Written by: Liu Honglin and Iris, Mankiw LLP
I will ensure that America becomes the global capital of cryptocurrency and the superpower of Bitcoin. If cryptocurrency is going to define the future, I want it mined in America, not somewhere else, and if Bitcoin is going to go “to the moon” as we say, I want America to lead the way.
--Trump
Since Trump made this statement, Bitcoin mining and Bitcoin value have become the focus of the market. According to an investor report released by analysts at investment banking giant JPMorgan Chase on October 16, the current 14 listed Bitcoin miners in the United States have controlled 28.9% of the global computing power, and their market dominance is still growing. At the same time, since October, the US election has entered the countdown, and whether Trump can be successfully elected has directly affected the Bitcoin BTC market. It is reported that if Trump wins, the price of Bitcoin may explode.
*Source: Voting in each U.S. state on October 23
Apart from the US election, the latest positive news about Bitcoin mining in the world is the Bitcoin mining bill that came into effect in Russia, which is expected to enhance Russia's position in Bitcoin computing power. Previously, Mankiw Law Firm has also published many articles, such as "Web3 Lawyer: What do you think of the United States buying 1 million Bitcoins as national reserves?", "Bitcoin welcomes "American production", and cryptocurrency mining becomes a new focus of the game between major powers" and "Web3 Lawyer: Russia passes the cryptocurrency mining bill, BTC mining is officially legal?", analyzing the important position of Bitcoin reserves and the mining industry.
However, whether in China or globally, the core issue in accepting or even promoting Bitcoin BTC mining lies in "how to solve environmental and energy problems."
The first of the seven sins of Bitcoin mining: not environmentally friendly
Restrictions on Bitcoin mining can be said to be a major global trend in recent years, the most typical example being China's regulatory policies.
China
China was once the absolute center of global Bitcoin mining, with nearly 75% of the world's computing power. However, the "Notice on the Rectification of Virtual Currency "Mining" Activities by the National Development and Reform Commission and Other Departments" issued in 2021 pointed out that Bitcoin mining leads to energy waste, especially in energy-intensive provinces such as Inner Mongolia and Sichuan. Its high power consumption runs counter to China's carbon neutrality goals, so Bitcoin mining became the first target to be hit. Against this background, domestic miners have moved overseas in large numbers. However, according to a report by Bitcoin Magazine, a well-known Web3 media, "China has never banned Bitcoin mining", China's Bitcoin mining computing power was only "cleared" once in 2021, and then recovered. At present, the computing power of mainland China ranks second in the world after the United States.
Kazakhstan
After the Chinese ban was implemented, a large number of miners moved to Kazakhstan, where energy is relatively abundant and electricity prices are low. The rapid growth of mining activities has put severe pressure on its power grid and even led to a nationwide power shortage. In order to control energy consumption, the Kazakhstan government began to limit the electricity quotas of Bitcoin mining companies in 2022 and stepped up crackdowns on illegal mines. The country also introduced an electricity surcharge for cryptocurrency mining to reduce the impact on the power grid.
Iran
Iran is another important Bitcoin mining country, and its low-cost electricity has attracted a large number of mining companies. However, Bitcoin mining is also considered to be one of the reasons for the country's power supply shortage. In order to cope with the peak of summer electricity consumption, the Iranian government has imposed a temporary ban on Bitcoin mining in the summer when electricity consumption is tight since 2021. By 2022, the Iranian government suspended mining activities again, trying to reduce the pressure on the power grid during peak electricity consumption, while cracking down on illegal mines.
Some states in the United States
Although the United States has a relatively relaxed or even welcoming attitude towards Bitcoin mining as a whole, it is "bulk" after all, and some states have adopted stricter regulatory measures for environmental protection and power resource allocation considerations. For example, New York State passed a bill in 2022 that temporarily banned Bitcoin mining facilities that use fossil fuel energy in the state.
Other law enforcement
In recent years, some countries and regions have taken more stringent law enforcement actions. For example, on August 21, 2024, Malaysian authorities destroyed more than 900 Bitcoin mining machines in a crackdown on electricity theft; on May 27, Venezuelan authorities seized more than 6,000 Bitcoin mining machines, a total of 17,000 were seized, and they planned to cut off all Bitcoin mining farms; on May 26, Paraguayan authorities seized nearly 400 Bitcoin mining machines in Sapuca City; on December 29, 2023, Indonesian regulatory authorities raided ten suspected electricity theft mining sites, seized 1,314 Bitcoin mining machines, and detained 26 people.
It can be found that law enforcement involving Bitcoin mining is usually linked to power pressure, electricity theft, and energy consumption transition. Therefore, if you want to change the attitude of governments around the world towards Bitcoin mining, you still need to start from energy and environmental protection . In fact, some countries have begun to use environmentally friendly solutions to alleviate the burden of mining on the environment and use this trend to promote economic growth, such as the United States and Russia.
US and Russia support Bitcoin mining: clean energy
Why can the United States and Russia adopt Bitcoin mining as a national strategy? How will they solve energy and environmental problems?
USA
Clean energy and technological innovation are their main means of solving the energy and environmental problems of Bitcoin mining.
At present, some states in the United States have begun to adopt clean energy, such as Texas. The state not only has low electricity prices, but also has a large amount of renewable energy, especially wind and solar energy. This type of clean energy can not only allow miners to operate at a relatively low cost, but also reduce Bitcoin mining's dependence on fossil fuels.
At the same time, many Bitcoin miners and companies in the United States have also realized the importance of energy efficiency and have taken some technological innovation measures to improve mining efficiency. For example, they use advanced cooling technology to reduce the energy consumption of mining equipment, build clean energy facilities near the mines, and reduce environmental impact through waste heat recovery. Another Bitcoin miner has adopted the method of purchasing carbon credits to offset their carbon footprint, such as investing in other sustainable projects (afforestation, etc.) to make up for their impact on the environment.
Russia
Abundant clean energy and a favorable climate have become key factors in the large-scale introduction of Bitcoin mining.
Russia's Siberia region has abundant hydropower resources, which provides cheap and clean electricity for Bitcoin mining. In addition, the vast land and sparse population will lead to an oversupply of local energy, so the Russian government is also encouraging miners to use these resources to reduce energy waste. At the same time, Siberia's cold climate helps reduce the cooling costs of Bitcoin mining machines, making the mining process more efficient and environmentally friendly.
In terms of policy, Russia's law on Bitcoin mining has come into effect. The law sets clear and strict regulatory requirements and severe penalties for energy consumption to ensure that legal miners can use clean hydropower resources while avoiding negative impacts on local residents' energy needs. In addition, the government also encourages the use of legal means to control illegal mines and ensure compliance with energy distribution during mining.
Other countries
Canada and Norway have abundant hydropower resources, Iceland uses almost all of its electricity from geothermal and hydropower renewable resources, and El Salvador is actively promoting the use of volcanic geothermal resources. These countries are using clean energy to reduce the impact of Bitcoin mining on the environment, thereby attracting a large number of Bitcoin miners to settle in and increase their economic growth.
The first step of global strategic layout: promoting environmental protection
In order to further promote the acceptance and development of global Bitcoin mining, especially in countries and regions where environmental issues are questionable, the primary task of the global strategic layout is how to promote environmental protection, which is also a key step in the sustainable development of the Bitcoin mining industry. Moreover, this process requires not only policy support from regulatory agencies, but also active cooperation and practical technological innovation from miners and related companies.
Attorney Mankiw believes that the possibilities can be considered from the perspectives of government agencies and miners and mining companies:
Government agencies. Just like the actions of the United States and Russia in environmental protection and energy utilization, from the regulatory agency side, whether it is directly providing clean energy supply to Bitcoin miners, or issuing incentive policies, or setting up similar carbon offset plans to encourage mining companies to invest in sustainable projects such as afforestation, they can all promote Bitcoin miners to adopt clean energy and consider energy conservation and efficiency improvement. In addition, through tax incentives, subsidy policies and other measures, the government can effectively guide miners to adopt more environmentally friendly technologies and reduce their dependence on traditional energy.
Miners and mining companies. Whether it is to comply with the environmental protection requirements of regulators or from the perspective of corporate social responsibility (ESG), actively adopting clean energy is a key step in solving environmental problems. At the same time, miners and companies should actively use technological innovation to improve energy efficiency. For example, adopt advanced cooling technology, use waste heat to generate electricity, and even explore more efficient mining algorithms to reduce electricity consumption. Mining companies can also choose to establish mining pools in areas with surplus electricity, feed back the heat generated during mining to society, assist the government in solving energy consumption problems, and achieve a win-win effect.
In addition, the government and mining companies can also consider jointly building clean energy infrastructure, such as establishing wind, solar or hydropower facilities near Bitcoin mines, so that energy can be converted and used locally. This will not only promote the application of clean energy, but also attract more miners and mining companies to settle in, increasing the country's share of global Bitcoin computing power. Based on these measures, the country can not only regulate the Bitcoin mining industry, but also incorporate it into the country's long-term energy strategy and carbon neutrality goals.
Attorney Mankiw's Summary
Raising Bitcoin mining to the level of national strategy is not only about environmental protection and energy management, but also closely related to technological innovation, economic development and international competitiveness. Therefore, "promoting the development of the Bitcoin industry" does not rely solely on slogans or visions, but also requires pragmatic actions. From clear regulatory policies to practical energy utilization plans to technological innovation, the sustainable development of Bitcoin mining requires all-round efforts and execution. If countries can coordinate the environment with mining needs, they can truly promote the global Bitcoin mining industry to maturity and stability. Forward the screenshot and leave a message before this week to get a Mankiw mouse pad!
