Three Reasons Why Bitcoin Mining is Good for Canada
Recent government crackdowns on mining cryptocurrency are misguided and fail to account for the important ways that the industry’s benefits far outweigh the risks.
My first real entry into the blockchain industry was an uncomfortably warm room filled to the ceiling with metal racks, each hosting a row of rectangular, softly whirring machines. This room was my basement, and after a lot of research and hard work, I had created something that to me, was incredible – a business based on truth.
Each of my machines – or mining rigs – was using a small amount of energy to help the Bitcoin network validate financial transactions, supporting the world’s first economy built on technological trust. In return for successfully validating a transaction, beating thousands of other miners racing towards the same goal, I earned a reward – a tiny fraction of a Bitcoin.
At the same time as I started my little mining data centre, about six years ago now, I was doing a lot of work in the oil and gas industry through my cleantech company, Absolute Combustion. It was hard to avoid frequent headlines and conversations about Alberta’s energy challenges – abundant resources, but constrained paths to market, and consequently, a deep discount to our most valuable exports.
As I looked at my racks of rigs, the thought occurred to me that this could be, if not the ultimate solution, a way for Alberta to capitalize on some of our assets in a new and more equitable way. If we couldn’t put more of our energy in expensive, contentious pipelines and send it to markets in the US and Asia, maybe we could put it in these small machines, and sell it over the internet.
“As I looked at my racks of rigs, the thought occurred to me that this could be, if not the ultimate solution, a way for Alberta to capitalize on some of our assets in a new and more equitable way. If we couldn’t put more of our energy in expensive, contentious pipelines and send it to markets in the US and Asia, maybe we could put it in these small machines, and sell it over the internet”
To me, that’s exactly what Bitcoin mining is – a new economy for Canadian energy. At scale, it’s an industry that consumes energy to great benefit – supporting a network that lets people securely transact digital money in a peer-to-peer way, without the need for banks, payments companies, or intermediaries. Now, through an upgrade to the network called Ordinals, it’s users can create new types of digital assets, like NFTs, and make completely novel types of value.
It’s interesting that one of our oldest industries is so essential to our participation in a disruptive and very new industry. Despite the peaks and valleys of the crypto market since the launch of the Bitcoin network more than thirteen years ago, it’s clear that crypto is hear to stay, and at approximately US $500 billion in value, the first blockchain network is still the best-adopted by far.
Unfortunately, several provinces in Canada – mainly Quebec, Manitoba, and BC, have moved to restrict the ability of miners to use energy from the grid. Hydropower-rich Quebec is limiting access to miners, fearing a future electricity shortage. Manitoba issued a moratorium on new grid connections by miners in December due to similar concerns. In BC, new mining operations are taking an 18-month pause while the government reviews the environmental and energy impact of the industry.
Why is Bitcoin mining of unique concern to Canada’s provinces, when other energy-consuming industries receive far less scrutiny and no comparable restrictions? I think education is key – and that well-meaning regulators need a better understanding of Bitcoin’s true impact.
A common misconception is that Bitcoin mining uses “excessive” energy. However, critics tend to ignore that the traditional payments industry, which it is starting to displace, has a massive electricity consumption – approximately 56 times that of Bitcoin, which is becoming increasingly energy-efficient as services like the Lightning Network help it process larger numbers of transactions with less mining. Another is that Bitcoin has a major environmental impact. According to a major 2022 study by the Bitcoin Mining Council, which has access to data from operations around the world, almost 60% of the network’s power comes from renewables – significantly better than the global 29% of electricity generating from renewables.
With these facts in mind, here are my three top reasons why Bitcoin mining is good for Canada – including our energy security.
- Incentivizing Sustainability
The Canadian government and Bitcoin mining industry are aligned on one key point: renewables are the future. Canada urgently needs to boost development of new wind, solar, and geothermal projects to keep pace with energy demand while meeting our national sustainability commitments. However, lengthy timelines to grid connection and revenue generation, along with the challenge of off-peak energy storage, limit the economics of many projects. Bitcoin mining can generate needed revenue ahead of grid connection, while acting as a preferential consumer for electricity during off-hours.
- Reducing Waste
For all of the concern about Bitcoin’s energy usage, few people talk about the fact that the world wastes 67% of all produced energy each year – most often as heat. What if a significant part of our financial system could be powered on this waste? From mining using oil & gas waste that would otherwise be flared, like this great project by ExxonMobil, to mining integrated into home heaters, the unique qualities of Bitcoin lead to flexible, innovative ways of using waste heat productively.
- Economic Growth
One of the great lessons from Texas’s successful Bitcoin mining development is that these hubs have a tremendous economic benefit – and they don’t exist in isolation. Large-scale mining facilities in Texas have rejuvenated failing post-industrial towns, created thousands of jobs across fields like electrical engineering, programming, security, and construction, and also sparked the growth of Fintech companies, analytics services, and other technology firms. Mining is at the center of a digital ecosystem and has flow-over benefits across economies.
When I look back on my early experiences in Bitcoin mining, I realize how much I still had to learn – but one thing that hasn’t changed is my believe that this is a truly world-changing technology, and one that has so much to offer Canada as we move into a digital economy already being embraced by forward-looking countries around the world.
Our traditional resources like energy can help shape this new economy, and give Canada an advantage that will accelerate our growth and innovation. Stakeholder education, collaboration between regulators and the mining industry, and stable policies are all essential for us to realize this abundant potential. For more information, I encourage you to visit the Canadian Blockchain Consortium at www.canadablockchain.ca to learn about our Mining Committee and its initiatives.