Shownotes
There is a lot of FUD about Bitcoin being bad for the environment. What is the truth? Should we be "mining" Bitcoin? Let's take a look at some of the current ways that Bitcoin is being mined and the extremely clever ways that Bitcoin mining operations are using "stranded" energy in the form of natural gas and methane to mine bitcoin.
News and Links
https://www.nature.com/articles/d41586-018-07283-3
https://www.npr.org/2022/07/21/1112689091/bitcoin-tesla-selloff
https://decrypt.co/105693/sec-coinbase-lists-nine-crypto-tokens-securities
https://www.whatbitcoindid.com/podcast/turning-garbage-into-bitcoin
https://bitcoinmagazine.com/business/bitcoin-mining-can-prevent-climate-change
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I can be reached by email at mcintosh@genwealthcrypto.com and on twitter at @McIntoshFinTech. My mastodon handle is @mcintosh@podcastindex.social. Looking forward to hearing from you!
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Music Credits
Rock Guitar Intro 07 by TaigaSoundProd
Link: https://filmmusic.io/song/8342-rock-guitar-intro-07
License: https://filmmusic.io/standard-license
Funky Life by WinnieTheMoog
Link: https://filmmusic.io/song/6040-funky-life
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Transcripts
Hey, everyone. No one on this podcast is a financial advisor. All information presented
Speaker:on this podcast is for informational purposes only. All right. We got that out of the way.
Speaker:Let's jump on in. Welcome to episode 63 of Generational Wealth of Cryptocurrency podcast.
Speaker:I'm your host, MacIntosh. Today, we're going to talk a little bit about proof of work and
Speaker:its effect on the environment. I was kind of planning on doing this maybe a week or
Speaker:two down the road, but decided to go ahead and do it. I'd been thinking about this for
Speaker:a little bit, but got to be honest, there's a podcast, a Peter McCormick, What Bitcoin
Speaker:Did, that had a gentleman on it on the latest episode that discussed an aspect of this that
Speaker:I find fascinating. I'd really not heard anything about this up until this episode. I will be
Speaker:including a link to the episode in the show notes. I would actually recommend if you are
Speaker:interested in what I'm talking about that you take a listen to that episode.
Speaker:All right. What are we talking about? There is a perception many times with Bitcoin specifically,
Speaker:but with proof of work in general, which is a verification form that a number of cryptocurrencies
Speaker:use, including currently Ethereum. This is opposed to proof of stake, which other systems
Speaker:use. We've discussed this a bit in the past.
Speaker:People feel like proof of work. There are people, I should say, who feel like proof
Speaker:of work is wasteful. It consumes a lot of energy. You'll see figures on the internet
Speaker:floating around saying that Bitcoin mining is more energy intensive than, I don't know,
Speaker:Sweden, the energy output of Sweden. I think that's actually a statistic that's now floating
Speaker:around. That may or may not be true. I don't know. To be honest, I think what Bitcoin provides
Speaker:is actually so important that the issues that we're going to discuss are important, but
Speaker:at the same time, we as a species fight over things like, well, natural resources, oil,
Speaker:this kind of thing. A lot of harm is done through our current money systems. Let me
Speaker:put it that way. I believe, and I've discussed this somewhat on this podcast, but I believe
Speaker:that a lot of you can give them titles, whatever, like Wall Street people who manipulate fiat
Speaker:money at the expense of the middle and lower class. I believe that Bitcoin to an extent
Speaker:squares this because they can't manipulate it in the same way. We can't print more Bitcoin.
Speaker:We know when we reach 21 million Bitcoin, that's it. There won't be any more Bitcoin.
Speaker:We're not going to print 22 million Bitcoin. We're going to print, so to speak, we're going
Speaker:to mine 21 million Bitcoin. Nobody can take advantage of that. See, there are people currently
Speaker:who take advantage of the fact that the US government and many other countries, but the
Speaker:US government prints money. What did we do? This is where our sovereign debt comes from.
Speaker:It's from money printing, and it's currently at $30 trillion. There are people, see, I
Speaker:look at that and say the government shouldn't have debt. I'm not allowed to have long-term
Speaker:debt. I go bankrupt if I can't pay it off. Can the US government pay off $30 trillion
Speaker:of debt? Well, I guess apparently people think that they can. I don't think that's realistic
Speaker:since that's more than the GDP of the country. But regardless, they're allowed to continue
Speaker:that fallacy, and they're allowed to continue to print money. There are people who take
Speaker:advantage of that. Those people probably aren't you and me. They're certainly not me. Maybe
Speaker:it's you. I don't know who listens to this podcast, but most likely not.
Speaker:See, Bitcoin fixes that. We can have a discussion about the energy usage of Bitcoin and proof
Speaker:of work mining in general, but that to me is of overriding importance. Now, let's talk
Speaker:about the energy usage. For one thing, I would point out, doing my research for this, that
Speaker:there's a widely used study that came out. I'll provide a link to it in the show notes.
Speaker:There's an article that was widely used to say that Bitcoin is extremely wasteful. It
Speaker:was listed in Nature. I'm not sure I can provide direct access. I do not know if I can provide
Speaker:direct access to that article, but I will try. But this article gets quoted and used
Speaker:a lot in these arguments, and it turns out that much of what is in that article can simply
Speaker:be discredited. It was done by undergraduate students at I think it was University of Hawaii.
Speaker:It's just frankly wrong in a lot of aspects. That set the stage. Then you had people come
Speaker:along at the right moment, like Elon Musk, for example, who said, hey, Tesla owns a lot
Speaker:of Bitcoin. I love Bitcoin, blah, blah, blah. Oh, wait. We think Bitcoin is bad. It doesn't
Speaker:have anything to do with these ESG requirements that we suddenly have. But Bitcoin is bad,
Speaker:uses lots of energy, and we're going to stop taking it for Tesla. In fact, I'll skip to
Speaker:the news this week, they actually sold 75% of their Bitcoin. I don't know why. I've given
Speaker:up trying to understand Elon Musk, to be honest, but it's irrelevant to me. It did cause the
Speaker:price of Bitcoin to drop a little bit, not actually that much. We'll discuss that later.
Speaker:I don't know if it was because he still thinks that's true. I don't know, don't really care.
Speaker:But because he has the social presence that he has, him and people like him, it's this
Speaker:drumbeat, Bitcoin bad, proof of work mining bad. Hey, we should switch to proof of stake,
Speaker:which I will promise you, and I've said this on this podcast before, that will never happen
Speaker:with Bitcoin. Now we're fixing to see it happen with Ethereum, and maybe for the right reasons,
Speaker:I don't know. But it will not happen with Bitcoin. It just will not. So, let's talk
Speaker:about that. So, one of the things that I've come across is that there's a lot of evidence
Speaker:that a lot, so one of the arguments, actually, was that much of Bitcoin mining was done with
Speaker:non-renewable energies. I actually, you have to understand what drives a Bitcoin miner.
Speaker:Now, you can have a home miner, and it's kind of maybe not the hobby nature of it, but they're
Speaker:not really looking to maximize their profits necessarily. They're wanting to support Bitcoin,
Speaker:and that's terrific. That's not who I'm talking about. I'm talking about the people who are
Speaker:building facilities and mining Bitcoin, and they're doing it for profit. What goes into
Speaker:a Bitcoin operation? Three things. The people, the servers, the ASICs that actually do the
Speaker:computations, and the power. Now, people cost is one thing. Your ASICs cost fluctuates really
Speaker:actually based on the price of Bitcoin. It's very odd. I've been involved in computers
Speaker:for a long, long time, and what happens with computer technology is the price goes down
Speaker:over time. Things become more powerful. That's not the case with ASICs, for Bitcoin mining
Speaker:ASICs specifically, probably all of them in general, but it literally fluctuates with
Speaker:the price of Bitcoin. Right now, you could go to compassmining.io or whatever their website
Speaker:is and try and order an S19, and you would find out that it was, I want to say like $4,700
Speaker:for an S19J, if I'm not mistaken. Somewhere right around there. When Bitcoin was at $59,000,
Speaker:it was like $15,000 or $20,000. It's insane. So now that prices have dropped, the cost
Speaker:of the ASIC has dropped. It has nothing to do with – it has to do with supply and demand.
Speaker:It doesn't have to do with the cost to manufacture that ASIC. Let's put it that way. But that's
Speaker:a factor in this. You've got the price of the – to get back to our story – price
Speaker:of people, price of the ASIC, and price of power. Bitcoin miners always want the cheapest
Speaker:power possible. Now this has created some very interesting opportunities. I'll give
Speaker:you some examples. Full disclosure, I own some stock in a company called BitFarm. They
Speaker:are a mining company, a Bitcoin mining company. They're in Canada. I believe they're in
Speaker:Quebec. They are listed on the stock exchange. I believe it's BitF. And by the way, their
Speaker:stock is a bargain right now. It fluctuates with the price of Bitcoin too, which I would
Speaker:expect. But regardless, what do they do? They get their power from what would be considered
Speaker:renewable energy. They get it from a hydroelectric dam. And I think I've discussed this in the
Speaker:past in regards to a project going on down in South America, Paraguay, maybe Brazil.
Speaker:There's a third country. They share a border, a river, and they built a dam there. And one
Speaker:of the countries – I apologize, I can't put all the details together in my head – but
Speaker:one of the countries was not using all the power and they were selling it, I believe,
Speaker:to Brazil for a very cheap price because they just didn't need it. Well, now they're actually
Speaker:going to start mining with that power, Bitcoin, mining Bitcoin. Because the power's there,
Speaker:the power is going to be there whether they mine Bitcoin or not. They have no other use
Speaker:for it. And they said, well, we'll make Bitcoin. We'll generate profit. That's a terrific
Speaker:use case for that. Anyways, back to, well, BitFarm, they are using hydroelectric power
Speaker:and so that keeps their power cost down. Other cases, which I've discussed multiple times
Speaker:in this show, we're seeing in the oil and gas industries where Bitcoin mining operations
Speaker:are partnering with oil and gas. Now, let's step back. Maybe from an environmental perspective,
Speaker:you say, well, we shouldn't be drilling oil and gas. I would make the argument that we're
Speaker:100 years from not needing oil, but that's maybe we can disagree on that. It's certainly
Speaker:something that's going on right now. It's not been outlawed. It's certainly allowed
Speaker:and so on. Now, one of the things that happens with oil and gas exploration, typically like
Speaker:we drill an oil well and there's natural gas present there. Now, oil, we pump it, we pump
Speaker:it into storage, and then they put it into whatever, maybe they ship it in an oil train,
Speaker:an oil container type thing, or maybe they barrel it up, I don't know, and ship it out.
Speaker:Whatever happens. When they're drilling oil, quite often, they also get natural gas. The
Speaker:thing about natural gas is you have to build a pipeline. Pipelines are very expensive.
Speaker:I actually saw some figures while I was doing research on it. It was like millions of dollars
Speaker:per mile. It was crazy. Rather than do that for no profit, essentially, the oil companies
Speaker:will often flare off this natural gas. You see the natural gas burning. That's what you
Speaker:see in these pictures of these oil rigs a lot of times.
Speaker:I don't know who that clever person was, but they came up with the idea that we're going
Speaker:to put a shipping container type data center right next to the oil well. Rather than flare
Speaker:off that natural gas, we'll run a generator off of it right there. The generator produces
Speaker:electricity and, of course, the electricity drives the bitcoin mining. What does bitcoin
Speaker:mining need? It certainly doesn't need a pipeline. All it needs is an internet link. You hook
Speaker:up to the internet and boom, there you go. Off to the races. They get that very cheaply
Speaker:because it's essentially a waste product.
Speaker:That and the renewable energy type stuff with solar and water, this stuff's been around.
Speaker:What I haven't heard about until very recently, at least that I remember, is methane. Let's
Speaker:go back to our ecological arguments. One of the things that when people talk about global
Speaker:warming is they talk about the CO2 levels. If CO2 reaches a certain percent, then it's
Speaker:going to cause average temperatures to rise a certain amount. Okay, but what most people
Speaker:don't even know about is an issue with methane. How is methane generated? There are several
Speaker:ways. One is through agricultural waste, essentially. When you have a large-scale cattle operation,
Speaker:for example, with a large amount, if they're doing feedlots or whatever, maybe they have
Speaker:a large amount of manure. That manure, as it breaks down, it creates methane. That's
Speaker:one way. Cattle, pig operations, this type thing. Another way is through landfills. This
Speaker:is the one that we're very uncomfortable talking about.
Speaker:We go to a waste landfill. I'll give you an example. The area that I live in, we have
Speaker:a landfill. I don't personally visit this landfill very often, but I've certainly been
Speaker:there. You drive in, you bring your trash in, you dump it, and they cover it up and
Speaker:so on and so forth. That keeps going, and they build these mounds, almost these mountains,
Speaker:and you get waste that, over time, break down. Some of it takes a lot longer than others,
Speaker:but it does break down over time. This breaking down of organic matter specifically in a landfill
Speaker:creates methane. Methane is far more dangerous, according to the research, as a greenhouse
Speaker:gas, basically. I hope I'm doing all this terminology correctly, but it's far more
Speaker:dangerous and causes far more damage far more quickly than releasing carbon dioxide.
Speaker:Now, I bet many of you didn't know that. What do we do? One of the facts that I've
Speaker:uncovered, I heard this on the What Bitcoin Did podcast, there's roughly 2,600 landfills
Speaker:in the United States. In a lot of those landfills, they actually flare off the methane, kind
Speaker:of like flaring off the natural gas. They figure, well, it's better for the environment
Speaker:to burn it than it is to just allow it to basically leak into the atmosphere. There's
Speaker:two problems with that. One, there's the expense problem. Just that alone with the setup that
Speaker:you do to do that plus the stack, essentially. It's like a million bucks. So for a smaller
Speaker:town like our area, a million dollars would be a fairly big expense. We don't have one
Speaker:that I'm aware of. I don't think they do this here. The second issue, so you have an issue
Speaker:where a lot of municipalities don't have a flare, essentially. But the second issue that
Speaker:you have is even when you do flare, it's basically 92% effective, according to the research.
Speaker:So that means that 8% of the methane still leaks out into the atmosphere. So what do
Speaker:we do? Well, there are municipalities, typically on a much larger scale, probably even like
Speaker:a Los Angeles class municipality, where rather than flaring it off, they actually create
Speaker:energy with that. And then they send that out to the grid. Now that can be effective.
Speaker:The problem is cost. Again, we're running lines to places and typically landfills are
Speaker:not right in the center of town. And if it's a smaller municipality like ours, for example,
Speaker:the cost of that operation would be astronomical. It would not make any kind of sense. That's
Speaker:why they don't do it. But what if we did something like what they do with these oil and gas rigs?
Speaker:There are some clever people who are working on this, including the gentleman who was on
Speaker:Peter McCormick's show recently, Adam. I want to say Adam West. I may be thinking of the
Speaker:Batman actor, but it was Adam. Yeah, let me see. I'll look it up real quick. But he is
Speaker:actually working out in California. And there's a specific reason, which I'll explain very
Speaker:quickly why they're doing it in California. Inside California or California inside the
Speaker:United States, California probably has the toughest regulations of any state. So his
Speaker:thought was if we can make this work in California, we can make it work anywhere in the United
Speaker:States. And that's probably a very fair statement. So they are working with a municipality in
Speaker:California to prototype this essentially. Where is that? Adam Wright. It was close to
Speaker:West. Adam Wright. Turning garbage into Bitcoin with Adam Wright is the name of the episode
Speaker:and it was aired on July the 13th. All right. So there you go. So it's very similar. You
Speaker:capture the methane, but instead of flaring it off, you run a generator with it. The generator
Speaker:produces electricity, but then you use it right there on site. So there's no overhead
Speaker:to that essentially. And you create Bitcoin by mining. Now that is some spectacularly
Speaker:smart thinking in my opinion. And these are the type things because companies will always
Speaker:look for the highest profit. These are the type of things that will drive the innovation.
Speaker:Oh, this is cheap power over here. Remember three aspects, right? The price of the ASICs,
Speaker:the price of the people, and the price of the power. But of those three, really the
Speaker:price of the power is the biggest driver. So I don't know offhand what the prices are
Speaker:for power in the United States, but the numbers that he was talking about in the show are
Speaker:quite low per kilowatt hour, which is how that's expressed. And they are helping the
Speaker:municipality. In his case, they do like a partnership with the municipality. So actually
Speaker:the municipality can receive money or they can receive Bitcoin. So this is a way that
Speaker:even municipalities could get involved in the Bitcoin game, so to speak. They can use
Speaker:it to offset the cost of running this methane containment system, which is essentially what
Speaker:they build, which that, you know, there's overhead there. There's costs there and these
Speaker:costs are getting passed on to the municipalities and they're having to do what? Charge higher
Speaker:rates. So this will help keep even the cost of the garbage more economical, garbage collection
Speaker:or garbage, whatever, whatever you want to call it. I would love to see something like
Speaker:this at every one of the landfills in the United States. Now, will that ever happen?
Speaker:I don't know. We will see. But very, very interesting. And I love the innovation and
Speaker:I love the ability to say to people who say, well, Bitcoin is consuming so much power.
Speaker:I'm like, okay, fine. But you tell me what industry that you've got that can do these
Speaker:things. See, in this case, especially, they are doing the exact thing that the people
Speaker:who are, you know, hardcore environmentalists, I don't know what else to call it. That's
Speaker:what they want. We want to get rid of methane creation. Well, here's a way to do it because
Speaker:people aren't going to stop making garbage. Sorry. And until we create a fusion reactor
Speaker:to put that garbage into, there's not a better way to do this. So there you go. It's a way
Speaker:that we can help the environment right now. And it's through the very thing that some
Speaker:of these hardcore environmentalists want to outlaw. I give you New York banning Bitcoin
Speaker:mining essentially, unless it's either already there or it's on a renewable power source.
Speaker:And there are times when that doesn't make sense. I won't. Well, I want to jump into
Speaker:this part real quick and then we're going to wrap up. People have different views on
Speaker:nuclear power. There are people who consider nuclear power to be green. I'm not sure that's
Speaker:really true, but it's power. And it provides a lot of power in a lot of places. There's
Speaker:places like France who the majority of their energy is nuclear power. What a lot of people
Speaker:don't understand about nuclear power is it's very difficult to regulate the amount of power
Speaker:that that plant produces. And when you want to basically have enough power for every situation,
Speaker:well, then what do you do with the excess? They basically waste it most of the time.
Speaker:But again, Bitcoin mining can provide an alternative for that. They can make agreements with a
Speaker:nuclear power plant. And this sounds crazy, but it would work. I don't know if it's been
Speaker:done yet, but I'm sure it will be. We are actually here in the United States from what
Speaker:I understand talking about building some more nuclear power plants. But let's say I'm just
Speaker:going to pull some numbers completely at random. I have no idea that these are any close to
Speaker:accurate numbers. But let's say they built a plant for an area and they said, we need
Speaker:50 megawatts of power. Okay. That's our peak load. Normally, we're only using 40 megawatts
Speaker:of power. Okay. Well, what do we do with the extra 10 megawatts? Oh, wait, Mr. Bitcoin
Speaker:mining company over here. I'll sell it to you for cheap if you promise when the load
Speaker:goes up that we shut those down. And that can be done. You can do that. And if we do
Speaker:it really cheap, then everybody's happy because when those servers are running, they're making
Speaker:good money. They're profitable almost regardless of the price, because a big component of that,
Speaker:of a mining cost is the power. So maybe we talk about that or another show. I don't know.
Speaker:But I'm going to wrap it up here for that. I don't really have any people to talk about
Speaker:this week. I'm sorry. I got a couple little small boost, no messages, very small boost,
Speaker:but that's okay. Maybe the last episode wasn't that great. I did try. It was a very difficult
Speaker:subject to be honest. A lot to wrap your head around there. I just, I don't know. It is
Speaker:what it is. And let's talk about the news. Let's talk about Bitcoin price and crypto
Speaker:in general. We saw a little bit of a resurgence. Bitcoin went above 23,000. I believe it actually
Speaker:went above 24,000 briefly. In fact, I know it did earlier this week. It has dropped back
Speaker:down. We're at 22,900 right now. It needs to hold a weekly, at least a daily close above
Speaker:23,800, I believe, in a lot of people's opinion in order to kind of be moving to the next
Speaker:level. I think we've proved that we made it back up to 23,000, but I would not be
Speaker:surprised at all if we go down from here again, back down towards 17 or so. Ethereum, on the
Speaker:other hand, kind of went a little nuts. It actually went up 50% in the last seven days,
Speaker:if I'm not mistaken. If Bitcoin starts dropping, I do expect it to go back down, although it
Speaker:may not go down. I don't know. It may hold its levels longer and so end up higher, so
Speaker:to speak. We will see. I just, as I've said a number of times, I don't think we're going
Speaker:to be out of this market for a while. I think we're very much correlated with the stock
Speaker:market, and the stock market has shown some signs of relief, to be honest, but I don't
Speaker:think we're out of the doldrums. I don't think we're out of the bear market.
Speaker:All right. News. Not a whole lot this week. I did have a couple of items. I did mention
Speaker:Tesla. They sold quite a bit, 75% of their Bitcoin. I will include an article in that.
Speaker:I have no other comments about that other than I don't understand what they're doing.
Speaker:They may have been doing it because they needed some cash, essentially, and that may be true.
Speaker:I don't know. It does look like we have something that just came out earlier today. They have
Speaker:charged, I would assume this is the SEC, has charged three former Coinbase people with
Speaker:insider trading. This is according to the US Attorney's Office for the Southern District
Speaker:of New York and the SEC. Okay. What's the SEC? I'm not surprised. I'm not shocked at all.
Speaker:To be honest, I think this kind of thing goes on on every centralized exchange. It would
Speaker:be very easy. I don't know what else to say. Should we outlaw centralized exchanges? No.
Speaker:I would say, actually, if they could maybe do some work on this and at least make it
Speaker:more difficult. This type thing, it's not good. It's not good for the industry and all
Speaker:that. That's all I got about that. I will note that it certainly did happen. Who knows?
Speaker:There's also a thing that the SEC claims Coinbase currently lists nine crypto assets that are
Speaker:securities, unregistered securities. This came out as part of that same insider trading
Speaker:thing. Actually, it lists the assets here. I'll go ahead and read through these. I don't
Speaker:know any of these actually. That's funny. Not one of these. AMP. I think I've actually
Speaker:heard of AMP, but I don't know anything about it. Rally, Derivodex, XYO, Rary Governance
Speaker:Token, LCX, Power Ledger, POWR, DFX, and Chromatica. There you go. That's not going to go well
Speaker:for those tokens. It's not. All right. That's it. I hope everybody's having a good week.
Speaker:We will be out with our regularly scheduled episode Monday. As far as I know, I will throw
Speaker:out... I got a little bit of COVID going through our house, so I am negative at this
Speaker:point earlier today, assuming I remain that way and can sit up right and record. If I
Speaker:can, we'll have an episode Monday. If you don't hear from me, I will at least try and
Speaker:post something on Twitter. That is life. That is the world that we live in these days. All
Speaker:right. I'm not going to go through the normal wrap-up about value for value. You guys know
Speaker:about that. I may take an episode here and break it down a little bit. We've got a lot
Speaker:of new listeners, I'm sure. I ask you this. If you like the content, please tell your
Speaker:friends about generational wealth cryptocurrency content. You may have noticed I stopped asking
Speaker:for reviews. Go put a review out if you want. I'm a value for value podcasting 2.0 person.
Speaker:I'm not going to tell you to go to Apple and put a review up. It would help me, but Apple
Speaker:is... They are definitely not... Well, they're very much against... They're value for value.
Speaker:The whole podcasting 2.0 ecosystem was basically created as a reaction to Apple and their handling
Speaker:of the podcast index, basically. I'm not going to go into detail about that on this podcast,
Speaker:but it's just not something I support. Anyways, I would say this podcast is best listened
Speaker:to on a podcasting 2.0 app, though. You can go listen to those, pick one of those up,
Speaker:newpodcastapps.com. You can test drive Fountain, for example. With Fountain, when you stream
Speaker:a podcast, if a lot of the podcasts, not all of them, but a lot of the podcasts, you get
Speaker:Sats back in your Fountain wallet, which is a Bitcoin wallet. It's a Lightning wallet,
Speaker:too. You can make money listening to podcasts. You could also support podcasts that way,
Speaker:as well. Thanks for being here. I hope this has been helpful, and I would love to hear
Speaker:from you. I'm on Twitter at MacintoshFintech, and you can reach me by email at macintosh.genwealthcrypto.com.
Speaker:Of course, the generational wealth website is at genwealthcrypto.com. Go out and make
Speaker:it a great week. I will talk to you all soon.
Speaker:Thanks for watching.
Speaker:Bye for now.
Speaker:Thanks for watching.