes from coal and gas-fired stations.
According to an April 2021 article published by CoinDesk, a news site specializing in covering the latest crypto developments, if bitcoin were a country it would be ranked 29th in energy consumption, between Ukraine and Argentina.
Carbon Footprint Concerns
Given the huge amount of energy used in bitcoin mining, concerns have peaked about its carbon footprint. Using clean energy sources to mine cryptocurrencies in a sustainable way has become a key focus for the crypto community. There have been efforts to encourage the use of renewable energy sources. A number of companies signed onto the Crypto Climate Accord, pledging to help the industry reach the goal of 100% renewable power consumption.
Another study by the Cambridge Bitcoin Electricity Consumption Index estimated that worldwide bitcoin mining utilizes approximately 105 terawatt hours of electricity per year. To put that into perspective, that is more electricity than the yearly usage in the Philippines.
A few months ago, Elon Musk announced that Tesla would suspend vehicle purchases using bitcoin because of the negative environmental impact of bitcoin mining. Elon Musk stated in a Twitter post, “When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions.”
Earth-Friendly Bitcoin Mining
Bitcoin mining companies that have focused on environmentally sustainable cryptocurrency mining are set to benefit from the growing trend.
In June 2021, the president of El Salvador announced that it would become the first country to adopt bitcoin as legal tender. The president of El Salvador also stated that they would use electricity generated from volcanoes to mine bitcoin.
Companies such as Cipher Mining with the necessary infrastructure and competitively priced power will occupy a competitive position going forward. And bitcoin is here to stay. Despite the recent drop in prices, bitcoin supporters are enthusiastic about the long-term potential.
Jack Dorsey, CEO of Square and Twitter remarked that, “For me, bitcoin changes absolutely everything. What I’m drawn to the most about it is the ethos, what it represents…Whatever I can do, whatever my companies can do to make bitcoin accessible to everyone, that is what I will do for the rest of my life…I don’t think there is anything more enabling for people around the world.”