Tesla CEO Elon Musk messed up cryptocurrency prices when he announced that the electric vehicle maker will not accept Bitcoin until mining becomes greener. But rest assured that crypto mining is getting more efficient.
We won’t go into Musk, but there are environmental issues with crypto mining. What is strange about Musk’s proclamation on cryptocurrency is that environmental concerns go back years before he added Bitcoin to Tesla’s balance sheet and raised Dogecoin. The Sierra Club highlights how crypto miners are moving to countries with less environmental regulations and cheap electricity (like coal). China makes up the bulk of crypto mining. For more, this New York story is handy, as is this University of Washington overview, which has a variety of footnotes. Musk quoted the Cambridge Bitcoin Electricity Consumption Index in his tweet on Bitcoin sustainability.
Does Musk Make A Sense Of Cryptocurrency Mining? For sure. Will many of these environmental problems be resolved in a few years or sooner? You bet.
Enter Hyperscale Provider. The crypto game is a bit like the Wild West right now. As long as cryptocurrency prices are stable in a profitable range, the mining operations become commercial and efficient in a rush. Don’t be surprised if Google Cloud or AWS somehow come into play. We have Microsoft Azure restore after closing the blockchain service.
And if the cloud giants don’t see crypto mining as a market, there will be specialized players. For example, Cipher Mining, a unit of Bitfury, announced a merger with Good Works Acquisition Corp. to create an industrial-scale Bitcoin mining operation in the United States.
I have no idea how cipher mining will perform as a publicly traded company, but I know that energy costs and efficient technologies dominate the investor presentation. Commercial crypto miners – Marathon, Bitfarms, Hive, and Hut8 – need low electricity costs, but much of that efficiency is achieved through better technology.
Here is the business model of cipher mining:
Cipher Mining will focus on the US and plan locations in Texas and Ohio. Parent Bitfury has set up crypto mining data centers in Iceland, Canada, Norway and elsewhere.
Just as cloud providers automate data centers to save energy and become more efficient, crypto miners will do the same. Sustainability equates to profit margins, and that means Musk’s concerns are likely to be addressed sooner than you think.