Two technicians work at a bitcoin mining facility in Quebec.
lars Hagbarg | AFP | Getty Images
For years, bitcoin critics have maligned the world’s biggest cryptocurrency for polluting the planet. But new data from Cambridge University shows that the geography of mining has drastically changed over the last six months, and experts tell CNBC this will improve bitcoin’s carbon footprint.
China’s big crypto crackdown this spring set off a chain reaction in the mining world.
For one, it took half the world’s bitcoin miners offline practically overnight. Fewer people mining has meant less machines running and less power being consumed overall, which slashed bitcoin’s environmental impact.
Beijing’s new crypto rules also permanently took a lot of older and more inefficient gear offline.
And crucially, China shutting its doors to crypto mining has set off a massive migration. Miners are now heading to the cheapest sources of energy on the planet, which more often than not are renewable.
“The bitcoin network is ruthless in its drive for the lowest cost,” said Mike Colyer, CEO of digital currency company Foundry. “Miners around the world are looking for stranded power that is renewable. That will always be your lowest cost. Net-net this will be a big win for bitcoin’s carbon footprint.”
China has long been the mecca of the crypto mining world, accounting for nearly three-quarters of all bitcoin miners at its peak, according to the Cambridge Centre for Alternative Finance. But after Beijing decided to expel its miners in May, more than 50% of the hashrate – the collective computing power of miners worldwide – dropped off the network.
Today, bitcoin draws roughly 70 terawatt hours of energy per year, or 0.33% of the world’s total electricity production. That is almost half of what it was in May and is roughly equivalent to the annual energy draw of countries like Bangladesh and Chile.
The exodus from China also means that a lot of older mining equipment that was probably long-past due for retirement will never be turned back on.
“It took off, likely forever, a large amount of the most energy inefficient rigs,” explained Alex Brammer of Luxor Mining, a cryptocurrency pool built for advanced miners.
Colyer says the overall bitcoin network will now be mostly made up of more efficient rigs that get about double the hashpower for the same amount of electricity. “This continues to significantly improve the security-to-energy ratio of the bitcoin network,” he said.
But not all of China’s miners are going dark. Many have begun to patriate elsewhere, gravitating to the world’s cheapest sources of power.
“The cool thing about bitcoin that is under appreciated by a lot of the naysayers is that it’s…like a portable market; you can bring it right to the source of energy,” explained Steve Barbour, founder of Upstream Data, a company that manufactures and supplies portable mining solutions for oil and gas facilities.
Because miners at scale compete in a low-margin industry, where their only variable cost is typically energy, they are incentivized to migrate to the world’s cheapest sources of power.
“They need to constantly reduce their electricity costs, which is their number one expense, in order to be competitive,” said Ria Bhutoria, former director of research for Fidelity Digital Assets.
The data shows that a whole lot of these miners are headed for cheaper pastures in the U.S.
The United States has fast become the new hotspot for the world’s global crypto miners. In the last six months, the country has jumped from fifth to second place and now accounts for nearly 17% of all global bitcoin miners. Although China was still solidly in first place as of April, with 46% share, America’s share of the market is likely a lot higher now since the Chinese government booted miners in May.
U.S.-based bitcoin mining operators have seen a huge uptick in business. Whit Gibbs, CEO and founder of Compass, a bitcoin mining…