Would you pay 10% more for a ‘green Bitcoin’?

Bitcoin has been taking heat for the massive amounts of energy it requires. Now some Bitcoin is going green, for a cost…

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Bitcoin (CRYTPO: BTC) has been taking heat for the massive amounts of energy required to mine new tokens and to verify transactions made with existing tokens.

While this issue has been around for years, it’s getting worse as Bitcoin’s energy use continues to increase alongside its growing popularity.

Tesla Inc‘s (NASDAQ: TSLA) Elon Musk recently brought the token’s huge carbon footprint to the world’s attention. Musk said that Tesla wouldn’t sell its Bitcoin holdings – originally purchased for US$1.5 billion. However, he added his company would no longer accept Bitcoin for payment until it was powered by cleaner energy sources.

He does have a point.

By some estimates, Bitcoin’s global energy consumption will soon surpass that of all of Australia. And with the ever-growing focus on climate change and decarbonising the planet, this is putting further pressure on the price.

A green premium

Where there are problems, there are potential profits to be made.

In this case, those profits could come in the form of a premium paid for ‘green Bitcoin’.

As Bloomberg reports:

Some [crypto miners] are working to sell what they are calling green Bitcoin – coins whose transactions are verified on the blockchain by computers powered only by renewable energy. The bet is that they will be able to command a premium of up to 10%.

Sheldon Bennett is the CEO at crypto miner DMG Blockchain Solutions Inc. DMG says that numerous banks and financial businesses have expressed an interest in transacting in Bitcoin that meets their environmental, social and corporate governance (ESG) commitments.

According to Bennet, “There’s a market that doesn’t know it yet… More and more, they are saying if there’s an option, I am willing to pay a premium to get it.”

Isaac Maze-Rothstein, a research analyst at Wood Mackenzie, added, “There are a bunch of miners who saw what happened with the coal industry. So they only pursue a project if it’s carbon negative. There are others who want to co-locate with wind, or with solar.”

Some crypto miners are also turning to hydropower. Others – with permission – tap into the unused processing powers of computers visiting their websites.

However, Christopher Bendiksen, the head of research at CoinShares, sounds a note of caution for any ‘green Bitcoin’ optimists.

He estimates that around 55–65% of Bitcoin mining uses renewable energy sources today. About half of all the mining is done in China, notoriously dependent on its coal-fired power plants.

With the Bitcoin price hitting record highs in April, miners may well be willing to spend a bit more for cleaner energy. But as the price falls, Bendiksen believes many will return to cheaper, dirtier energy sources.

Bendiksen said (quoted by Bloomberg):

Right now mining is hyper profitable. And these hyper profitability periods don’t last forever. When mining costs start approaching Bitcoin price again, the costs will matter. Bitcoin mining is absolutely ruthless, and you are competing against miners that are in different countries than you are, and they don’t necessarily care about the environment like you do. It’s quite dangerous for your competitiveness over time.

Australia based Iris Energy, founded by Will and Daniel Roberts, has been atop the ‘green Bitcoin’ theme for some time. Back in February, the company raised $25 million to ramp up the computing power of its Bitcoin mining operations in Canada. Those operations are powered by hydroelectricity.

Bitcoin price snapshot

One Bitcoin is currently worth US$35,269 (AU$45,804). That’s down 7% over the past 24 hours and down 46% from the all-time high of US$64,829 reached on 14 April, according to data from CoinDesk.

To give you an idea of the ongoing volatility of the world’s largest crypto, over the past 24 hours it traded as low as US$31,180 and as high as US$38,235. That’s a price variance of more than 22%, all within a single day.

So, would you pay an extra 10% knowing your Bitcoin was mined with renewable energy?

A growing number of sustainable crypto miners are hoping you said ‘yes’.

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Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Bitcoin and Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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