From Energy Drain to Eco Gain: Greening Bitcoin and AI

AI / Cryptocurrency/Energy Intensity/Green Transition

(Source: Pexels)

In recent years, artificial intelligence (AI) has captured the spotlight and garnered the attention of tech enthusiasts, the general public, and investors alike. However, this rapidly growing sector, with huge potential and far-reaching implications as a ‘general-purpose technology’, hides a darker side. The ‘AI craze’ dominating the media and the crypto mining industry—which shares similarities with generative AI’s computational processes—often overlooks the environmental degradation and resource depletion imposed on society through immense energy and water consumption. As these sectors continue to grow, can we ‘greenify’ the industry? This article outlines the rise of AI and bitcoin mining from a financial perspective, explores their negative environmental externalities, and evaluates initiatives to promote a greener investment mindset.

AI is revolutionising numerous industries, from healthcare to transportation, creating an appealing investment landscape. It is being used in fraud detection, customer service, and self-driving cars, and shows great potential to transform industries and create new ones [1]. Since early 2023, AI-connected stocks have delivered 30% better returns than both U.S. and global indexes, and the ‘meteoric rise’ of stocks like Nvidia, known for its AI-powered graphic processing units (GPUs), highlights continued investor confidence [2][3]. Furthermore, according to the 2024 Bitcoin Mining Mid-Year Report, the convergence of trends in AI with bitcoin mining has presented miners with an ongoing exponential demand curve.

However, beneath its game-changing potential lies an energy-intensive process with a staggering carbon footprint. As datasets and models in AI and bitcoin mining become more complex, the energy needed for training and operation increases significantly. This rise in energy consumption directly affects greenhouse gas emissions and exacerbates climate change. Since 2012, the computing power required to train cutting-edge AI models has doubled every 3.4 months, and by 2040, emissions from the Information and Communications Technology (ICT) sector are expected to reach 14% of global emissions [4]. Bitcoin mining, similar to algorithmic training in AI, relies heavily on fossil fuels and has serious implications for water and land use. Research from the UN indicates that Bitcoin mining’s water footprint in 2020-21 was akin to filling over 660,000 Olympic-sized swimming pools, enough to meet the domestic water needs of more than 300 million people in rural sub-Saharan Africa. During that same period, China, the largest Bitcoin mining nation, would have needed to plant 2 billion trees to offset emissions from coal-intensive mining, an area equivalent to Portugal and Ireland combined [5][10][12].

Despite this bleak picture, there are ways to align investments in AI and bitcoin mining with broader ESG themes, and BIT Digital exemplifies this ambition. In April 2021, inspired by the Paris Climate Accord, they signed the ‘Crypto Climate Accord’, an agreement among leading crypto-companies to decarbonise mining and reduce energy consumption. BIT Digital CEO Bryan Bullet stated that “sustainable energy sources are clearly the right thing to do for the planet… and it’s something our investors care about too.” Out of their 46,000 miners worldwide, BIT Digital estimates that 55% are renewable or low-carbon, with plans to increase this percentage. Their new facility in Nebraska, housing 20,000 miners, is nearly fully powered by solar panels, showcasing concrete steps toward their green aspirations. Additionally, BIT Digital is exploiting ‘stranded energy’—accessible but underutilised energy—hoping to reduce its carbon footprint. This energy can arise from grid limitations or demand fluctuations in hydroelectric power, and BIT Digital has moved operations to remote areas where such energy is common [6].

“Research from the UN indicates that Bitcoin mining’s water footprint in 2020-21 was akin to filling over 660,000 Olympic-sized swimming pools, enough to meet the domestic water needs of more than 300 million people in rural sub-Saharan Africa” (Source: United Nations University)

The Enigma21 mine in Texas has adopted a similar approach, locating its operations in a corridor of West Texas that combines high-quality sunlight with consistent wind speeds to power solar panels and wind turbines. They also employ innovative technology to use stranded energy even more effectively, adjusting bitcoin miners in response to supply fluctuations to stabilise the grid. However, these companies face challenges. Operating in hot, dusty areas like Nebraska and Texas requires substantial cooling infrastructure, which, while generated sustainably, demands significant water—about 1,600 gigalitres in 2021—straining local resources and harming biodiversity [7]. Another notable example of green transition in the crypto-industry is Ethereum, which successfully shifted from a proof-of-work (PoW) to a proof-of-stake (PoS) model in September 2022, known as “The Merge.” This transition from a more energy intensive confirmation mechanism, reduced Ethereum’s energy consumption by approximately 99.95% by validating transactions through a network of validators who stake their cryptocurrency instead of competing for it [8]. While this approach minimises the need for computational power, it raises concerns about reduced security and validator centralisation. Nonetheless, it sets a precedent for other cryptocurrencies and emphasises the importance of collective action for sustainability.

(Source: Ethereum)

In conclusion, aligning growing investment opportunities in AI and bitcoin mining with sustainability goals is possible, provided eco-friendly practices are championed long-term. Many crypto-companies believe they could outlast competitors by establishing sustainable bitcoin mining norms with support from investors and governments. Governments play a crucial role; without global regulation and collective cooperation, efforts may fail to deliver a sector-wide transition. Continued innovation to improve resource consumption, especially water, is essential. Initiatives like liquid dielectric immersion are emerging to reduce water needs, but broader application is still required. Projects like the Netherlands’ ‘bitcoinbloem’, which utilises heat from bitcoin miners to power greenhouses, could also be expanded to benefit the wider agriculture industry and compensate for the ecological issues associated with crypto-mining [9][11]. Ultimately, with concerted effort, the narrative around bitcoin mining and AI as ‘energy-drains’ can be reversed and could even be used to champion sustainable practices across the sector, and the wider financial landscape.

Research Analyst: Thierry Mancini-Tuffier

Research Editor: Pranav Shankar Kaundinya

References:

[1] Jones, Andy 2024. “How to Invest in Artificial Intelligence (AI).”

[2] de la Sota, Bruno 2024 “How to Invest in AI’s Next Phase | J.P. Morgan.”

[3] Smith, John “Nvidia’s Success: 12 Crucial Facts,” June 27, 2024.

[10][11] Dhinsa, Simrit, Anthony Scheercousse, Samuel Kiernan, Gabe Parker, and Zack Pokorny. n.d. “2024 Bitcoin Mining Mid-Year Report.” Galaxy.

[4] Kanungo, Alokya. 2024. “The Real Environmental Impact of AI | Earth.Org.” Earth.Org. March 5, 2024.

[9] Min, Roselyne. 2022. “Amid Europe’s Energy Crisis, This Dutch Tulip Farmer Is Swapping Gas for Heat From Bitcoin Mining.” Euronews, December 14, 2022.

[12] Chamanara, S., Ghaffarizadeh, S. A., & Madani, K. 2023. The environmental footprint of Bitcoin mining across the globe: Call for urgent action. Earth's Future, 11, e2023EF003871.

[5] “The Hidden Environmental Cost of Cryptocurrency: How Bitcoin Mining Impacts Climate, Water and Land.” 2024. United Nations University. October 4, 2024.

[6] Grantham Research Institute, 2022. “What Are Stranded Assets? - Grantham Research Institute on Climate Change and the Environment.” 2022. Grantham Research Institute on Climate Change and the Environment.

[7] Calma, Justine. 2023. “It’s Not Just Electricity — Bitcoin Mines Burn Through a Lot Of Water, Too.” The Verge, November 29, 2023.

[8] “The Merge” 2024 | ethereum.org.” n.d. Ethereum.Org.