Cryptocurrency may have no value, but it definitely has a price

Cryptocurrencies, like Bitcoin and Ethereum, have no intrinsic value. They exist only as numbers in a blockchain, and they’re worth whatever the wildly swinging market says they are worth at a given moment.

But even if crypto has no real-world value, it absolutely has a real-world cost. Because finding the magic numbers for each currency requires solving mathematical equations that are purposely difficult to execute. Completing those calculations requires more and more dedicated computing hardware over time—and more and more energy.

As a new report from the Energy Information Administration warns, “mining” for cryptocurrency now consumes up to 2.3% of electricity produced in the U.S. What’s more, that power includes some of the dirtiest electricity in the nation. It’s also directly affecting the cost of electricity for consumers while putting money in the pockets of the companies mining for “digital gold.”

The new report shows a sharp increase over a report from 2022 that estimated crypto already consuming as much as 1.7% of U.S. electricity. According to the EIA, the 2022 amount was “similar to all home computers or residential lighting in the United States.” Now crypto is consuming still more, and the new report notes there have been incidents in which “electricity prices spiked due to a sudden surge in cryptocurrency mining.” 

As The Texas Tribune reported in January, one Bitcoin mining company made millions by taking advantage of Texas’ managed energy market during last summer’s heat waves. As Texans were suffering through record-breaking heat and being asked to cut back on their use of electricity,  crypto mining company Riot Platforms sold off $32 million in power credits it had purchased when the market was low. 

Texas’ electrical market allows large energy companies to hit the jackpot during emergencies when electrical demand is high. Some companies have made more profit in a single day from selling energy credits than they have in a whole year of operating normally.

But consumers aren’t able to play this game. Instead, they pay inflated rates for the electricity that companies are selling back to the grid at a profit. In the case of cryptocurrency miners, companies can take a big payday precisely because the miners are such large consumers of power.

“I think that the rewards for their behavior are so lucrative and unfair,” said Mandy DeRoche, deputy managing attorney at Earthjustice, a nonprofit environmental group. “It’s like we’re bending over backwards to give money to the (crypto) miner for putting the strain on the grid and the system in the first place.”

As CBS News noted, the infusion of cash from Texas’ power grid operator ERCOT lowered Riot Platforms’ cost of mining Bitcoin, making their profit-per-coin higher. Riot Platforms’ CEO stated that this was “a key element in making Riot one of the lowest cost producers of bitcoin in the industry.”

In other words, Texas is making it cheaper to mine Bitcoin by having small consumers pick up the crypto miners’ energy bills.

But dipping into people’s pockets for a discount may be one of these crypto mining companies’ more benign activities. Across the country, crypto mining has bolstered failing coal and gas power plants and kept them running. According to Sierra, the magazine of the Sierra Club, some of these plants are using waste coal left over from previous mining specifically because it contains high levels of sulfur, mercury, lead, and other pollutants. Now it’s being burned for Bitcoin.

Loopholes allow some of these operations to dodge the requirements that would normally apply to a power plant, even though they are operating at scales that could power thousands of homes. During the Trump administration, EPA restrictions were relaxed, allowing miners to use tremendous amounts of power with very little oversight because their power stays “behind the meter” rather than being sent out to consumers. Because they are not regulated as power producers, most crypto mining companies can avoid reporting their emissions under the Clean Air Act.

A 2018 study from Nature Climate Change projected that greenhouse gas emissions from crypto mining alone were enough to push the average global temperature 2 degrees Celsius higher in the next 30 years. 

Sen. Ed Markey introduced the Crypto-Asset Environmental Transparency Act in the Senate Committee on Environment and Public Works early in 2023. That bill would require the EPA to conduct a study on the effects of crypto mining and regulate mining operations producing over 5 megawatts. However, no further action has been taken on this proposed legislation. 

Cryptocurrency is imaginary. But the consequences of producing crypto are real. They affect real consumers’ pocketbooks and, thanks to lax regulation, they affect the whole world by turning out more greenhouse gasses as well as other pollutants.

It is primary season, and Donald Trump seems pretty low energy these days. Kerry and Markos talk about the chances of Trump stumbling through the election season and the need to press our advantage and make gains in the House and Senate. Meanwhile, the right-wing media world is losing its collective minds about Taylor Swift registering younger Americans to vote!

Campaign Action

Read More:Cryptocurrency may have no value, but it definitely has a price