Key Points
- The upcoming Bitcoin halving could lead to a more sustainable and greener Bitcoin mining network.
- Over 54.5% of the Bitcoin network’s energy consumption could be powered by renewable energy sources by January 2024.
The imminent halving of Bitcoin could potentially result in a more eco-friendly Bitcoin mining network that utilizes sustainable energy sources.
The rewards for Bitcoin block mining are set to decrease from 6.25 BTC to 3.125 BTC. This, coupled with a steadily rising Bitcoin hash rate, could impact the profitability of mining companies. As a result, miners might seek out more capital-efficient, sustainable energy sources, suggests Matteo Greco, a research analyst at Fineqia International.
Bitcoin’s Energy Consumption
Bitcoin has frequently been criticized for its high energy use and dependence on fossil fuels. However, by the end of January 2024, renewable energy sources could power over 54.5% of the Bitcoin network’s energy consumption, as per the Bitcoin ESG Forecast, a monthly research report authored by Daniel Batten, the managing partner of CH4 Capital.
Bitcoin mining mechanics are also encouraging greater efficiency, which could be one of the primary reasons for the network becoming increasingly more sustainable.
Bitcoin Mining in China
Despite a ban on Bitcoin mining, China currently contributes to approximately 15% of the global Bitcoin hash rate, as per the April 5 issue of Batten’s Bitcoin ESG Forecast.
There is no longer any off-grid coal-based mining. It’s too conspicuous, it competes for baseload energy, and it conflicts with the central government’s emission targets. This has resulted in a significant reduction in the emission intensity of Chinese mining post-ban.
Miners in mainland China primarily depend on hydroelectric power, which is abundantly cheap during the wet months in the four regions of Xi’an, Wuhan, Beijing, and Xining, as noted by Batten.
Furthermore, Batten pointed out that a significant number of retail participants are mining Bitcoin at a loss, primarily to have an exit from the Chinese financial system.
“They convert Chinese yuan for ASICS and electricity which creates Bitcoin, which gets converted into USD. Many retail miners are willing to take the profitability hit simply to have a way to convert Yuan to USD,” he said.