In 2018, the global cryptocurrency market had crashed, and Sergii Gerasymovych was looking for a way to keep his Bitcoin mining company afloat. He eventually settled on a plan to make money while cleaning up two notoriously climate-polluting industries.
Gerasymovych’s biggest headache—as for all Bitcoin miners—was the price of electricity. Bitcoin miners compete against one other to unlock coins by solving increasingly difficult math problems with fleets of computers. This consumes a lot of power globally: about as much as Argentina each year. Bitcoin miners’ profit margin largely relies on the gap between electricity bills and Bitcoin’s value; if the latter drops, the only way to make up the margin is to curb the former. That’s why so much of the world’s cryptocurrency mining is tied to low-cost coal and hydroelectric plants in Asia. Gerasymovych was hunting for cheap power in the US, and stumbled on an intriguing source: Flare gas from natural gas wells. Now, a number of market trends are converging to propel a nascent industry in gas-powered Bitcoin.
Fracking for Bitcoin
Oil and gas wells in hydraulically fractured (“fracked”) shale formations produce some waste gas as a byproduct, mostly composed of methane. Since selling this gas is usually unprofitable, it’s typically disposed of by burning it off. Those little flares, from thousands of wells around the world, add up. Gas flaring is responsible for at least 1% of global carbon emissions, and collectively wastes hundreds of millions of dollars worth of natural resources every year. In the US, that has made flaring a target for regulators in gas-producing states like Texas, New Mexico, and North Dakota, which are considering new restrictions on the practice. BlackRock, the asset manager that has stepped up pressure on companies to disclose their climate risks, has called for the “near elimination” of flaring globally by 2025.
Anticipating a crackdown, some gas companies are starting to look for their own solutions. One cost-effective way to reduce flaring emissions is to turn the waste gas into electricity with a generator, and use it to power something, like lights or pumps, on the well site. But Gerasymovych realized that crypto miners and gas drillers could both benefit by converting waste gas into cheap power. What better way to reduce emissions than supplying a data center, ravenous for cheap 24/7 electricity, that can be built into a transportable shipping container?
There was just one problem: Perhaps because of Bitcoin’s tumultuous price swings, gas companies weren’t interested. “People laughed at us,” Gerasymovych said. Then three things changed. First, the pandemic struck, and the price of natural gas cratered; an industry that was already on shaky financial footing found itself facing an existential crisis as drilling ground to a halt and scores of shale companies went bankrupt. Second, thanks in part to a Feb. 2021 endorsement by Elon Musk, the…