Cryptocurrency, has become a significant part of the global financial system, offering decentralized digital transactions and investment opportunities. However, the underlying mechanism—cryptocurrency mining—has raised alarms about its energy consumption, health and environmental impact, and infrastructure burden. Mines produce tax revenue but few local jobs.
Cryptocurrency mining—particularly of Bitcoin—has grown rapidly in the U.S. due to China’s ban on the industry. US hosting grew from 3.5% in 2020 to 38% in 2022. In particular, Georgia has witnessed a surge of mining facilities, growing to #3 (or #2, depending on the day) in the nation. Georgia is an attractive state due to our cheap energy, decentralized power system, and lack of consumptive transparency.
Technology is ever-evolving, there are already more efficient methods to mine cryptocurrencies. People and businesses default to the easiest and cheapest method of operating. Policymakers need to explore ways to incentivize lessening power and water consumption including: increased transparency around energy rates and energy and water consumption, utilizing carbon offsets or renewable energy sources, and demand pricing reforms.
[In] 2018, each $1 of Bitcoin value created was responsible for $0.49 in health and climate damages in the US.
— Cryptodamages: Monetary value estimates of the air pollution and human health impacts of cryptocurrency mining
Fast Facts
- Noise Pollution: A single Bitcoin mining machine produces about 70-90 decibels (dB) of sound. An average nightclub is at 98 dB. Residents in the vicinity of crypto mines often liken the noise to the constant sound of a jet engine. Studies have shown exposure to noise pollution can cause cardiovascular problems, changes to brain tissues, depression, anxiety, and behavioral problems.
- Power Usage: Globally, the Bitcoin mining network consumed over 173 TWh of electricity from 2020 to 2021. This is equivalent to the electricity use of a mid-sized country, surpassing the total annual energy consumption of nations like Argentina or Norway.
- Carbon Emissions: Global mining emissions were over 85.89 Mega-Tons of Carbon Dioxide (CO2). This is equivalent to “burning 84 billion pounds of coal or operating 190 natural gas power plants.”
- Water Use: “The global water footprint of BTC mining was about 1.65 km, more than the domestic water use of 300 million people in rural Sub-Saharan Africa.” In Georgia, power plants already account for about 40% of all freshwater usage.
- Lack of jobs: mining operations in rural areas like Dalton and Adel employ as few as 10-30 people per facility.
- Increased Transparency in Energy Rates: Legislation should mandate greater transparency in the energy rates negotiated by large-scale users like cryptocurrency mines. By making these rates public, policymakers can ensure that these operations pay their fair share of grid infrastructure costs and don’t place an undue burden on residential customers. For example, New York has implemented transparency laws requiring energy providers to disclose rates charged to large energy consumers, ensuring fair pricing and preventing preferential treatment for industries like cryptocurrency mining.
- Regulate Energy Consumption Caps: States like Georgia could introduce caps on the amount of electricity consumed by cryptocurrency mining facilities, limiting their impact on the grid during peak demand periods. Quebec, Canada, has already implemented such measures, where Hydro-Quebec has capped energy consumption for crypto mines, especially during high-demand seasons like winter, to ensure energy availability for residents and essential services.
- Carbon Offset Requirements: Legislators could implement carbon offset mandates for cryptocurrency mining facilities, requiring them to offset their carbon footprint by investing in renewable energy projects or purchasing carbon credits. Similar requirements have been introduced in Switzerland and certain Canadian regions, where high-energy industries, including cryptocurrency mining, must offset their emissions to mitigate their environmental impact.
- Adoption of Renewable Energy: Mining facilities should be encouraged—or required—to transition to renewable energy sources such as solar or wind. Georgia, with its significant solar potential, could incentivize cryptocurrency mines to invest in or purchase power from renewable energy projects.
- Demand Pricing Reforms: To prevent cryptocurrency mines from profiting during crises (as they did in Texas), demand pricing mechanisms should be restructured. Instead of allowing surge pricing that benefits large industrial users, energy buybacks should be capped, and compensation should be tied to the actual grid relief provided. After the 2021 Texas winter storm, California considered demand pricing reforms to prevent industrial users from exploiting energy crises for profit, ensuring a more equitable cost distribution.
2024, HB 1192 – Georgia General Assembly
– Objective: Suspend tax breaks for data centers and empower local governments to regulate crypto mining through public votes.
– Impact: Prevent unchecked growth of mining facilities and ensure local input in permitting processes
– Result: Passed by both houses of the Georgia General Assembly in 2024. Vetoed by Gov. Kemp.
2023. Sen Markey (D-Mass) and Rep Huffman (D-CA) Crypto-Asset Environmental Transparency Act
– Introduced in the US Senate – Text – S.661 – 118th Congress (2023-2024): Crypto-Asset Environmental Transparency Act of 2023 | Congress.gov | Library of Congress
– Objective: Require crypto mining facilities to disclose environmental impacts.
– Impact: Encourage sustainable mining practices and highlight the benefits of transitioning to Proof of Stake (PoS), which uses 99.95% less energy than Proof of Work (PoW) protocols.
Gilmer County Ordinance
– This ordinance aimed to control crypto mining operations, but poor enforcement led to continued community disruption due to noise and resource use.
Proposed Ordinance Recommendations:
– Noise Measurement: Use dBC readings to capture low-frequency noise, not dBA.
– Location Restrictions: Limit proximity to schools, parks, nursing homes, and residential areas.
– Water and Cooling Requirements: Use gray water or recycled water for cooling to minimize freshwater consumption.
– Environmental Controls: Mandate stormwater management and land grading to prevent local flooding.
– Energy requirements: require the use of green energy sources.
– Transparency on water and power usage: a lot of these centers hide their consumption rates behind “trade secrets” – so that communities do not know the real cost.
– Charge conservation rates for water and power usage.
– Charge a tariff on consumption: mines require new energy generation facilities. Ensure that they pay a tariff to pay for the construction of new facilities.
– Southern Georgia Regional Commission Model Ordinance for Cryptocurrency and Data Mining
Algorithmic and technological improvements are constantly occurring. It is important technology companies know that they will need to conserve compute resources, so that they are encouraged to innovate and not ‘lock in’ to a specific technology or algorithm.
New techniques such as model pruning, knowledge distillation, memory management, and mixed-precision training, as well as, hardware advances, can and do provide performance while minimizing energy use.
Future AI models will focus on combining different approaches (e.g., general and specialized models) to achieve efficiency and accuracy.
Bitcoin is running on first generation blockchain technology (termed ‘proof of work’) which is highly energy consumptive. New generations of blockchain technology utilize ‘proof of stake’ which use much less energy.
FAQs
Both crypto mines and data centers are large, temperature controlled, warehouses filled with computers. Data Centers support multiple commercial uses such as e-commerce and cloud computing. They support multiple businesses and customers. Crypto Mines are dedicated solely to crypto mining and support only the owners of the crypto mine.
- A secure method for validating a transaction using a “token” without the need to exchange sensitive information (such as a credit card number or SSN)
- A series of “blocks” are created where each is dependent on the last – using math that makes it impossible to create a fraudulent block
- But it can be used to facilitate any sort of banking, electronic transaction, equipment rentals, etc.
- All cryptocurrencies are on blockchains, but not all blockchains are for crypto currencies.
- Legalese
- ‘Blockchain’ means data that are shared across a network to create a ledger of verified transactions or information among network participants linked using cryptography to maintain the integrity of the ledger and to execute other functions and distributed among network participants in an automated fashion to concurrently update network participants on the state of the ledger and any other functions.
- ‘Blockchain protocol’ means any executable software deployed to a blockchain composed of source code that is publicly available and accessible, including a smart contract or any network of smart contracts.
Like any technology, blockchain has changed over the years. Each new “jump” in technological capabilities is termed a “generation”
– Blockchain Generations:
- First Generation – Focused on cryptocurrency like Bitcoin.
- Second Generation – Introduced programmable blockchains (e.g., Ethereum).
- Third Generation – Scalable for millions of users with better performance.
– Tokens can represent anything (services, products) and allow peer-to-peer transactions without the need for intermediaries (e.g., banks).
– This model promotes trust and allows for secure, tamper-proof transactions through hashing.
Validation methods
- Old school – proof of work – new blocks on the chain are created and validated by solving complex algorithmic puzzles. Miners compete to create new blocks and the fastest one wins. Winning gets you paid. In the case of Bitcoin – you are paid in Bitcoin.
- New school – proof of stake – people become part of a pool of validators by “buying into” it (like a poker “ante”) – new blocks on the chain are created and validated by a randomly selected validator.
– Decentralization of a network means that anyone, anywhere, can contribute to the blockchain.
– Performance is a measure of how quickly a calculation can be done.
– Fully decentralized networks (e.g., Bitcoin) are slower, more energy consumptive, but are ‘unhackable’ and thus can be universally accessible.
– Centralized blockchains like Solana have higher transaction speeds and less energy use, but limit accessibility due to lessened security.
– Blockchains developed by different companies (e.g., Walmart, JPMorgan) are often centralized, but this creates challenges in integrating data.
– A compromise between energy, security, performance, and centralization would be to have decentralized, local, networks operating quickly and energy efficiently. And then performing interoperability checks via something akin to Bitcoin.
- A currency that relies on blockchain technology and exists outside of traditional governmental authority / regulation / backing
- Dollar is backed by the US Government. Bitcoin is backed math.
- Georgia Code § 7-1-680 (2023) – Definitions :: 2023 Georgia Code :: US Codes and Statutes :: US Law :: Justia
- (30) “Virtual currency” means a digital representation of monetary value that does not have legal tender status as recognized by the United States government. Such term shall not include the software or protocols governing the transfer of the digital representation of monetary value; units of value that are issued in an affinity or rewards program and that cannot be redeemed for money or virtual currencies; or an affinity or rewards program tied to a credit, debit, or prepaid card that awards points for purchases or other transactions, which points can be redeemed for dollar denominated credit to a checking, credit card, or prepaid account, or for a gift card, goods, travel, or services.
- A large computing center where Bitcoins are mined by performing the Proof of Work validations.
- legalese
- ‘Virtual currency mining’ means the use of electricity to power a computer for the purpose of securing a blockchain protocol.
- ‘Virtual currency mining business’ means a business that uses a group of computers working at a single site that consume more than 1 megawatt of energy for the purpose of generating virtual currency by securing a blockchain protocol.
Pros: libertarian currency free from government interference and oversight.
Cons: energy intensive, water intensive, obtrusive noise due to cooling fans. Ponzi scheme style of wealth accumulation.
- A large computing center that enables cloud storage and cloud computing. Offsite backups, online applications (Microsoft Teams applications, Google Docs/Sheets, Quickbooks, Fortnite, Chat GPT), and token transactions that are not based on crypto mining.
- Georgia Code § 48-8-3 (2023) – [Effective Until 1/1/2025] Exemptions :: 2023 Georgia Code :: US Codes and Statutes :: US Law :: Justia
- (ii)“High-technology data center” means a facility, campus of facilities, or array of interconnected facilities in this state that is developed to power, cool, secure, and connect its own equipment or the computer equipment of high-technology data center customers and that has an investment budget plan which meets the high-technology data center minimum investment threshold.
Pros: Distributed computing. Offsite storage protects from individual data loss. Innovative new companies have reduced start-up capital costs.
Cons: energy intensive, water intensive, deep fake videos.
- Storage is a series of hard disk drives that hold your digital information.
- Compute is the CPU, where the computer does work such as modeling, Excel calculations, editing a photo, making a video.
- Storage is relatively cheap and not energy taxing.
- Computing is expensive and energy intensive.
- Chat GPT is part of an evolution in modeling – from training models to do specific tasks – to training models that are generic and then asking them to do anything. These new models are called foundational models. The ‘generic’ nature of these models means that you can just a question and get an answer.
- For example, say you wanted to use a picture of flooding to measure the depth of the water
- Before – you would have to train a model to pick out the people, and tell it how to use the people to estimate water depth. The model would have to be retrained if you wanted to use cars, or trees, or signposts, or anything else to estimate flood depth.
- Now – when you can just ask the foundational model – tell me the water height – and it can utilize the person, or tree, or signposts without needing three different training mechanisms.
YES!
Computer algorithms and hardware are always adapting and evolving.
20 years ago, most code did not account for cyber security (because being online was new and no one thought of security before we were all connected), and now it does.
A similar paradigm shift can occur where developers should program with compute efficiency in mind.
Computer hardware and chip design will also evolve to handle common computations in an efficient manner.
As with anything, the default is the quickest and cheapest way to do things. Right now, compute cycles are inexpensive, so there is no pressure to innovate more efficient methodologies.