These machines, known as mining rigs, work around the clock to find new units of cryptocurrency.
Benjamin Hall | CNBC
Some of the biggest names in bitcoin – including Jack Dorsey, Tom Lee and Michael Saylor – have teamed up to refute claims by House Democrats calling on the Environmental Protection Agency to investigate the environmental impact of cryptocurrency mining.
Bitcoin operates on a proof-of-work (PoW) mining model, which means that miners around the world run powerful computers to simultaneously create new bitcoin and validate transactions. Proof-of-work mining, which requires sophisticated equipment and a whole lot of electricity, has almost become synonymous with bitcoin, although ethereum – at least for a few more months – still uses this method to secure its network.
Rep. Jared Huffman (D-Calif.), Along with nearly two dozen lawmakers, wrote to the EPA last week, asking the regulator to ensure that mining companies comply with the Clean Air Act and the Clean Water Act, citing “serious concerns about reports of “Cryptocurrency facilities across the country are polluting communities and making an overall contribution to greenhouse gas emissions.”
In a rebuttal letter sent to EPA chief Michael Regan on Monday morning, a mix of bitcoin miners and industry experts – as well as firms such as Benchmark Capital, Fidelity Investments and Fortress Investment Group – claim that the House Democrats took very badly in their messages about the basics in proof-of-work mining.
First, the letter calls for lawmakers to confuse data centers with power generation facilities.
The rejection letter states that data centers that contain “miners” are no different from data centers owned and operated by Amazon, Apple, Google, Meta and Microsoft. According to the letter, every single building where electricity drives IT equipment is to run computer workloads.
“Regulating what data centers allow their computers to do would be a massive shift in U.S. policy,” the letter reads.
“They confuse the public,” said Darin Feinstein, co-founder of cryptocurrency mining operator Core Scientific – and one of the lead authors on the letter. “Pollution comes from the energy production source, and all data centers buy electricity off-site, upstream.”
Feinstein said that if the EPA wants to regulate energy production, channels are already in place to regulate energy production facilities at the federal, state and local levels.
“It would be very unusual for the EPA to regulate the kind of calculation that takes place within a data center. It is clearly outside their mandate,” Castle Island Ventures’ Nic Carter, who helped write the rebate, told CNBC.
“It makes no sense to ask the EPA to worry about what kind of calculation is being made,” Carter said.
While the EPA regulates power plants, very few PoW mining companies actually own electricity production, according to the contradiction.
“The letter makes it sound like there’s a bunch of these vertically integrated miners like Stronghold and Greenidge … but that’s a small part of the overall hash rate,” Carter continued, referring to an industrial term used to describe the computing power of all miners in the bitcoin network.
Huffman and his colleagues from the House also take issue with the specialized computer hardware that they claim creates “major electronic waste challenges” as millions of devices quickly become obsolete, leading to large amounts of electronic waste.
The letter cites estimates that bitcoin mining alone produces 30,700 tons of electronic waste annually. “Industry must be held accountable for this waste and discouraged from creating it,” the letter argues.
The memo to the EPA this morning rejects the claim of e-waste and says lawmakers cited a highly criticized research study that makes bold assumptions about the depreciation timeline for mining rigs. The letter says the assumption of a 1.3-year period of depreciation is “extremely short,” and lawmakers conclude that the entire fleet of rigs is periodically junked.
It is unclear whether the EPA will wade into the larger debate over proof-of-work mining. The agency did not immediately respond to CNBC’s request for comment.