Bitcoin is eating up Quebec. Will the mining frenzy destroy the world?

At first glance, the old industrial park in Saint-Hyacinthe, 60 miles east of Montreal, doesn’t look particularly high-tech. The air is thick with the smell of roasted cocoa, a large chocolate factory nearby, and the smell wafts through the honking delivery trucks and abandoned offices.

Not far away, an audiovisual repair shop and an agricultural laboratory specializing in pathogen detection for livestock and poultry are competing for space with a large abandoned dairy processing plant. Behind them, a dilapidated, low-rise building was once a warehouse for a soup company, and before that, a diaper factory. You might think the place was forgotten long ago. But the plastic sheeting suggests that new buildings are coming inside.

However, the biggest clue is that if you stand next to the car outside the building, you can hear some high-tech things going on inside - and these sounds are made by thousands of computers.

These computers are the property of Bitfarms, the largest mining company in North America. In this once abandoned factory, 7,000 shoebox-sized machines are tightly lined up, stacked from the floor to the ceiling. On the back of the machine are messy wires and routers, exposed to the cold wind of Canada. Busy employees in T-shirts and jeans walk around the computers. Even if the weather is cold, the heat in the house is enough to make their faces flush.

These computers, often called rigs, are purpose-built. They can withstand dramatic changes in temperature and humidity. They can perform trillions of calculations per second, 24 hours a day. With great power comes great energy consumption, and these 7,000 computers use as much electricity as a nearby ice hockey arena.

Millions of these computers are working around the world, all thanks to the rise of cryptocurrencies in 2009. Since the birth of Bitcoin 10 years ago, China and Romania have done most of the mining work because these two countries have abundant electricity and loose regulations. In 2016, Hydro Quebec officially announced a plan to attract data centers to Quebec, such as those of Microsoft and Amazon. Miners heard the news and started submitting applications in September 2017. Soon, the number of applications from miners increased, and the company could no longer bear it. If Quebec accepts a small number of them, it will become the new mining center of the world. So the question began to arise about how strong Hydro Quebec's power grid can withstand, especially in winter. At the same time, environmentalists and social justice advocates are also worried about the impact of this plan on ecology and culture. In addition, the moral question of the true value of virtual currency has also aroused widespread discussion among people.

Worthless puzzle pieces

Cryptocurrencies are inherently energy-intensive. As decentralized ledger systems, most rely on something called proof-of-work for security. About every 10 minutes, new Bitcoin coins are issued in exchange for successfully solving a computational problem that verifies a “block” of transactions. Participants do this by converting the data representing those transactions into a sequence of codes called a “hash,” trying again and again until certain criteria are met. While it’s not overly complex — insiders liken the process to guessing lottery numbers — it does produce a lot of wrong guesses.

“We’re solving a puzzle that can’t be solved mathematically,” said Christian Catalini, associate professor of technology innovation at MIT and founder of the institute’s Crypto Economy Lab. “You can only break in by brute force, and the brute force is the extremely high power required by the miners’ computers.”

Megawatt

Catalini said that in decentralized systems, resource-intensive characteristics are inherent because the participants in these systems lack basic trust. Ordinary currencies have central banks behind them - such as the U.S. Federal Reserve, but the way cryptocurrencies such as Bitcoin fight fraud is to make all transactions transparent and verifiable.

"To put it simply, you have an economic cost between the user and the attacker," Catalini said. "If someone wants to subvert the system by counterfeiting transactions, or restore legitimate transactions, they have to do a lot of computation and consume a lot of energy, which is not economically cost-effective. In other words, the cost of subverting the system is higher than the benefit."

But that also means that legitimate transactions must consume a lot of energy to prove their verifiability.

David Malone is a senior lecturer at Maynooth University in Ireland, specializing in mathematical models of networked systems. Currently, the number of hashes calculated per second by Bitcoin globally is 2500 quadrillion, and this number is expected to continue to grow in the months and years ahead. In the near future, the electricity used to cool these computers (which cannot function properly once the temperature exceeds 40°C) will be equal to the electricity consumption of the entire Ireland. It is also important to note that while Bitcoin is the largest cryptocurrency known to most people, there are actually 1,500 other cryptocurrencies in use, each of which has extremely high power requirements.

Without a doubt, electricity is the biggest cost for any mining operation. Therefore, in order to pursue profits, miners must find cheap energy. This is why China is far ahead in the mining boom: China's electricity costs only 9 cents per kilowatt-hour. However, as the government gradually strengthens supervision, the power system is under increasing pressure, and many miners are starting to look for mining locations around the world.

For several years, China has led the world in greenhouse gas emissions reduction. This is partly because China is the most populous country in the world; on the other hand, most of its electricity comes from burning coal, which is also one of the "dirtiest" energy sources. The United States, the second largest mining site in the world, relies on oil for most of its electricity supply. Together with mining centers in other parts of the world, the industry produces 29,000 kilotons of greenhouse gases each year, more than Afghanistan, Croatia, Kenya or Panama produce in a year.

This is also an important reason why Bitfarms founder Pierre-Luc Quimper placed his five mining centers in Quebec, where his 20,000 computers can rely on hydroelectric power. Quimper and his colleagues at Bitfarms began to enter the cryptocurrency industry in 2009. They founded the company in late 2017 and built the relevant equipment - just in time for the mining boom in Quebec.

“We use a lot of energy,” Quimper said, “so it has to be clean. If it has a bad impact on the environment, that’s not good.”

Hydro-Quebec claims its hydroelectric power is the best solution: a clean, renewable energy source that is available in large quantities.

However, some people have doubts about the cleanliness of hydropower, especially conservative ecologists, who say the impact is too high for any industry, let alone one that only mines Bitcoin.

Million-acre underwater greenhouse gas reservoir

Electricity generation, which uses flowing water to turn turbines that generate electricity, is undeniably cleaner than coal and fossil fuels. Still, it has significant environmental impacts. One of the biggest is the damage to water sources caused by building reservoirs. In places like Quebec, building reservoirs requires cutting down forests, which are the most efficient greenhouse gas converters on the planet and store carbon dioxide. When trees decay in water, they release methane, which has a greater impact than carbon dioxide.

“You’re essentially putting millions of acres of greenhouse gases under water,” said Jeff Wells, a conservative ecologist and researcher at Cornell University who co-authored a 2011 study of the impact of industrialization on the boreal forest. “You’re pumping greenhouse gases into the environment to the point where the area can’t absorb any more, and you lose an entire ecosystem.”

The researchers calculated the carbon emissions impact of hydroelectricity worldwide. Their estimates show that if all cryptocurrency mining switched to this energy source, the industry would still produce more than 9,000 tons of carbon dioxide per year, plus more than 150 kilotons of methane.

While hydroelectricity in cooler climates would emit less carbon and methane than in the tropics, it comes with an environmental cost. The northern ecosystem known as the boreal forest does more than sequester carbon. Its rivers supply water that makes up much of the Arctic Ocean and are considered key currents responsible for water migration and determining global weather patterns. Because dams such as Hydro-Quebec’s are often far from population centers, they require massive transmission lines and transformers. These can damage wildlife habitats, kill birds and introduce invasive species.

Hydro-Quebec spokesman Marc-Antoine Pouliot assured that before building a new dam, they would conduct a comprehensive environmental impact study. The company will analyze all new blockchain centers and will cover the necessary costs if upgrades to the power grid are required. The only problem, he said, is how to maintain supply during peak electricity usage, such as during the Canadian winter.

“In Quebec, the average home is heated by electricity. Therefore, when the temperature drops below -20°C, electricity demand peaks,” Pouliot said. “We are analyzing the impact of blockchain during peak winter. One solution is to ask blockchain companies to suspend their activities during the winter.”

In an industry that generates tens of thousands of dollars a day, it remains to be seen whether such a solution will be accepted by industry insiders.

Wells wants fewer large dam complexes, not more. “I’ve come to realize that destroying a system that actually supports life on Earth is not a good idea,” he said. “There are fewer and fewer places left. It’s reckless to do it for the sake of cryptocurrency or some speculative technology.”