Bitcoin mining is the process of creating new digital tokens and adding past transaction records to a public blockchain ledger. This energy-intensive process is a heavy greenhouse gas emitter.
Some startups encourage crypto miners to use clean energy sources. Texas tech startup Lancium recently raised $150 million to power bitcoin mining with renewable energy. The Houston, Texas company will create bitcoin mining sites across Texas.
Hanwha Solutions, a clean energy company, led Lancium’s latest funding round. Most of the financing round participants were power companies.
Lancium’s CEO, Michael McNamara, said “I think the fact that it’s all energy companies investing suggests that we have a shared vision of the role bitcoin mining should play in the grid.”
Making Mining More Environmentally Sustainable
Lancium, founded in 2017, describes itself as a carbon neutral cloud computing company. It plans to build and operate technologically advanced data centers that will promote renewable energy growth.
The vast amounts of open space in Texas make it an ideal location for renewable energy bitcoin mining sites. “You can’t build a 1000-megawatt solar plant in New York City, or Tokyo, or Frankfurt,” commented McNamara.
West Texas has optimal conditions for solar and wind power generation. “You get this perfect overlap with both sun quality and wind speed in West Texas,” stated Shaun Connell, Lancium’s executive vice president of power.
Renewable energy sources have some downsides. For example, many renewable power sources do not generate power as a baseload. In other words, they may not be able to supply the minimum amount of power needed to meet demand on an electrical grid at any given time.
Nic Carter, the founding partner of Castle Island Ventures, said “Solar works 10 hours a day and with wind—it could be windy or there could be none whatsoever. In practice, that means you have to be prepared for all renewable energy to go offline at any point.”
Lancium will expand its “Clean Campuses”, or data centers, that will host bitcoin mining. The startup will establish 2,000 megawatts of capacity across multiple locations in Texas this year.
The startup’s technology could make renewable energy sources an economically viable solution. It patented technology that can get around some issues that have traditionally constrained renewable energy transmission. When supply outpaces demand, the data mining centers will absorb significant quantities of renewable energy. As demand on the electrical grid rises, the bitcoin mining sites will reduce their energy intake.
The startup established a strategic partnership with the Electric Reliability Council of Texas (ERCOT), a nonprofit that operates 90% of Texas’s electrical grid. ERCOT will pay miners to power down during peak energy consumption periods. Lancium’s “SmartResponse” software helps monitor and adjust the electricity consumption of its data centers according to electrical grid demand levels.
“Imagine how much you would have to pay Amazon to say, ‘Hey, there’s too much demand for power. Please power down your data center,” said Brandon Arvanaghi, a crypto mining engineer.
How Bitcoin Mining Works
We’ve previously written about bitcoin mining, which requires sophisticated hardware. Specialized computers called ASIC miners solve complex math problems. As a reward, miners earn new bitcoins and collect transaction fees. Miners can be individual enthusiasts or professional mining groups.
Miners call the bitcoin mining process a proof-of-work consensus mechanism. The first miner to solve the cryptographic puzzle receives bitcoins for completing the transaction “block”. Each block contains up to one-megabyte of bitcoin transaction data.
The inventor of bitcoin set a hard limit on bitcoin’s supply: 21 million bitcoins. What this means is that miners have mined almost 90% of the available bitcoins.
Every four years, the number of bitcoins awarded for solving a new block is halved. Based on this schedule, it could be a few decades before the final bitcoin is mined. Once this milestone is reached, miners will be able to collect transaction fees as a reward.
Sustainable Bitcoin Mining: Other Industry Players
The sustainable bitcoin mining industry is becoming increasingly competitive. Lancium has competitors who also pioneer clean energy solutions. These companies highlight their carbon neutral bitcoin mining operations and include Greenidge Generation Holdings, TeraWulf Inc., and CleanSpark.