What is Sustainable Bitcoin Mining?

Since its introduction to the public back in 2009, Bitcoin has gone on to become the most well-known cryptocurrency in the world.

Yet, surprisingly few understand exactly how Bitcoin mining works and the impact it has on our environment. Here’s exactly why sustainable Bitcoin mining is the clear way forward and here’s why Iris Energy holds such a valuable competitive edge in the Bitcoin mining market.

How is Bitcoin mined?

Bitcoin mining is the process through which new Bitcoins enter into circulation. Powered by proof-of-work blockchain – a decentralized ledger of all the transactions across a network – groups of approved transactions form a block, then join to create a chain. Bitcoin mining is the process of adding a block to the chain.

Mining is performed using sophisticated hardware to come up with the 64-digit hexadecimal number (a ‘hash’) that is less than or equal to the target hash. Essentially, it’s guesswork. The process is relatively straightforward: be the first computer to find the solution and receive a predetermined amount of Bitcoin as an incentive for doing the work and recording transactions.

Approximately every 10 minutes, the Bitcoin protocol generates a random number, and people around the world are using computers to guess that number through trial and error. It is entirely probabilistic, which means the more computing power you have operating, the greater share of the Bitcoin reward you receive.

The process then resets itself approximately every 10 minutes.

The mining process incentivizes miners to efficiently use the energy required to power the miners. It all comes down to electricity, computing power and efficiency.

What Is Sustainable Bitcoin Mining?

The concept of sustainable Bitcoin mining is simple: use clean renewable energy sources to mine Bitcoin.

The question is, can Bitcoin go green?

Iris Energy has shown that it well and truly can, building out a sustainable business model that uses 100% renewable energy, supports local communities and helps solve energy market challenges.

Iris Energy believes western energy markets, regional communities and the global Bitcoin network are transitioning into the decarbonized world. We also believe Iris Energy is at the forefront of this evolution.

How Iris Energy Works

Our sites are powered by 100% renewable energy, currently ~97% sourced from clean or renewable sources as reported by BC Hydro (primarily from hydroelectricity) and ~3% sourced from the purchase of Renewable Energy Certificates (RECs).

Iris Energy operates in regions that have effectively overbuilt renewable energy – wind, solar, hydro – and is using the geographic flexibility of these data centers to locate them close to the source of low-cost excess renewable energy, and monetize it into this emerging digital asset: Bitcoin. This business model offers the flexibility to ramp up and down our energy consumption when needed to support the energy market.

We are a vertically integrated real asset business which owns or controls the land, data centers, grid connection infrastructure and substations. We’re big believers in controlling our own destiny across the full data center environment.

Input: Excess renewable electricity

Output: Bitcoin daily

The process is simple and essentially:

  1. Mine Bitcoin
  2. Sell Bitcoin
  3. Pay energy bill and overheads

Benefits of Sustainable Bitcoin Mining

Sustainable Bitcoin mining has an asymmetric return profile and provides attractive upside. When the price of Bitcoin falls, higher-cost miners may be unable to pay their power bill and therefore exit the network. For lower-cost miners like Iris Energy, using renewable energy, our share of the global network can go up, and we start receiving more Bitcoin each day.

With a greater share of the global network hash rate and stable power costs, our unit cost of production falls and our cost per Bitcoin mined goes down.

Then we look on the flip side: what happens when the cost of Bitcoin rises?

The real world can no longer scale exponentially to keep pace with price rises. As the price of Bitcoin goes up, there isn’t immediate access to additional power capacity and data center infrastructures to keep up. The ability to monetize Bitcoin all comes down to access to real world data centers capacity, computers, transformers, capital, grid connection infrastructure and a great team.

The real world vs digital world dislocation hits the industry head on – and Iris Energy is well positioned to capitalised on this opportunity.

The Future of Bitcoin Mining

Bitcoin mining opportunities are abundant, but it all hinges on a player’s ability to meet the real-world challenges mentioned above, and those that can address these challenges are going to be best positioned to take advantage.

In an environment where everyone may have access to efficient hardware technology, the whole battleground for the sector moves away from who’s got the most efficient chip towards who has the best access to energy and the required infrastructure. Enter: sustainable Bitcoin mining.

Iris Energy saw the opportunity to deliver an institutional grade infrastructure proposition to the market. By building and owning real assets that mine Bitcoin using 100% renewable energy, Iris Energy supports local communities and develops sustainable energy infrastructure. This has also enabled the creation of a geographically diversified portfolio of projects: across energy markets and jurisdictions.

This is the Iris Energy competitive advantage.

Iris Energy is focused on using 100% renewable energy, and only entering markets where the incremental load we bring to that market can help solve energy market challenges and generate positive outcomes. It’s about fundamentally integrating into energy markets and communities and helping de-risk our underlying business.

Case Study: British Columbia (Regulated Market)
Under the regulated pricing model, when there's an oversupply of power (e.g. hydro-electricity), power prices may need to go up in order to deliver a regulated return on the utility's investment.

Iris Energy is able to enter those markets and use that surplus renewable electricity, which not only powers our data centers, but in the process, can help alleviate upward pressure on prices to consumers.

Case Study: Texas Panhandle (Deregulated Market)

In markets like West Texas, not only is there an enormous amount of renewable energy that may be constrained because the transmission lines are not able to export that power to the major load centers in the South East such as Dallas and Houston, but there is also a time of day issue and a network volatility issue.

We see large periods during the year where there is negative power pricing and then a really small number of time periods where we see power prices peak because of reduced resilience in these networks and prices spike.

When there’s a weather event, network outage, wind stops blowing, or the sun stops shining, Iris Energy is able to dynamically reduce our energy consumption to support the grid.