BODEN, Sweden — Tucked away in snowy Swedish Lapland is a modern gold mine. But instead of picks and shovels, it’s filled with thousands of computers.
Also known as mining rigs, these machines work around the clock to find new units of cryptocurrency – in this case ethereum, the second largest token in the world.
To do this, they must compete with others around the world to find the answer to a complex math puzzle, which becomes increasingly difficult as more and more computers, known as “miners”, join the network. The aim is to ensure the security of the system and prevent fraud.
This ethereal mining facility is run by Hive Blockchain, a company focused on using clean energy to mine crypto.
Benjamin Hall | CNBC
The entire process is supported by something known as proof of work. And it consumes an incredible amount of energy. Bitcoin, the world’s largest digital currency, also uses this framework. It now consumes as much energy as entire countries.
Governments around the world are concerned. Some countries, such as China, have even gone so far as to ban crypto mining altogether.
Switch to renewable energy
The mine in question, a warehouse-like building in the military city of Boden, houses a total of 15,000 of these mining rigs. At 86,000 square feet, it is larger than a standard football field.
The facility is run by Hive Blockchain, a Canadian company focused on using green and renewable energy to mine crypto.
With an area of 86,000 square meters, Hive’s Swedish mining facility is larger than a standard football field.
Benjamin Hall | CNBC
Hive’s Swedish operation is powered by a local hydroelectric power station in Boden, in the north of the country. The region is known for its surplus of cheap, renewable electricity.
“In the north of Sweden, 100% of the energy is based on hydropower or wind,” says Johan Eriksson, a consultant at Hive. “It’s 100% renewable.”
Eriksson says cryptominers use excess energy capacity that would otherwise be wasted — in other words, it isn’t required by households in the region.
But the sheer amount of power required to carry out operations like Hive’s has alarmed officials.
Also known as mining rigs, these machines work around the clock to find new cryptocurrency units.
Benjamin Hall | CNBC
Finansinspektionen, the Swedish financial watchdog, is calling on the European Union to ban crypto mining due to its massive energy consumption.
“Crypto-asset producers are eager to use more renewable energy and are increasing their presence in the Nordic region,” the agency said in a statement last year.
“Sweden needs the renewable energy crypto asset producers are targeting for the climate transition of our essential services, and increased use by miners threatens our ability to comply with the Paris Agreement.”
Is decarbonization enough?
Edinburgh-based crypto firm Zumo is part of the Crypto Climate Accord, a coalition of companies that aims to achieve net-zero emissions in the crypto industry by 2030.
Kirsteen Harrison, Zumo’s climate policy advisor, says the initiative is working on a piece of software that would be able to verify that the energy source used in crypto mining is renewable.
“There are quite a few trials going on right now,” she said. “If that works, hopefully it will filter through to the rest of the sector.”
According to some activists, simply decarbonising the production of cryptocurrencies may not be enough.
Greenpeace and other environmental groups are calling on the bitcoin community to replace the proof of work mechanism with one called “proof of stake” instead. That would remove the huge computational costs of verifying new crypto transactions.
Ethereum is currently in the midst of a lengthy transition to proof-of-stake, a move that proponents say would reduce energy consumption by more than 99%. And other cryptos, such as cardano and solan, are already working on proof of stake networks.
But, as Harrison explains, taking a cryptocurrency like bitcoin away from proof of work is easier said than done.
“I don’t believe there is an option to abolish proof of work precisely because no player is in control of the system,” she says.
Not everyone is on board
While Hive and other crypto companies are increasingly using green energy to fuel their operations, there are plenty of others who are not yet on board with the shift to renewables.
Some deliberately use gas that would otherwise be flared to generate electricity for crypto mining, for example.
Since China banned crypto mining, bitcoin backers had hoped it would make the cryptocurrency greener.
But a peer-reviewed study published in February found that bitcoin mining will only get dirtier by 2021, with miners flocking to regions more dependent on coal and other fossil fuels, including Kazakhstan and southern US states like Texas and Kentucky. .
Part of the problem is the decentralized nature of cryptocurrencies like bitcoin. While there are now several groups that claim to represent the industry, bitcoin has no central authority and anyone can participate in the network.