Cryptocurrency And Energy: A Symbiotic ESG Relationship | Timely LLP

In the most basic terms, what is Bitcoin?

Dusek: Cryptocurrency like Bitcoin is an alternative currency that offers anonymity while reducing transaction costs. It is decentralized and can withstand inflation. It has the potential to end global poverty. Politicians hate it and governments fear it.

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ligon: As stated in the Bitcoin whitepaper by anonymous creator Satoshi Nakamoto, Bitcoin is a decentralized, peer-to-peer version of electronic money that allows online payments to be sent directly from one party to another without going through the financial institution. Since the launch of Bitcoin in 2009, many other competing cryptocurrencies have emerged, including Ethereum and many others, but Bitcoin remains the most widely adopted and valued for its pseudonymous transaction capability and network security. . New bitcoins are “mined” by special computers that compete to predict a complex set of numbers. The winner is rewarded with a Bitcoin “block,” and the process (called the proof-of-work consensus mechanism) is to create the Bitcoin blockchain and verify transactions with other users.

Do you think the relationship between oil and gas producers and crypto miners is here to stay? Will it be sustainable in the long term?

Dusek: So far the relationship is great, but we are still in the honeymoon phase. As margins narrow (for a variety of reasons), we see new variants evolving. Just as fracking has changed the way we produce energy; Bitcoin miners are the key to the next generation of energy development.

ligon: I think bitcoin miners have the highest correlation with off-grid power sources and smaller oil and gas producers, but we’ve already seen large producers like ExxonMobil running projects in pilot to test the use of flared gas for Bitcoin mining.

Crypto miners extract natural gas from oil and gas producers that would otherwise burn to use their hungry supercomputers and servers as a logical partnership with oil companies facing growing pressure from governments and agencies to reduce their greenhouse gas (GHG) emissions. How will ESG integrate this partnership and what is its role for both parties in the future?

Dusek: Currently, the consumer does not have 100% renewable energy. You may pay for it, but it’s just as clean as your neighbor. As long as the world uses 100% renewable energy, reducing GHG emissions is a board game. Creating or earning revolving credits is the fastest way to meet standards. As such, crypto miners have the potential to be the only exception to the rule.

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ligon: While cheap energy is the main driver for Bitcoin miners trying to partner with oil and gas producers, the implications of ESG are why we see these same producers accepting them with open arms. There is ample proof of concept describing the potential for carbon-neutral crypto mining, bitcoin mining reducing GHG emissions compared to flaring and venting, and other “greener” options compared to practices.

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