ccaf bitcoin mining study

The Majority Of Bitcoin Mining Is Fueled By Sustainable Power

Read Time:7 Minute, 53 Second

2023-02-19 13:00:00

Opposite to a misguided Cambridge College research, Bitcoin mining leverages 52.6% sustainable power, making it an interesting ESG funding.

This text offers a take a look at my newest analysis, revealing the way it got here to be {that a} 2022 Cambridge Centre For Different Finance’s (CCAF) research on Bitcoin’s environmental influence underestimates the quantity of sustainable Bitcoin mining occurring. I additionally handle why we might be very assured that the precise sustainable power utilization is no less than 52.6% of Bitcoin mining’s complete power use.

Why This Issues

No matter your place on ESG funding, the fact is that it’s hovering, on observe to achieve $10.5 trillion within the U.S. alone. What’s additionally true is that Bitcoin adoption can not happen until this $10.5 trillion of ESG funds feels comfy that Bitcoin is a web optimistic to the setting.

Proper now, ESG buyers largely don’t really feel comfy that that is the case. In talking with them, my impression is that one purpose for ESG investor discomfort with Bitcoin is that the CCAF research, “A Deep Dive Into Bitcoin’s Environmental Influence,” reported that Bitcoin makes use of solely 37.6% sustainable power.

Whereas ESG buyers are usually fast to dismiss the work of Bitcoin-critic Alex de Vries — debunked in an earlier Bitcoin Journal article — I’ve discovered they’re additionally extra more likely to belief the CCAF research over a Bitcoin Mining Council (BMC) research that discovered Bitcoin makes use of 58.9% sustainable power. You possibly can perceive why: The Cambridge model says “respected, unbiased analysis,” whereas BMC’s says, “business physique.”

Sarcastically, being an business physique, the very factor that provides BMC entry to real-time Bitcoin mining knowledge, additionally made its findings simpler for no less than some ESG buyers to disqualify. Environmental teams comparable to Earth Justice and journals comparable to “The Ecologist” have been equally fast to imagine the CCAF numbers should be the right ones.

Thus far, Bitcoiners have had a muted response. The outcome: The dialog about ESG funds getting behind Bitcoin can not progress. Bitcoin consumer adoption stalls.

In the meantime, environmental teams acquire extra gasoline to foyer governments to control Bitcoin mining in a punitive method.

What Would It Take For ESG Funds To Help Bitcoin?

ESG funds require three issues earlier than they’ll spend money on Bitcoin initiatives. These are the identical three issues that the White Home would want to be able to not punitively regulate Bitcoin mining: unbiased, empirical knowledge demonstrating unambiguously:

  1. How the CCAF research got here to be understated and by how a lot
  2. That the Bitcoin macro development is quantifiably shifting towards sustainable power
  3. That Bitcoin is quantifiably a web optimistic to the setting and society

The analysis introduced right here is the reply to the primary requirement for ESG buyers. It gained’t by itself open the floodgates for institutional ESG funding, but it surely does knock over the primary main boundaries.


All through 2022, I used to be perplexed in regards to the constant, 20%-plus distinction between the BMC and CCAF estimates of Bitcoin’s sustainable power use. I noticed each the Bitcoin neighborhood and environmental teams quote the determine that match their narratives.

Being within the uncommon place of straddling each communities, my easy query was, “Who’s proper?”

I made a decision to analysis the query.

What I spotted was that the CCAF mannequin was excluding a number of components. No nice detective work on my half: It says so on its web site beneath the “Limitations Of The Mannequin” part.

So, I quantified the influence of those exclusions. It turned out that the three exclusions talked about on its web site trigger its mannequin to understate Bitcoin’s sustainable power share by 13.6%. This explains two-thirds of your complete variance between the CCAF and the BMC mannequin. 

When all exclusions from the CCAF mannequin are factored in, the Bitcoin sustainable power share determine is a full 15.5% increased.

Right here’s a full breakdown of the entire CCAF mannequin exclusions. There are 9 exclusions in complete: seven (in inexperienced) that improve the sustainable energy-use determine; two (in pink) that lower it. A full analysis of every issue and the methodology used to quantify exclusions might be discovered on my analysis web site.

complete sustainable bitcoin mining estimate

So, in abstract, the CCAF mannequin doesn’t consider:

  • Off-grid mining (influence: plus 10.8%)
  • Flare-gas mining (influence: plus 1.0%)
  • Up to date geographical hash fee (Kazakhstan miner exodus, influence: plus 1.8%)

With all exclusions factored in, the sustainable power combine calculation is 52.6%. This determine represents a lower-bound estimate, so it’s not incompatible with the BMC research exhibiting 58.9% sustainable power.

How Assured Can We Be That Bitcoin’s Power Use Is Over 50%?

We will simulate this utilizing the revised mannequin. For Bitcoin’s true sustainable power use to be under 50%, no less than one of many following situations must be true:

  • 4 massive Bitcoin mining operations secretly run off 100% coal-based power
  • ERCOT (The operator of Texas’s electrical energy grid) has over-reported its true renewable power numbers by an element of 4
  • Regardless of the widely-reported exodus of miners from Kazakhstan, its declare on Bitcoin mining truly elevated its share of worldwide hash fee from 13.2% to twenty%

I might fee the prospect of any of those being true as far fetched. As for the chance that the true sustainable share of the Bitcoin community is 37.6%, there’s a increased chance of you profitable first prize in a single-ticket entry lottery the place each man, girl and little one within the U.S. has a ticket.

What Does This New Analysis Imply For Bitcoin’s ESG Narrative

Three issues:

1. It gained’t cease mainstream media from quoting the Cambridge research or environmental teams from utilizing it. However it can make a distinction to how ESG buyers take a look at Bitcoin. For the primary time, Bitcoin advocates have a reliable, data-based strategy to take away the roadblock that the CCAF research has for a while created within the minds of ESG buyers.

Previous the primary hurdle, proponents of Bitcoin can ask the following two large questions that ESG buyers and the White Home have: Is Bitcoin’s macro-trend quantifiably shifting towards sustainable power? And is Bitcoin quantifiably a web optimistic to the setting and society?

2. It additionally implies that earlier CCAF findings that seem to have used the identical partial knowledge set will must be revisited. Particularly, we might want to revisit its findings that:

Preliminary calculations counsel that every one 4 findings could also be incorrect. This can want additional evaluation earlier than we will say this with confidence. I’ll do this in separate items of labor.

3. To one of the best of my information, all different main industries are considerably behind Bitcoin of their use of sustainable power. Bitcoin can legitimately declare to be main all different industries in its adoption of sustainable power sources. It is a very sturdy ESG case, as a result of it reveals an business taking management within the renewable transition, which has the potential to encourage different industries by instance.

Additionally noteworthy is that Bitcoin has achieved this feat within the remarkably fast time of simply 14 years.

In abstract: One of many three hurdles to institutional adoption of Bitcoin on ESG grounds successfully not exists. Each Bitcoin advocates and ESG buyers can now really feel assured that Bitcoin is predominantly sustainable.

Last Phrases

All through the method, I used to be in touch with each Alexander Neumueller, the digital property challenge lead at CCAF, and Michael Saylor, the founding father of BMC. Every was each encouraging and supportive of the strategy I used to be taking.

To my information, CCAF was the primary to create power and emission knowledge for the Bitcoin community utilizing a sound methodology and high-integrity knowledge. I take advantage of each its power consumption index (CBECI) and its mining map extensively in my very own analysis and have discovered each the methodology and the info of those two instruments to be sound. It’s only the sustainable power percentages the place I discovered that an underestimation was occurring.

When CCAF first began calculating the sustainable power use of the Bitcoin community in late 2019, it was extremely correct. It’s the subsequent proliferation of largely renewable-based, off-grid mining, flare-gas mining and speedy miner motion from Kazakhstan and to Texas that noticed its mannequin begin to lose tune. As any quant-trader can inform you, “even an incredible algorithm will lose tune over time.”

It is a visitor submit by Daniel Batten. Opinions expressed are totally their very own and don’t essentially mirror these of BTC Inc or Bitcoin Journal.

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