How crypto mining is targeting clean energy #CriptoNews

CNN
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In broad daylight, law enforcement officers raid a warehouse on the outskirts of the city of Sukhumi in Abkhazia, a Russia-backed breakaway Georgian region. No one’s there; no drugs or weapons either. Only a large cooling cabinet containing dozens of electronic devices.

This is a cryptocurrency mine.

A video of the raid was posted in December by the Abkhaz press service, one of many it has posted to YouTube since 2021. Crypto mining is banned in Abkhazia, yet for years this energy-intensive industry has flourished, attracted by the region’s cheap hydropower.

For Abkhazia, it comes at a cost. The region typically faces seasonal power shortages as water levels drop in the winter, but they have become more disruptive because of crypto mining, which is sucking up electricity 24 hours a day.

Abkhazia has experienced crippling blackouts. Daily power cuts were introduced for four hours at the start of November. By the second week of December, Abkhaz residents had almost ten hours of blackouts a day. Badra Gunba, the acting leader of Abkhazia, declared the region’s critical electricity left it facing “a humanitarian catastrophe,” according to a Reuters report.

To “mine” for digital currencies, powerful computers perform trillions of calculations per second. The more computer power miners have, the more profitable mining will be. This all adds up to huge amounts of electricity use.

Where once Abkhazia was powered almost entirely by renewable hydropower, it’s now increasingly reliant on subsidized energy from Russia to help reduce blackouts. As most Russian energy comes from fossil fuels, crypto mining is also contributing to more climate pollution generated by the region.

What’s happening in Abkhazia is extreme but it’s indicative of a global trend. The crypto industry, while always volatile, is booming and is hungry for power. “Electricity is the largest cost input to crypto,” said Theresa Sabonis-Helf, an energy security professor at Georgetown University.

To get their hands on it, many miners — both illegal, like those in Abkhazia, as well as legally-operating companies — are looking to places where they can tap into cheap electricity, often those with plentiful renewables. Experts warn it can come at a cost for local people, exacerbating shortages and diverting clean energy.

The global mining of Bitcoin, the most popular cryptocurrency, consumes more energy than is used by all of Pakistan, home to more than 230 million people, according to a 2023 study published by the United Nations University. The crypto industry’s electricity consumption is expected to increase 40% between 2022 and 2026, according to an International Energy Agency report.

President Donald Trump has pledged to turn the US into the world’s “crypto capital,” and electricity demand there is expected to shoot up nearly 16% by 2029, in part due to data centers powering crypto mining and AI, according to one analysis.

Some US cryptocurrency companies are turning to homegrown renewable energy to find cheaper, cleaner ways to run their operations.

In December, Florida-headquartered MARA Holdings announced it bought a wind farm in north Texas to power Bitcoin mining. “We’re leveraging renewable resources that would have otherwise been curtailed (and) reducing our bitcoin production costs,” said Fred Thiel, MARA’s chairman and CEO in a December statement.

But it’s also looking further afield. MARA plans to generate 50% of revenue overseas by 2028. It has operations in Paraguay, which run on hydropower electricity. This is a “win-win formula,” said a MARA spokesperson. The company uses “underutilized renewable sources,” boosts the development of renewable projects and contributes to overall grid stability, while also increasing access to affordable, reliable energy, the spokesperson told CNN.

But some experts worry about the extra pressure on energy grids in countries where access to electricity is already patchy. Many low-income households in Paraguay still use firewood for heating.

“If you use all that cheap, clean hydro(power) for crypto mining, then humans and small businesses can’t use it and then they have to go somewhere else for that energy — and often it is fossil fuel based,” said Mandy DeRoche, deputy managing attorney at US-based non-profit Earthjustice.

In Paraguay, these fears have been stoked by the proliferation of cowboy crypto miners, which, unlike MARA, operate illegally. State energy company ANDE reports that around 28% of the country’s electricity is lost every year, driven in part by fraudulent crypto mining.

Ethiopia is another country attracting crypto miners, where electricity is almost entirely powered by hydropower.

BitFuFu, a Singapore-headquartered Bitcoin mining company, which operates mostly in the US, announced a new stake in a Bitcoin facility in Ethiopia in October.

The acquisition will contribute to Ethiopia’s economy and increase people’s access to cheap power, the company said, as well as also benefiting BitFuFu’s bottom line. “With power costs averaging below US$0.04 per kilowatt-hour, this acquisition is expected to reduce BitFuFu’s cost per Bitcoin,” it said in an October release.

Some experts, however, have expressed concern about the potential impacts of a burgeoning crypto industry on Ethiopians. “I would really question any claim that Ethiopia is the place where the crypto mining should be developing,” said Mikael Alemu Gorsky, co-founder of solar energy developer 10 Green Gigowatt for Ethiopia.

Nearly half the country’s population has no reliable electricity access, according to the World Bank. “Where my father lives, in Addis in the capital, they have electricity three days a week,” Gorsky told CNN. “All those ideas that the country had any excess electricity, or it has enough electricity are false.”

“(Businesses) cannot get more electricity from the power lines because there is very little generation that is centralized. So people import oil for power generators,” Gorsky added.

BitFuFu did not respond to CNN’s request for comment.

Often, the reasons a region is profitable for crypto miners are the same reasons that make it vulnerable, said Kaveh Madani, an environmental scientist and director of the United Nations University Institute for Water, Environment and Health.

It’s becoming common to “to see (crypto) mining in areas that already have issues: energy shortages, environmental problems and so on,” he told CNN.

Madani, who co-authored the UNU report on the environmental impacts of crypto mining has called for “regulatory interventions and technological advancements,” to ensure an expanding crypto industry doesn’t have unintended environmental consequences.

“When you note which groups are currently benefiting from mining Bitcoin and which nations and generations will suffer the most from its environmental consequences, you can’t stop thinking about the inequity and injustice implications,” he said.

In Abkhazia, anger at crypto’s impact has been growing.

Local activists in the village of Adzyubzha, took matters into their own hands in December, setting crypto equipment alight, according to local media reports.

“We’re past the first quarter of the 21st century and our people are dreaming of electricity,” Nugzar Kasya, a representative for the village’s Council of Elders, told local media outlet Aiashara. “If there is any respect for their people, any sense of patriotism, they should switch off the mines, and allow people to live in peace.”