Governments and environmentalists are quick to criticize the amount of electricity Bitcoin mining uses, but growing investor interest in cryptocurrencies is making positive strides in the energy sector.
The impact of the Blockchain industry on the energy sector has been a major source of controversy over the last five years. Governments and environmental protection advocates have routinely raised concerns about the amount of energy required to keep the Bitcoin network secure. The data shows that grid energy consumption now rivals the annual energy consumed by some small countries.
Although much of the debate has focused on the negative environmental impacts of Bitcoin (BTC) mining, the drive to maximize mining profits and integrate Blockchain technology with the energy grid has also introduced new developments that have the potential to be beneficial in the long run.
Below, there is a list of various developments that have come out of the demand for energy to run Blockchain networks and the positive effects that cryptocurrency mining is having on the energy industry.
Recovering Wasted Energy
One of the fastest-growing segments of the cryptocurrency mining industry is the monetization of historically wasted energy sources, such as natural gas that is burned in oil extraction facilities.
The discovery of natural gas pits is a common occurrence in the oil drilling industry and, until recently, this gas used to be burned in a process called “flaring” because the necessary infrastructure for its collection did not exist or there was not enough demand for LNG.
As the value of Bitcoin increased over time, the search for cheap energy sources led to the installation of shipping containers filled with mining equipment at drilling sites that can use the energy generated by combustion to extract BTC.
Although the process still produces carbon dioxide emissions, revenues are generated during the process and these funds could be redirected towards mitigating environmental problems.
More recently, several companies have been exploring the integration of mining through flared gas in the Middle East, which accounted for more than 38% of global flaring in 2020 and presented one of the biggest opportunities to turn wasted energy into value.
Blockchain Technology Can Make Power Generation More Efficient
A second side benefit of the drive to maximize profits from cryptocurrency mining is improved energy infrastructure and a greater focus on developing sustainable forms of power generation.
Less developed countries such as Kenya and El Salvador have been able to benefit from improvements in power generation from sustainable sources such as geothermal power plants, which have given their economies an additional source of income.
Whether it is the utilization of excess energy generated by hydroelectric plants or the increased use of wind and solar energy, cryptocurrency mining is providing a financial incentive to help further optimize energy generation and efficiency.
Smart Grid Technology
Another energy-related Blockchain development is the formation of Blockchain-based smart networks that aim to improve large-scale energy distribution.
Inefficiencies in electricity distribution have been largely localized at the retail level, where smaller companies that own very little of the electricity grid infrastructure primarily provide simple services such as billing and metering.
These types of services can be easily managed by Blockchain technology and Internet of Things (IoT) devices that help consumers bypass retailers and connect directly with wholesale distributors, potentially reducing electricity bills by up to 40%.
Although the sector is still in its infancy, it is a trend worth following because, in the coming years, Blockchain technology will be further integrated into the energy sector.
By Audy Castaneda
