Brian Nibley

<div id="highlights-block_626a9366c3b21" class="highlights">
 <ul>
 <li>Soluna Computing integrates the computational work of mining into its overall model of computing</li>
 <li>Proof-of-work blockchains such as Bitcoin have the potential to increase the efficiency and sustainability of the world’s electrical infrastructure</li>
 </ul>
 
</div>



The science of crypto mining isn’t about spending computational energy. It&#8217;s about building the most efficient computational infrastructure. When you understand the science through this lens, crypto mining is really an entrepreneurial endeavor that will revolutionize data centers and move the world toward green energy.



As you may have heard, the mining industry has been the subject of much scrutiny for its proof-of-work energy consumption. But mining advocates argue these accusations are not fair, considering that they only account for <a href="https://bitcoinminingcouncil.com/wp-content/uploads/2021/10/2021.10.19-Q3-BMC-Presentation-Materials-Final.pdf" target="_blank" rel="noreferrer noopener">0.1% of global energy usage</a>. But more importantly, they argue that mining is a paradigm changer. Its protocols incentivise innovations in green energy.&nbsp;&nbsp;



Crypto users, by no means, have escaped similar criticisms. Some have even gone as far as to suggest that they might be <a href="https://www.linkedin.com/posts/freelance-cryptocurrency-writer_fud-buybitcoin-earnbitcoin-activity-6922646884394176512-21gT?utm_source=linkedin_share&amp;utm_medium=member_desktop_web" target="_blank" rel="noreferrer noopener">right-wing extremists</a>.



Fortunately, we had a chance to sit down once more with the team at Soluna Computing to learn more about the realities of mining, minus the incendiary rhetoric.



<h3 class="wp-block-heading">Mining amid data center computing</h3>



Soluna is not a bitcoin mining company per se. Rather, they integrate the computational work of mining into their overall model of computing. Doing so provides benefits to their business endeavors and efforts toward sustainability.



“In our case, [mining is] a fully integrated solution to wasted energy and it&#8217;s really integrated in the sense that it monetizes itself right away. It allows us to pay for all of the infrastructure, electrical cost of buildings, etc., very quickly and then we can reinvest in that facility to put in more general-purpose equipment to go after these other markets,” CEO of Soluna Computing John Belizaire said. “So, mining is a really great catalyzer for the data center business we&#8217;re building. It&#8217;s also a great solution for the green energy problem. That&#8217;s why we invest in it, and we build it.”



John also had some things to say with regard to the factors would-be miners need to consider before setting up shop. There’s more to it than simply buying mining machines and plugging them in:



“So, if you&#8217;re self-miner, there&#8217;s a lot you have to do, you have to figure out how to source your power. Well, we do that by providing a service to the power generation companies. You have to run a multimillion-dollar construction project to build out a facility. You&#8217;ve got to negotiate very large complex relationships with vendors, everything from electrical to contractors, EPCs, and all the way up to the large mining companies that make the computing equipment. And if you&#8217;ve never done that before, it&#8217;s pretty challenging as an entrepreneur to figure that out.”



Mining alone involves bringing together a variety of factors, and as mentioned, mining is not Soluna’s sole endeavor.



<h3 class="wp-block-heading">The challenges of creating disruptive enterprises</h3>



Creating a business of any kind comes with plenty of challenges. But doing so in a brand new, disruptive way brings an added dimension of difficulty.



In response to the question, “What’s it like to start this kind of disruptive business?,” Belizaire used a provocative analogy after noting his 20 years of experience in this area: “The best way to describe it is, we&#8217;re all standing in a room, and we have to say, okay, I&#8217;m going to start pumping nitrogen into this room, and we all have to breath nitrogen from now on, and it&#8217;s the right thing to do. It&#8217;s going to make you stronger, actually, it might kill you, but it&#8217;s the right thing, and you&#8217;re like, what? Why is it good to breathe nitrogen? That&#8217;s what it&#8217;s like introducing a new disruptive technology, you have to convince people to change their whole perspective on the world.”



Doing something disruptive involves forcing a paradigm shift. To this end, a process of “missionary-style education” can be necessary, according to Belizaire. He went on to explain that “you have to help them see how the world is changing and the role that this technology will play in generating opportunities from that change.”



Proper education can result in the necessary paradigm shift, as people come to an understanding that goes beyond the mainstream narratives being pushed. As Belizaire puts it, “It&#8217;s a constant process of education. Many who are critical of bitcoin’s impact on the environment don’t see the bigger role it can play. Computing when housed in flexible data centers can be infrastructure, making it not just a power user, but an architectural resource for the grid. Computing is a better battery.”



In this way, mining can be beneficial for power grids and businesses that conduct other modes of computing. Far from a simple waste of energy, proof-of-work blockchains such as Bitcoin have the potential to increase the efficiency and sustainability of the world’s electrical infrastructure.



Check out Soluna’s <a href="https://www.subscribepage.com/cleanintegration" target="_blank" rel="noreferrer noopener">newsletter for</a> more insights into the acceleration of renewable energy through crypto mining.



<hr class="wp-block-separator"/>



This content is sponsored by&nbsp;<a href="https://www.solunacomputing.com" target="_blank" rel="noreferrer noopener">Soluna Computing</a>.



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Crypto Mining as an Entrepreneurial Endeavor

Ben Strack

<div id="highlights-block_61e84de8f238a" class="highlights">
 <ul>
 <li>Blockchain Association’s Dave Grimaldi says he expects context around mining numbers that “sound scary,” discussion around collaborations</li>
 <li>Witnesses to testify include Bitfury CEO Brian Brooks, who spoke at last month’s hearing in front of the House Financial Services Committee</li>
 </ul>
 
</div>



Members of Congress are set to gather on Thursday for a hearing focused on the energy impacts of blockchains, marking the latest effort by lawmakers to learn more about the crypto space ahead of <a href="https://cms.blockworks.co/crypto-companies-brace-for-year-of-regulation-in-2022/">expected regulation</a> this year. The Subcommittee on Oversight and Investigations of the Committee on Energy and Commerce will host the hearing, which is scheduled for 10:30 a.m. ET. A live stream of the hearing can be accessed below:



<hr class="wp-block-separator"/>



<iframe loading="lazy" width="560" height="315" src="https://www.youtube.com/embed/HWg731-3id8" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen=""></iframe>



<hr class="wp-block-separator"/>



<h3 class="wp-block-heading">What to Expect</h3>



Those set to testify are Ari Juels, professor at Cornell Tech; Soluna Computing CEO John Belizaire; Bitfury CEO Brian Brooks; Steve Wright, former CEO of Chelan County Public Utility District and Bonneville Power Administration; and Gregory Zerzan, a shareholder of business law firm Jordan Ramis PC.



“Most industries kind of emerge from a regulatory and legislative perspective over years — maybe even a decade or more,” said Dave Grimaldi, head of government relations at <a href="https://theblockchainassociation.org" target="_blank" rel="noreferrer noopener">Blockchain Association</a>.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Crypto and blockchain have kind of burst onto the scene and are a trillion-dollar part of the economy and a big element of everyday lives for a lot of users, and that’s happened in probably two years.”</blockquote>



Grimaldi joined Blockchain Association — a group aiming to improve the public policy environment so that blockchain networks can thrive in the US — in November. He previously worked as the chief of staff for Federal Communications Commission (FCC) Commissioner Mignon Clyburn from 2010 to 2013. Prior to that, he had served as legislative counsel to then-US Rep. Ed Towns and senior counsel to Majority Whip James Clyburn.



Though the complexity of crypto and blockchain can be intimidating for lawmakers, Grimaldi explained, many members of Congress have shown a genuine desire to learn more.



The hearing comes after <a href="https://cms.blockworks.co/crypto-industry-will-move-offshore-if-congress-doesnt-act-executives-warn/" target="_blank" rel="noreferrer noopener">crypto company executives testified</a> in front of the House Financial Services Committee last month about the broader digital assets space. FTX CEO Sam Bankman-Fried said during the event that crypto technology can help make the financial system more equitable, while Brooks warned of crypto companies moving offshore if US regulators don’t act.&nbsp;&nbsp;&nbsp;



Grimaldi called the Dec. 8 event a “watershed hearing,” noting that most lawmakers seemed more interested in learning than making accusations.



“We thought that if there was going to be tough questions or scrutiny or demagoguery around crypto mining and climate, it would have happened then, and it didn’t,” he told Blockworks.



<h3 class="wp-block-heading">Focus shifts to energy</h3>



While the hearing last month covered a bunch of topics around digital assets and the future of finance, Thursday’s hearing is expected to focus more on the energy and environmental impacts of certain blockchains used in cryptocurrency mining.



“Members of Congress are generalists; they’re spread across 20 different things with barely any time in a day to be conversant in any of them,” Grimaldi said. “Deep-diving on them is helpful and puts sunlight on them. I hope that’s what Thursday is.”



A memorandum sent by House Committee on Energy and Commerce Chairman Frank Pallone (D-N.J.) to the Subcommittee on Oversight and Investigations cites <a href="https://digiconomist.net/ethereum-energy-consumption" target="_blank" rel="noreferrer noopener">an analysis by Digiconomist</a> indicating that the energy required to validate just one ether transaction could power a US home for more than a week. <a href="https://digiconomist.net/bitcoin-energy-consumption" target="_blank" rel="noreferrer noopener">Another</a> found that the energy required for a bitcoin transaction could power a home for more than 70 days.



However, <a href="https://hbr.org/2021/05/how-much-energy-does-bitcoin-actually-consume" target="_blank" rel="noreferrer noopener">industry experts point out</a> that use of a ‘per-transaction’ metric is misleading. In proof-of-work consensus blockchain networks like Bitcoin and Ethereum mainnet, the energy consumption is almost entirely related to issuance of new coins, and not the processing of transactions.



“Due to their broad adoption, cryptocurrencies are predicted to remain in use for the foreseeable future, raising questions about their rising energy consumption,” the memorandum states.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Validation mechanisms that use less energy, such as Proof of Stake (PoS), exist, and demonstrate that exponential energy consumption is not necessary for cryptocurrencies to function.”</blockquote>



For example, when Ethereum merges its mainnet with the Beacon Chain (also known as Ethereum 2.0), becoming fully proof-of-stake, its energy consumption <a href="https://blog.ethereum.org/2021/05/18/country-power-no-more/" target="_blank" rel="noreferrer noopener">will plummet</a> by 99.95%.



The New York Times <a href="https://www.nytimes.com/interactive/2021/09/03/climate/bitcoin-carbon-footprint-electricity.html" target="_blank" rel="noreferrer noopener">reported in September</a> that bitcoin uses more electricity than many countries, a story that Grimaldi said likely helped spur lawmakers’ attention to this issue.&nbsp;



“If power consumption numbers are going to be discussed, I hope that they are explained in a way where a number that sounds eye-popping and a number that sounds too big is explained by the witnesses for what it is,” he said.



Grimaldi added that committee members will likely explore during the hearing how crypto miners can decrease energy usage if necessary and how they can be incented to do so. The head of government relations noted that he will also be listening for discussion around how municipalities, city governments and public utilities companies can partner with mining communities.&nbsp;&nbsp;



“There is not a gotcha element to this hearing,” Grimaldi explained. “I hope it’s open ears and open minds and open dialogue, and I think that’s a real possibility.”



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



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