Bitcoiners Protest Democrats ‘Misleading’ Letter Sent to EPA

David Canellis
David Canellis May 5, 2022
Updated 2022/05/05 at 12:57 PM
8 Min Read
  • The Bitcoin industry has railed against a letter signed by nearly two dozen members of Congress requesting the EPA closely regulate crypto mining
  • Crypto proponents cite flaws in critics data, and a misunderstanding of the industries future energy demands

Bitcoin industry advocates responded this week to a letter submitted to the Environmental Protection Agency by Representative Jared Huffman (D-CA) and signed by a total of 23 Democratic members of Congress.

The extensive rebuttal sent by the Bitcoin Mining Council, a group representing Bitcon miners, is co-signed by nearly 50 industry figures, including Castle Island Ventures’ Nic Carter — who contributed much of the essay — as well as Block’s Jack Dorsey and Galaxy Digital’s Mike Novogratz.

“I had wanted to write a response, there were a whole bunch of key stakeholders who thought a response was warranted based on how misleading the Huffman letter was and how critical it could be,” Carter told Blockworks, noting the EPA could make it more difficult for crypto mining companies to acquire their own energy-production sources.

“If you have 23 members of Congress signed onto this thing, it could get messy.”

Carter described a number of inaccuracies in the original Huffman letter. For one, he noted Huffman highlighted the EPA’s denial of a Greenidge application to keep open its so-called “coal ash ponds,” large dirt ditches it uses to dispose of harmful coal byproducts which don’t biodegrade.

But Greenidge is now a gas-only operation that mines Bitcoin. The firm uses those ponds to continue mitigating waste associated with its past life as a coal plant. So celebrating the EPA’s move against Greenidge’s coal ash ponds isn’t at all relevant to crypto mining, said Carter.

Another sticking point was Huffman’s claim that “a single Bitcoin transaction could power the average US household for a month.” This calculation relies on taking average transaction counts and simply dividing it by the estimated energy usage of the network.

The Bitcoin Mining Council’s response labeled the ‘per-transaction’ energy cost analysis as a “deeply flawed way to reason about Bitcoin, since projecting future energy growth is not a function of transaction count, but instead of value of Bitcoin issuance (which is a function of price and supply growth), together with the fees users are willing to pay to transact.”

The crux of Carter’s response sought to separate data centers (read: crypto mining farms) from their energy sources. To Carter, crypto miners are just another flavor of data center like those run by Microsoft and Amazon; large warehouses packed with servers in support of our modern internet infrastructure.

“It’s not really the EPA’s mandate to say what you’re doing with this data center is environmentally damaging, because it’s not the data center activity causing damage, it’s the generation of power and that’s already regulated,” said Carter.

He noted that some vertically-integrated crypto mining operations — those that control the data center and their energy source – are already sanctioned by the EPA and some state regulators. Just 2% of Bitcoin’s hashrate comes from vertically-integrated crypto miners, according to the Council’s response to the EPA.

“It’s a myth to say that the EPA is not aware of these things. They’re very much aware of them, and in some cases they’re supported,” Carter added. He did however note that noise pollution caused by bitcoin miners is unnecessary, and that he’d actively discourage industry participants from setting up in residential areas.

Bitcoin runs on a global secondary market for ASICs

As for PoW’s supposed problem with e-waste, Carter questioned whether environmentalists are interested in the truth or whether they’re simply using the concept as a cudgel with which to attack Bitcoin.

Veteran mining consultant and founder Alejandro de la Torre agreed. Having spent the past five years assisting and building mining operations around the world, de la Torre expressed disbelief that any industry participant would simply discard their ASICs after less than two years of use.

He explained that in his experience, once a machine has some sort of error — say a board burns or a part is faulty — miners almost always fix it rather than pay for a brand-new rig. In fact, the entire crypto mining industry relies heavily on a lively secondary market for used ASICs.

De la Torre described a global market for ASICs that allowed lesser-capitalized mining outfits to acquire used rigs from more established crypto powerhouses. Richer crypto mining companies know they can eventually sell their top-of-the-line mining rigs as more efficient tech gets developed.

This creates a symbiotic relationship between small and large operations that benefits both sides: smaller ones can buy cheaper hardware from bigger ones looking to offset costs associated with state-of-the-art machines. Every mining operation in the ecosystem makes use of this secondary market, emphasized de La Torre.

“Right now, there’s miners all over who are paying next to nothing for their electricity, sometimes even zero,” de la Torre told Blockworks. “Those in Venezuela, or off-grid miners who own their own hydroplants and those that use flared gas.

“They don’t mind buying a machine that’s four years old because they have free electricity — so they run their machines until they die.”

Once ASICs finally go kaput — often after multiple repairs and numerous owners — ASICs are repurposed. Much of the circuitry and aluminum is sold for scrap and otherwise recycled. On average, de la Torre estimated the average lifespan of an ASIC is closer to six years, far longer than the 1.29 years often cited by environmentalists.

“That’s why the economics of bitcoin mining work so well,” said de la Torre. “You buy a machine for, as an example, $10,000. You run it for two years, then you sell it for $6,000. You’ve only lost $4,000 on the machine, while you’ve generated lots of bitcoin with it.”

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The post Bitcoiners Protest Democrats ‘Misleading’ Letter Sent to EPA appeared first on Blockworks.

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