BANGKOK: During good times, mining for Bitcoin is an around the clock job.
In Nonthaburi, a province outside Bangkok, through the day and night one facility’s thousands of machines are on the hunt. An ordinary factory from the outside, inside row upon row of machinery sits quietly at work in the dim light, in an enormous 16,000 sqm space.
This mining operation is said to be the biggest in Southeast Asia and the bounty it is looking to unlock has become more valuable than ever before.
Behind the fluctuating rise of Bitcoin lies the cold, constant reality of how it is accessed. The nature of its software means each Bitcoin transaction requires a large amount of electricity and leaves a carbon footprint that is worsening the onset of climate change.
Just like in 2017 when the price for Bitcoin dramatically spiked, the latest run has seen budding investors flock to cryptocurrency markets in search of a quick fortune. For those in Thailand, turning to mining services like ZMINE are a gateway into the crypto game - by lending their computer equipment to the “farm”, they get back a share of the spoils.
In March last year, the price for the digital currency sat just above US$5,000. Nine months later it peaked at more than US$40,000 on Jan 8. It was the latest surge in a highly speculative market.
For mining farms like ZMINE, the past few weeks have been the welcome return of a boom period, following years of struggling to profit.
“We had some difficult times when we had to shut down our mining farm because it’s not worth it. In the last six months, we just got back to operating. It wasn’t a 100 per cent shutdown but we could do it only in the night time because of the electricity cost,” said ZMINE CEO, Kasamapat Vithanwattana.
“We’ve had a bad time, but we’ve passed that time,” he said.
While it may offer relative anonymity, secrecy and freedom from government interference, Bitcoin is still leaving a hefty trail in its wake.
Mining involves solving complex algorithms with specialised computers. Using their own hardware, miners help add to Bitcoin’s blockchain platform by verifying and recording financial transactions.
The more machines a miner operates, the more rewards are likely to be received in the form of unlocking new currency. But these mathematical calculations are - by design - getting more difficult, increasing the need for more and more powerful computers.
It is estimated by analysts of global cryptocurrency mining that a single transaction uses an amount of electricity that could power an American household for one month or a user watching YouTube for five and a half years. One Bitcoin transaction uses the same electricity as more than 650,000 Visa transactions.
The pure size of ZMINE’s facility means it is a major consumer of electricity. It is running around 11,000 graphics card units, the device of choice for miners wanting to perform multiple calculations at the same time to solve the coin puzzle. As a result, Kasamapat says his operation’s monthly energy bill ranges from US$130,000 to US$230,000.
“Some say it’s proof of waste. Proof of work is proof of waste. But we are fundamentally about the blockchain community that was born with Bitcoin,” he said.
Still, there are climate consequences of tapping so much power and it has become a pressing global issue. And not all electricity used by Bitcoin mining is made equal.
A SERIOUS AMOUNT OF ENERGY
Analysis has shown that the vast majority of electricity powering Bitcoin mining comes from fossil fuels. The activity is most common in China, and increasingly in countries that can provide a cheap, steady supply of power, making Iran and Kazakhstan popular set-up locations.
Alex de Vries, a financial economics expert and founder of Digiconomist, “a platform that is dedicated to exposing the unintended consequences of digital trends”, says there is ample proof that coal is fuelling Bitcoin.
He estimates that Bitcoin is already consuming potentially up to one per cent of global energy, a number that could continue to rise alongside the currency’s price.
“Right now you can see that with the amount of money that these miners are earning, this network could increase in size to consume as much electricity as a country like Sweden, which is almost double where my Bitcoin index shows where it stands today,” he said, noting that Bitcoin makes up only about half of the cryptocurrency mining using the proof of work mechanism.
“The Bitcoin price action is usually a lot faster than the energy action but that doesn’t mean that the energy isn’t going to catch up with the price.
“If the number goes up like this, probably within this year, this network is going to be consuming more electricity than all the data centres worldwide - that run the Internet, cloud servers, financial systems, anything. That’s getting into a very serious amount of energy,” he said.
Mining across Southeast Asia appears to be picking up, as operators relocate away from tightening regulations in China.
Likewise, interest from new investors and miners alike has grown in Thailand due to the high prices, just like in 2017, says Rit Bencharit, the co-founder of Bitcoin Addict Thailand, one of the largest cryptocurrency communities in the country.
Billboards around Bangkok advertising local coin exchanges and investment opportunities attest to the current wave of excitement surrounding Bitcoin.
“There are some similarities and differences to 2017. The (phenomenon of) newbies trying to get in is the same. The same FOMO to try and buy Bitcoin. I get five phone calls every day from people asking me what Bitcoin is,” he said.
He estimates that there are about one million trading accounts open in the country, but the number of advanced traders is just a fraction of that, with many more beginners just looking to make fast money without understanding how cryptocurrencies work.
“They don’t know the risks, they just want the reward. That’s the scary part of the crypto market in Thailand right now.”
In Thailand, like much of Southeast Asia, the vast majority of electricity is generated from dirty sources, like coal power plants and natural gas. A faster shift to clean renewables would naturally reduce the impact of crypto mining.
“In some places, electricity use doesn't have so many consequences. But if you’re talking about a place like China where most of the electricity comes from carbon, then the impact of electricity is not the same,” said Camilo Mora, an associate professor of geography at the University of Hawaii, Manoa.
A report co-authored by Mora in 2018, following the first Bitcoin price spike, presented the bleak prospects of a fast incorporation of the technology that powers crypto mining. The report found that Bitcoin alone could produce enough emissions to raise global temperatures by two degrees Celsius as soon as 2033.
Yet, rather than helping to expedite that transition, there are many examples of the allure of Bitcoin helping fossil fuel power generation to hold on even longer.
In the United States, a natural gas power plant is using its own energy generation to enable Bitcoin mining on a massive scale instead of selling electricity to the public, which it now only serves during peak demand periods.
Meantime in Russia’s Siberia, one of the world’s biggest gas producers is situating mining centres nearby to its oil drilling sites to provide cut-price electricity and increase cost viability for crypto operators.
“Normally, competition was putting these generators out of business, which we might think is okay, as a humanity. There are some times where we just have to let go,” Mora said.
“Now these electricity companies who are struggling to sell their power at a viable price are starting to mine Bitcoin. It will prolong the existence of these technologies.”
For ZMINE, environmental impact is of little concern, according to Kasamapat. Right now, the cheap and readily available energy in Thailand is conducive to doing business, as long as the market price is right.
“It’s not a big consideration but at some point, maybe, because other countries have lower electricity costs. In the future, electricity like from a solar cell must be cheaper so maybe renewables could be a consideration,” he said.
He acknowledges that the price of electricity could become a factor in the future, depending on the country’s energy mix and policies. At present though, he says, the government is happy to take his sizeable business.
“They sell, we pay, that’s it. If we take electricity from you we pay. They’re happy, we’re happy. That’s it.”
Mora says that attitude just does not cut it given the pressing urgency of climate change action. He believes crypto miners globally need to take more responsibility for their carbon impact.
“It’s sad when you analyse it. I can see people losing their mind to this ambition,” he said.
“When people have the rights to capitalise on this, they also have societal responsibilities to fulfill. They should balance these tradeoffs a little more by having some environmental responsibility as well.”
"EVERYONE IS GREEDY"
While Thailand has some of the more advanced frameworks for the domestic cryptocurrency ecosystem in the ASEAN region, like many nations it does not regulate mining centres.
Indeed, finding solutions to this vast amount of energy waste will be difficult, de Vries, the financial economics expert, explains. “Globally we could decide we’re not going to allow these facilities anymore. But if only one country does it, they’ll go to the next country,” he said.
“The best thing you can do from an external point of view, is not driving the price of bitcoin any higher. The higher the price goes, the more these miners will earn and the more they will spend on wasting resources. It’s that simple.”
Not all cryptocurrency works the same. Another popularly traded coin and large-scale competitor to Bitcoin - Ethereum - is considering shifting its software away from mining altogether. But these platforms are not easily reformed.
“The part that consumes a lot of energy - the mining - is only part of the software. The community could agree to change that. That’s not a very likely thing to happen right now,” de Vries said.
“It is possible to do it but the problem is the community mindset. Bitcoin miners typically don’t like change."
Rit of Bitcoin Addict Thailand says that market forces are likely to determine where the technology goes and where the money flows. He does not see the demise or alteration of mining anytime soon.
“I think the proof of work that Bitcoin is using is still going to last until it’s not worth it anymore. It depends on the price,” he said.
“Everyone is greedy. When they see Bitcoin rise, of course the mining also becomes profitable. Everyone loves the words passive income.”
“They all have some small greed in their heart.”