How cryptocurrency might incentivise renewables (if they don’t kill us first)
Cryptocurrencies as they currently exist have a huge carbon cost compared to their current actual utility. They account for .55% of our global carbon footprint, and while they promise to serve many purposes, right now they use a non-negligible amount of carbon so redditors can gamble. However there are persuasive arguments that crypto currencies could drive the adoption of renewables.The razor sharp margins of crypto-mining coupled with the increasing competitiveness of wind and solar might mean that the former accelerates the latter. The flexible buying power of crypto-mining might allow for the development of infrastructure ahead of demand, and also increase return on existing assets. So what would it mean if the blockchain went carbon neutral, dragging our economy with it? Could we have power that wasn’t killing us, and money backed by the sun? Is this techno-utopian ideal worth the risk of the carbon we’re burning now? And what about the material costs of all that extra computing equipment and the extra energy assets required to support them?
Why would doing sudokus to sell heroin save the planet?
The initial case for cryptocurrencies and renewables is that crypto currency mining runs on very thin margins, and will seek out the best value power. Most cryptocurrencies ‘mine’ by running intensive math equations. This process validates transactions, and miners are rewarded with coins unlocked when rules are met. As more power comes online the system autocorrects and increases the difficulty, to maintain the rate that coins are generated. This creates a fluctuating and highly competitive market, where one of the key costs is energy.
Couple this market dynamic with the fact that over the past decade renewable costs have fallen over 70%. This new demand could accelerate a positive tipping point, where renewables get more affordable, so they get increasing investment, then they become more efficient, so the feedback loop tightens. This could get accelerated by the intense but flexible power demands of crypto-mining
Alternatively miners might keep hashing blocks so people can trade jpegs and buy drugs online, and we pump an extra .55% carbon into our atmosphere. In this scenario fossil fuels could stay the dominant force and integrate cryptocurrencies, and we accelerate the impacts of catastrophic climate change. The reality is there is no way to predict how the market, human ingenuity and luck will interact.
I’ll have free market with a side of government intervention
So unsubsidised renewables have now reached a point where they are cheaper than fossil fuels. Wind and solar cost $28-$42 a megawatt hour(MWh) compared to $44 — $152 MWh for coal and gas. But what’s stopping miners from finding the dirty cheap fossil fuel sources and propping them up? China for example has some of the world’s cheapest coal, and the proliferation of mining there puts such a strain on their energy grids and renewable energy targets, that it has essentially been banned. So the answer there, and the only real check on the ‘free market’ in most cases, is government intervention.
But China also has another real world example where mining worked hand in hand with renewables. During China’s wet season, mining would account for 55% of the world’s bitcoin mining footprint, compared to 10% of the world’s coin supply in the off season. Here is an example where states or organisations with access to huge amounts of renewable energy can increase their profit beyond the localised demand. This could feed back into the facilities, local economy and overall outlook for renewable energy.
The same is true for underutilised fossil fuel sources. For example some fossil fuel mining rigs are actually being built with bitcoin miners in them. These rigs are able to utilise pipeline energy that would have had to be burned off, so what’s the harm? What it does do is drive up the ‘mining difficulty’ for crypto, which increases the total energy cost required. It also props up ‘stranded’ fossil fuel assets in the way it does for solar.
Those things considered, crypto-mining’s ability to generate revenue directly, predictably and flexibly is a bigger advantage to renewables than fossil fuels. Solar and wind are only able to generate revenue when the wind is blowing and the sun is shining, but demand is usually fixed. These fluctuations are called the duck curve, describing the daily peaks in generation capacity over demand, this ends up as unused energy. From the Square white paper ‘Bitcoin is Key to an Abundant, Clean, Energy Future, there are “>200 GW6 of delayed solar and wind capacity currently in just three U.S. grid interconnection queues. These are solar and wind projects which have developers and financing readily available, but which grids physically cannot accommodate.” Crypto mining will allow these networks to generate income when demand is low, utilising that surplus. This significantly increases the financial viability of any renewable which has mismatched supply and demand. This would then incentivise further investment in this infrastructure.
This also means that when there are unusual spikes in demand, that surplus is there and has a baseline value. Because this power is now paired with a blockchain, it’ll be easier for multiple energy suppliers to sell energy in a granular, targeted way during high demand on the grid. This could potentially smooth out the $10k energy bills that occurred during the Texas storms of 2021. There, people receiving wholesale rates ended up getting billed with crazy rates a consumer would not normally be exposed to. They had no control, visibility or other options on a dumb, outdated single supplier market. Imagine if surplus energy being generated for mining was available, and people could bid against the market rate. Their elastic demand would supersede the fixed demand of the crypto, and power sellers could switch over.
Finally crypto mining makes it possible to build energy capture infrastructure before a grid is ready, and before the demand is there. Because once the demand is there it’ll be very hard to get ahead of. For example El Salvador has connected a volcano to the bitcoin mining market. This turns their natural renewable resources into liquid assets that can then be invested back into more energy capture, and other national infrastructure.The fact that the president is a bit shady and a bitcoin bull aside, the free market and its magical abstraction of human labour and ingenuity is harvesting that volcanoes power. Whether this will put that wealth into the hands of the people of those nations is another question.
Regardless, humans love trade, we love markets. We’ve abstracted and tokenized nearly every aspect of our culture for as long as we’ve sported a prefrontal cortex. From blockchains made of stone on the bottom of the sea, or ‘trade, feasting and dancing’ to communicate and navigate complicated intra-nation relationships. And this ability, this mental technology has been what has let us abstract global pools of labour, resource and ingenuity. We love to trade, to say one thing means another. It’s obvious that selling renewable power in Australia and using that to buy power in Denmark’ isn’t the same as sending it via a giant pipe. But that kind of abstraction and arbitrage smooths out the market and opens up energy capture, storage and transfer to the engines of capital around the world. Creating a solar powered token that people can trade and ‘move’ around the world (even in abstract) aligns our nature as traders and merchants with our love of energy, the information of the universe harnessed to realise our will.
A solar dollar and a cheaper panel
If, like some modelling shows, renewables end up driving the cost of electricity down to essentially zero, then what does that mean for the ‘sol-coin’? Energy will still be captured, and it will find an equilibrium where it can either be sold ‘on market’ based on material needs, mined, with a coin market priced in parallel, or traded in the abstract as a financial instrument.
This will create a levelling as energy sellers move between these markets, meaning that the tokenised kwH will essentially represent the energy needs of a person. This person is then able to contribute to society in ways understood now and in the future. This creates its ultimate value, its ability to support a productive, actualised human.
The only limiter on human capability then becomes our energy capture, until even this levels out, and our $kwH creation becomes merely a factor of time. So essentially we will create a token that represents human capability over the passage of time, and acts as an abstraction that lets us transact and build community on a global and eventually intergalactic scale.This mental technology to distribute our capability has been integral to our success from pre-industrial times, through capitalism. An evolution of this will surely be core to whatever comes next. Maybe this evolution from the fiat petro dollar to the distributed solar dollar will erase the inequality, corruption and coercion inherent in today’s systems of capital. Or maybe it will entrench it, writing it immutably into the solar blockchain. Maybe we’ll suffer cascading ecosystem collapses because we accelerated global warming by .55% so I could buy ketamine in my pyjamas.
Waves of wire
Returning to the near future for a moment, if crypto-mining and renewable energy capture became inextricably linked, we would see renewable energy capture popping up around the world, disconnected from demand. This energy could then ‘move’ through the market as money, and by moving create a wake of labour and value. As the market stabilises and adapts, these energy capture sites would be able to reinvest, and connect to other energy markets. A smart energy asset would be exposed to a range of energy demands. Examples could include things like the massive cable being run from darwin to singapore, or the solar battery in South Australia. Perhaps batteries become like energy futures, a bet on the price, maybe not next year, but in the next millisecond. Meanwhile consumer grids are already evolving to manage energy on a more nuanced level, allowing for distributed capture, two way energy transfer and financial exchanges to support this. As these smart grids connect with these crypto renewable sites, blockchains that best support this will evolve. From capture, distribution to storage, that ‘price on power’ and the ability for those micro exchanges to happen autonomously between end points will bring great efficiency to the energy market at every level. Or electricity will become the next NFT craze and it’ll cost ten thousand dollars to turn on your light switch (but if you find an old power bank lying around you’re rich).
Alternatively, the energy itself, now with a tokenized price point, and lossless movement around the world, becomes another type of data. Something to be sent with a click, not a barge full of barrels. Over the last 200 years it went from 6 months to 6 milliseconds to send a page of a text. So consider the economic and innovative implications of being able to ‘send’ energy, like information, anywhere in the world. For example, imagine being able to contribute some of your excess energy to a school in the over-exploited nations (referred to the undeveloped by their exploiters). To be able to put our excess energy to work like this will supercharge our global, market based economy. Best of all it will have driven the carbon cost to zero, meaning that at least the energy side of the market can grow without strangling us.
Or maybe in the face of climate change due to a failed economic system, we will become like the proto-humans in the Hitchhiker’s Guide to the Galaxy. They crash on the earth of the deep past, where they declare the leaves of trees to be money. In the inflation crisis that ensues, they burn down all the trees to preserve their wealth.
All these are possible futures, but the trends are here to stay, so it is up to us to chart a course to the good future and go for it.
That’s a lotta servers
All this might be an exciting techno utopia to some. A lattice of unlimited power and information wraps the earth, empowering us and connecting us to a shared abundance. But every solar panel and wind turbine has a mineral cost. So by using crypto mining as a way to ‘incentivize’ the creation of more renewable assets (to meet that demand) the mineral and extraction costs would increase. Then consider the toll of creating the mining hardware. Recent modelling has shown that a bitcoin transaction has the material cost of essentially throwing away an ipad. We tend to think of ‘the cloud’ and these other services as ephemeral places, but they are actually huge hulking buildings filled with racks of computing equipment. And the crypto mining space is moving so quickly that this equipment is quickly superseded. Would the reduction of the society’s carbon output by 80% justify an increase in mineral extraction of 20%? Would we be the one sentient civilisation in the galactic senate that was only able to escape the carbon bottleneck by making more plastic gizmos?
Beyond this, industries like steel production, that are key to the ‘growth’ our current economic model is predicated on, still require the extraction of minerals and the burning of coal. Does more crypto mean more renewables means more jobs means more houses means more cars means more steel and eventually just means more carbon? By decarbonising without addressing the market and its inherent toll, do we just take the limiter off an unsustainable growth engine, and still end up living on a cored out husk of a planet?
But what if we like growth? What if we like making new things, exploring, inventing, imagining, building towers of steel, green and glass? What if you think despite our many flaws that our ingenuity, our questing ever upwards and outwards, is a beautiful thing that is surely unique in the universe? What would it mean to have the explosive power of unadulterated human ingenuity at our fingertips, no longer limited by a ticking carbon time bomb or the eventual doom of endless extraction? What if we could preserve our biosphere, serve the communities and people in it and continue to leap forward in human knowledge, capability and understanding?
Out of site, out of min(e)d
So far we’ve got a solar based economy, with energy tokenised by its value on the crypto market, moving frictionlessly to where it’s most needed, allocated by a market geared to human well being. Sounds great. But it still predicates the extraction of minerals and some fossil fuels. Both are finite resources and practices that damage our biosphere. In fact as outlined above they would accelerate this harm through increased demand, taking one rate limiter off an unsustainable economy. But could we take that mineral extraction and polluting manufacturing offworld? Could we see the remaining fossil fuel and mineral resources we are comfortable using as our bootstrap to get extraction and manufacturing into space? As we bring enough resources online, we would follow with space elevators, which would significantly reduce the fossil fuel cost of beating the gravity well. Here a blockchain would support the same distributed market principles for energy capture on earth. Labour, value and energy can be exchanged in orbit, or in the abstract with earth.
Flowering into the open sky
So finally we have frictionless, unfettered production capability that doesn’t harm our biosphere. We can now build our wildest dreams and grow and unfurl like a seed bursting from the soil. But none of this speculation takes into account the injustices and inequalities the current market is built upon. The exploitation and the dissolution of the working class would surely replicate and exaggerate as the masters of steel and wire spread their carbon wings. In space, no one can hear you organise.
But it does suggest an energy system, financial market and industrial capability that isn’t guaranteed to eventually destroy the only home we might ever have.This gives us time to figure out the other stuff, to shift our culture and apply our ingenuity and technology to solving the next lot of human challenges. With space the workshop, and the sun the battery, Earth becomes the garden. The sacred font of life. Innovation and environmental protection are no longer in a zero sum game, where the more we think and grow the more we destroy. We no longer have to eat our mother. Think of the seed, a simple set of properties, manifesting as a spread towards moisture and heat. It bursts from its surroundings and breaks through the soil, to spear upwards, spreading its leaves. Or think of the child in the womb, feeding, nourishing, in symbiosis with its host, until a violent expulsion takes what the mother has wrought and sends it to the void. The cord cut, we orbit her for our formative years, still guided and fed, but no longer consuming her essence directly. One day we are able to meet our own needs alone, and eventually we return to tend to her, with love,respect and appreciation.
So in this now very hypothetical situation we have the ability to turn raw matter into machines and food throughout the solar system. But would we be fuelled by a blind market, that only came into being out of distributed market consensus to grow by turning sunlight into ledger entries? What are we then spreading to the stars? One ideal, the peaceful gardeners, bringing life, activating fertile soil, a wave of green spreading through the universe. But that’s the dream of a gardener. Are we gardners? Are we likely to spread green and peace?
A more apt description of humanity at a global scale is the great paper clip factory. This is a hypothetical about a superintelligence whose job is to make paper clips. It keeps increasing its production capacity, resource acquisition, and solving the threats to its existence, all to make more paper clips. In the end, the moral outcome is irrelevant, the universe is nothing but paperclips. The machine itself has no qualms with what it has done. It was tasked to make paper clips. So are we embedded in this intelligence, a superstructure driven by an economic engine? And if so what happens when we set its task to the conversion of energy into computing power? Does our economic interest become so disconnected from our material reality that in the end, generations thousands of years later can’t think of anything but to serve the machine.To fly to new galaxies to harvest the light of a thousand stars and feed the great blockchain? Is this so different to the market’s service of the GDP today? Are we ensconced in an intelligence that has grown from us, around us, with money its blood and the market its circulatory system and with all its might all it can do is eat? If so, is it not the battle of the next few generations to hobble the beast, to tame it?
Or perhaps it is an extension of the emergent intelligences that form around all human communities, coalescing today into a form that works for a global market. And like all intelligent human systems, this one can grow and evolve, building on the layers that came before as the brain evolved over millions of years. Can we teach the paperclip factory about love and spirit and hope and art, and calibrate it to help us tend to the garden? Though any gardener knows that every plant is a savage, a relentless paperclip factory itself, only bought into check by forces it cannot understand.
Go backwards to go forward
Perhaps we can start laying the groundworks for a new economic model now. Degrowth is a model that suggests we must first reduce the way society consumes, change our relationship with material things, and relegate the free market to the history books. Maybe by decarbonising under capitalism we could fuel the next thousand years of growth safely. But we’ll still end up in the same position, even if it’s at the limits of the solar system, galaxy or universe. Once everything is either a bitcoin miner or an iphone, will we look back gladly? So if we don’t change our relationship to growth for growth’s sake, taking the moral and environmental limiters off our energy consumption might just accelerate our consumption of the stars. Or we might just cause another environmental calamity, and drive global civilisation back a few steps. Perhaps the culture that emerges from that might have internalised the lessons writ to our collective memory through pain.
Or perhaps the new systems emerging today might form the distributed market conditions needed to elevate renewables above fossil fuels. Maybe in this seismic shift we overcome entrenched power and money structures. Perhaps we create a distributed energy capture infrastructure that powers a new market where the value tokens are literally backed by the sun. Maybe it buys us the next hundred years we need to move towards a more equitable, balanced and peaceful society.
Who knows? At the turn of the 19th century everyone was worried that horse shit would end up on second floor windows by the 21st century. These cultural and technological trends tend to happen in spite of us, so maybe it isn’t our job to try and stop them, but understand, predict and mitigate them like we would any other natural force.