Drawn to upstate New York for its abundance of inexpensive power, the cryptocurrency industry promises to bring good-paying jobs to cities and towns sorely in need of economic growth, but it's a business fraught with risks to the environment.
Bitcoins are not physical coins. Cryptocurrency "mining" does not mean digging for something in the ground. Blockchain technology, NFTs, Web 3.0 — the terms seem part of a foreign language.
The arcane terminology and confusing aspects of the digital currency industry have allowed it to get ahead of government regulators and establish a foothold in Western New York and elsewhere upstate. However, more lawmakers are catching up in response to concerns about possible threats to the environment caused by the new businesses. At minimum, New York State needs a cost-benefit analysis of having digital currency entrepreneurs grow their businesses here.
Last month, a bill in the State Assembly advanced to the Ways and Means Committee that would put a two-year moratorium on "proof-of-work" cryptocurrency mining. That's an energy-intensive process by which computers race against each other to solve math puzzles to process and validate blockchain transactions. The bill would also require the state Department of Environmental Conservation to complete within one year an environmental impact statement on crypto operations throughout the state.
The two-year moratorium may be a step too far, potentially stunting the growth of an industry that could benefit the upstate economy.
An alternative bill, which is co-sponsored by Assembly Majority Leader Crystal Peoples-Stokes of Buffalo, would require creating a task force to study the impact of cryptocurrency in New York and assess whether the industry is compatible with the state's climate goals.
Whether it's a task force created by the Legislature or a study by the DEC, New York needs to understand the trade-offs involved in having an ever-increasing presence of the crypto industry.
Environmental groups such as the Sierra Club want Bitcoin mining banned in the state, citing harms to the environment. Bitcoin, the most popular of all cryptocurrencies, uses as much energy in a year as Norway and Sweden.
Crypto industry representatives say those claims are overblown and that crypto miners are increasingly moving to the use of renewable energy resources, a process that will accelerate as renewables come down in price.
The CEO of Foundry, Mike Colyer, recently met with The Buffalo News editorial board. Colyer said that 20% of all Bitcoin mining is done through Foundry's pool software. Participants in their pool, he said, get 73% of their power through renewable energy.
"It's because in Bitcoin mining, the algorithm drives miners to the lowest cost energy and the lowest cost energy is renewable energy," Colyer said.
Still, even as miners choose renewables, the large amounts of electricity they consume can take away from the supply of renewable power available for homes and other businesses.
New York State set ambitious goals in the 2019 Climate Leadership and Community Protection Act, which calls for steep reductions in greenhouse gas emissions in coming years. By 2040, the state is to generate 100% of its electricity from clean-power sources. Once a state task force is established, the cryptocurrency industry must show that its power-hungry computers can coexist with New York's climate goals.
Ground zero in the battle between the crypto mining industry and environmentalists in New York State is in the small village of Dresden in the Finger Lakes. That's where Greenidge Generation, a cryptocurrency data center and power generation company, bought a retired coal plant, converted it to a 106-megawatt natural gas plant and uses it to power its crypto mining business. Burning natural gas puts carbon in the air.
Greenidge has applied to the DEC for renewal of its air emissions permit. The agency has put off a decision while it studies information submitted by Greenidge Generation about its greenhouse gas mitigation strategies. The decision is likely to shape decisions on how the state treats other crypto mining operators.
There's plenty of enthusiasm in the state for digital currency and its economic potential. New York City Mayor Eric Adams has said he wants the city to become "the center of the cryptocurrency industry." Niagara Falls has several crypto mining businesses putting down roots.
Upstate needs new sources of prosperity when it can be achieved without throwing New York's climate goals into an incinerator.
A CRYPTO GLOSSARY
Bitcoin: The first and most valuable cryptocurrency, launched in 2009 as a "peer-to-peer electronic cash system."
Blockchain: A digital ledger in which each transaction is verified by a network of computers and added as a "block" to the chain. It is the technology behind cryptocurrencies.
Decentralized finance ( DeFi): Financial activities conducted without the involvement of an intermediary, like a bank or government.
Ethereum: The second largest cryptocurrency by trade volume.
Non-fungible tokens (NFTs): Units of value used to represent the ownership of unique digital items like art or collectibles.
Proof-of-work: It allows a party to use computers to solve a cryptographic puzzle to validate a transaction in mining.
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