Exxon Mobil is using excess natural gas to power crypto mining: Report

Exxon Mobil is using excess natural gas to power crypto mining: Report

The oil and gas giant launched the pilot program in January 2021 and is now reportedly considering expanding it to Nigeria, Argentina, Guyana, and Germany.

United States-based energy producer Exxon Mobil has reportedly been running a pilot program aimed at using the energy from excess gas to power crypto mining rigs — and it may be expanding its operations to four other countries.

In a Thursday report, Bloomberg said Exxon Mobil had inked a deal with Crusoe Energy to use excess gas from oil wells in North Dakota to run Bitcoin (BTC) miners. The project reportedly uses 18 million cubic feet of natural gas per month — roughly 0.4% of the oil giant’s reported operations in the state, producing 158 million cubic feet of natural gas each day.

The company launched the pilot program in January 2021 and is now reportedly considering expanding to Nigeria, Argentina, Guyana, and Germany in addition to launching a similar project in Alaska. Cointelegraph reported in February that oil and gas giant ConocoPhillips was running a program selling excess gas to third-party BTC miners for fuel.

Transporting natural gas requires pipelines which cannot always safely accommodate the amount produced. Companies are often forced to burn off any excess gas or vent it into the air, ultimately harming the environment and the firms’ profit margins.

“It is creating use of what would be otherwise wasted,” said Danielle Fugere, president of environmental shareholder advocacy group As You Sow, referring to the energy being diverted to Bitcoin miners.

According to a report from Argus Media, Crusoe Energy operated 60 data centers for crypto mining across four U.S. states as of September 2021 powered by “gas from the oil wells that would otherwise be flared on site.” Instead of burning off the gas, diverting it to crypto mining reportedly reduces carbon dioxide-equivalent emissions “by as much as 63%.”

Related: Stranded no more? Bitcoin miners could help solve Big Oil’s gas problem

Though the Bakken shale basin in North Dakota is a major source of natural gas for the United States, Texas is also home to many oil and gas companies in addition to crypto mining firms seeing the potential for energy production in the state. In contrast, New York lawmakers have proposed suspending proof-of-work mining powered by fossil fuels in response to critics citing environmental concerns.

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Kazakhstan Police Shut Down Another Crypto Farm Amid Ongoing Crackdown on Mining

Kazakhstan Police Shut Down Another Crypto Farm Amid Ongoing Crackdown on MiningLaw enforcement officers in Kazakhstan have busted another mining facility as they continue to crack down on illegal activities in the sector. The crypto farm, located at a railway station, is the latest targeted mining operation in the country which has been struggling with its power deficit. Authorities in Kazakhstan Seize Over 100 Mining Rigs […]
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Bitcoin hash rate may see ‘small capitulation’  with difficulty set for new all-time high

Bitcoin hash rate may see ‘small capitulation’ with difficulty set for new all-time high

Bitcoin network fundamentals appear more resilient than ever to attacks on miners‘ operations.

Bitcoin (BTC) set a new all-time high for hash rate last week, but opinions are divided as to whether the uptrend can continue.

In a Twitter debate on March 21, Preston Pysh, host of The Investor‘s Podcast, eyed changing behavior in Bitcoin‘s hash ribbons metric for signs of a new hash rate “lull.”

Questions over “lull” in hash rate after record highs

Bitcoin has overcome considerable odds over the past year to see the processing power dedicated to mining — hash rate — reach a giant 222 exahashes per second (EH/s) this month, according to estimates from monitoring resource MiningPoolStats.

First China sparking a mass miner exodus, then this year‘s crackdown of mining hubs in Kazakhstan put the cat among the pigeons in terms of miner operation.

Nonetheless, a full recovery ensued on both occasions, reinforcing the idea that as long as there is at least one “friendly” jurisdiction for miners, mining will come back harder than ever before.

Hash ribbons use two simple moving averages (SMAs) of hash rate to assess miner health and has been used to conclude when likely price bottoms are near based on that health.

Miners have a breakeven cost for producing each Bitcoin, and when the spot price is lower than that cost, the danger arises that they will begin to “capitulate,” or cease operations due to a lack of profitability. This has the knock-on effect of reducing price performance, and an adjustment in Bitcoin network difficulty is needed to lower miners‘ production costs en masse.

In terms of hash ribbons, when the 30-day SMA crosses under the 60-day SMA, this suggests a capitulation event — at least large enough to measure — has occurred.

“A simple 1- and 2-month simple moving average of Bitcoin’s hash rate can be used to identify market bottoms, miner capitulation and — even better — great times to buy Bitcoin,” Charles Edwards, CEO of asset manager Capriole, who created the metric, explained in a blog post in 2019.

“When the 1-month SMA of Hash Rate crosses over the 2-month SMA of Hash Rate, the worst of the miner capitulation is typically over, and the recovery has begun.”

This time, events in Kazakhstan could have formed the trigger for a capitulation event, which has, nonetheless, already been erased in terms of hash rate growth.

“Margins are still very healthy. Production cost is low-mid 30s. Electrical (running) cost is low 20s,” Edwards responded to Pysh, referencing a theory by Blockware analyst Joe Burnett.

“I think (Burnett’s) reasoning re- Kazakhstan is most logical. So perhaps a small capitulation (provided broader macro/market strength).”

Bitcoin hash ribbons vs. BTC/USD chart. Source: Glassnode

Difficulty set for record highs

It‘s not just hash rate: Mining difficulty is also enjoying a winning streak that looks set to resume this month after its own brief consolidation.

Related: Bitcoin ‘could easily see $30K’ with stocks due to 30% drawdown in 2022 — Analyst

As the most important of Bitcoin‘s fundamentals indicators, the difficulty is set to increase by an estimated 4.66% at the next automated readjustment in eight days‘ time.

The last two readjustments were both negative, but only just, meaning the upcoming increase will send difficulty to new all-time highs of 28.73 trillion.

Bitcoin difficulty 7-day moving average chart. Source: Blockchain
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EU vote on Bitcoin mining: What does it mean for the industry?

EU vote on Bitcoin mining: What does it mean for the industry?

A win in the European Parliament, but will mining rules have to change? “Eventually, only PoS will be adopted by blockchain applications.”

Proof-of-work (PoW) crypto mining won’t be banned in the European Union — not this year at least. That’s the conclusion from last week’s closely watched committee vote in the European Parliament (EP). 

A last-minute amendment presented by an ad hoc coalition of social democrats and Greens would have established a de facto ban on proof-of-work mining — the type of consensus mechanisms used by native cryptocurrencies like Bitcoin (BTC) and Ether (ETH) — has been decisively rejected. The crypto community can breathe easily, but some still worry that the industry’s problem with its energy-intensive consensus protocols remains. 

“My first reaction to the Economic and Monetary Affairs committee vote outcome was a sigh of relief,” Joshua Ellul, director at the Centre for Distributed Ledger Technologies and senior lecturer at the University of Malta, told Cointelegraph, adding:

“It is definitely a sign that crypto and distributed ledger technology is no longer a niche bringing together technologists, investors, hobbyists and idealists — it is a technology that is here to stay.”

But, Ellul also believes that the community should not rest easy with last week’s win. Miners who support PoW blockchain projects should be “investigating renewable energy sources,” not only in anticipation of other possible regulatory actions but also to minimize their carbon footprint. 

The committee vote was part of the European Union’s ongoing Markets in Cryptocurrency Assets (MiCA) process designed to bring harmonization, clarity and regulation to Europe’s cryptocurrency markets. 

“In all likelihood, the de-facto PoW-ban amendment would not have found its way into the final MiCA agreement,” Patrick Hansen, head of strategy at crypto firm Unstoppable Finance, told Cointelegraph. But, that doesn’t mean that energy profligacy and carbon footprint are dead issues. Hansen added:

“The macro-environment — Ukraine, inflation, etc. — is changing rapidly, and energy consumption reduction might soon become an absolute policy priority.”

A wake-up call?

“This is good news for the crypto sector,” Yu Xiong, professor of business analytics and director of the Center for Innovation and Commercialization at the University of Surrey, told Cointelegraph, regarding the EP committee vote. It is another sign that cryptocurrencies and blockchain technology are being widely accepted by the public, but also “definitely provided a warning to those mining activities that use PoW. Prepare for transformation because nobody can predict if there will be another such vote in future.”

Ethereum will “hopefully” successfully transition to a more eco-friendly proof-of-stake (PoS) consensus mechanism later this year, he added. Otherwise, the vote provides time for other projects that use PoW to undertake their own transformation to reduce energy consumption and their carbon footprint.

Like some others active in the crypto space, Xiong believes that enlightened regulation — of the sort MiCA presumably offers — will be an overall plus for the crypto industry. Or, as European People’s Party spokesperson Markus Ferber put it recently: 

“The markets for crypto assets have been like the Wild West for too long and need a European sheriff […] The new rules for crypto currencies will fill the existing regulatory vacuum by putting in place a clear framework to protect investors and ensure market integrity.” 

All said, the 32 to 24 vote to reject the amendment was preceded by a certain amount of trepidation in the crypto community. “The MiCA situation is worse for crypto than anything in the USA,” noted Blockchain Association policy chief Jake Chervinsky, who said the amendment looked “like a pretext for a Bitcoin ban.” Meanwhile, Jean-Marie Mognetti, CEO of CoinShares, described the bid to ban PoW protocols as “more than just bad news” but rather “a thoughtless, uninspired proposal that does not reflect the realities and the future of the industry.”

Soon to be part of Europe’s sustainable “taxonomy”

Separate from the amendment tussle, the ECON committee also asked the European Commission to include cryptocurrency mining activities in its EU taxonomy — a classification system — for sustainable activities by January 1, 2025. The EU would then determine whether crypto mining could be classified as a “sustainable” activity. If deemed non-sustainable, European institutional investors and others might be inclined to give the crypto sector a wider berth. 

“The taxonomy has a huge influence over where companies, investors and states [can] invest their money and subsidies,” explained Hansen recently. And, as more environmental laws pass, the more that influence will grow. Meanwhile, he added that PoW crypto mining could very likely be listed as “unsustainable” under the taxonomy. 

But, this is still some time in the future and might be of limited scope. “I don’t think that the addition to the sustainability taxonomy from 2025 onwards will have a big impact on crypto adoption,” Hansen told Cointelegraph. “Depending on how it is defined, it might make investments in mining companies more difficult in the future, but we are still years away from that and mining is not an important economic activity in the EU anyway.”

More importantly, Hansen added, it will affect only the mining companies and “not the entire crypto industry as for the alternative amendment that was voted against.”

Xiong described crypto mining’s inclusion in the EU taxonomy as “reasonable.” It will put more pressure on miners to transition to more eco-friendly alternatives and he anticipates that fewer networks will use PoW consensus mechanisms come 2025. “Eventually, only PoS will be adopted by blockchain applications,” predicted Xiong.

Ellul said that the 2025 deadline offers some breathing room. “I hope that it encourages more renewable energy sources.” One problem with the PoW-energy debate, he added, is that it is highly polarized: “One extreme is that ‘no matter what the cost, PoW should remain,’ while the other is that PoW is going to kill us all.”

A less-heated middle position might be useful, he suggested.

A climate crisis looms

Were any lessons learned in this latest regulatory skirmish? According to Xiong, one lesson is that crypto and blockchain developers must “only embrace environment-friendly crypto” because any carbon emissions-related activities in this sector “will be quickly picked up by watchers.”

Indeed, Eero Heinäluoma, a European Parliament member and a backer of the anti-PoW amendment, said that “The carbon footprint of a single bitcoin transaction equals a transatlantic return flight from London to New York. This is 1.5 million times the energy used up by a VISA transaction. If we don’t curtail this massive carbon footprint by putting crypto-currencies on a more sustainable path, our efforts to combat the climate crisis and boost our energy independence risk being in vain.”

However, not all in the crypto community are swayed by these sorts of comparisons. Mognetti noted

“At an annualized emissions rate of 41 million tons CO2, the global Bitcoin mining industry has a small environmental footprint relative to the aviation industry, marine transport sector, air conditioners, electric fans, data centers, and tumble dryers.”

Source: Twitter

Ellul agreed that the energy issue can’t be viewed in isolation. “Most everything of utility in the modern world requires energy and many other activities are power-hungry, too.” One example: Ireland’s power operator estimates that by 2028, 30% of Ireland’s electricity will be consumed by the country’s data centers.

Overall, the European Parliament committee vote “did not result in stifling technology this time, but indeed it raises questions about the future,” Ellul told Cointelegraph. Meanwhile, Hansen added that even if the committee vote had been lost, the mining ban would surely have been dropped from the MiCA bill later when the three key EU entities — Parliament, Council and Commission — reconcile their legislative texts in the EU’s unique “trilogue” process. Still, a defeat in the ECON committee would have looked bad, said Hansen: 

“The mere symbol of the EU Parliament calling for a PoW ban would have had a very detrimental effect on the market.”

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Bitcoin rally hopes diminish as pro traders flip bearish, retail interest at 12-month lows

Bitcoin rally hopes diminish as pro traders flip bearish, retail interest at 12-month lows

A symmetrical triangle shows support at $38,000 but pro traders have failed to add leverage long positions, according to exchanges’ data.

Bitcoin (BTC) has been trapped in a symmetrical triangle for 56 days and the trend change could last until early-May, according to price technicals.

Currently, the support level stands at $38,000, while the triangle resistance for daily close stands at $43,600.

Bitcoin mining up, retail interest down

Bitcoin/USD price at FTX. Source: TradingView

The week started with a positive achievement for the Bitcoin network as the Lightning Network capacity reached a record-high 3,500 BTC. This solution allows extremely cheap and instant transactions on a secondary layer, known as off-chain processing.

After cryptocurrency mining activities were banned in China in 2021, publicly-listed companies in the United States and Canada attracted most of this processing power.

In result, Bitcoin’s hash has recovered dramatically since the summer. It’s currently at all-time highs at over 200 EH/s. According to the Cambridge Bitcoin electricity consumption index, 45% of the global hash rate derives from North America

Furthermore, Whit Gibbs, the founder and CEO of Compass Mining, stated that “public mining companies definitely have an advantage when it comes to holding Bitcoin because they have access to the capital markets.” In addition, there is less selling pressure as miners’ reserves have been steadily increasing.

Global search for the “Bitcoin” term. Source: Google Trends

Meanwhile, searches for “Bitcoin” on Google are nearing their lowest levels in 12 months. This indicator could partially explain why Bitcoin is 41% below its $69,000 all-time high, i.e. public interest is low. Still, one needs to analyze how professional traders are positioning themselves, and there’s no better gauge than derivatives markets.

Still, one needs to analyze how professional traders are positioning themselves, and there’s no better gauge than derivatives markets.

Related: Crypto miner Hut 8 posts record revenue as BTC holdings surge 100%

Long-to-short data confirms lack of excitement

The top traders’ long-to-short net ratio excludes externalities that might have impacted specific derivatives instruments. By analyzing these top clients’ positions on the spot, perpetual and futures contracts, one can better understand whether professional traders are leaning bullish or bearish.

There are occasional methodological discrepancies between different exchanges, so viewers should monitor changes instead of absolute figures.

Exhanges’ top traders Bitcoin long-to-short ratio. Source: Coinglass

Bitcoin might have jumped 8% since March 13, but professional traders did not increase their bullish bets according to the long-to-short indicator. For instance, Huobi’s top traders’ ratio slightly decreased from 1.10 to the current 1.06 level.

Moreover, OKX data shows those traders reducing their longs from 1.26 to 1.03 significantly reducing their longs. Binance was the only exception, as top traders increased their longs from 1.05 to 1.13. Still, there has been a slight 0.06 decrease across the three major exchanges on average.

Can the triangle break to the upside?

From the perspective of the metrics discussed above, there is hardly any sense that Bitcoin price will flip bullish in the short-term. Data suggests that pro traders have reduced their long positions, as expressed by the basis rate and long-to-short ratio.

Moreover, the broader Google search trend signals retail interest is not picking up despite high inflation data and global socio-political uncertainties. For now, the odds of the symmetrical triangle breaking for the upside seem dim.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bitcoin Miners Catch a Second Break With Another Downward Difficulty Adjustment

Five days ago, Bitcoin’s hashrate had shown improvement as it increased 15% over the course of ten days and today, the computational power remains above the 200 exahash per second (EH/s) region. Meanwhile, bitcoin miners caught another break on Thursday, as the network’s mining difficulty adjusted downward for the second time in a row, making […]
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Stranded no more? Bitcoin miners could help solve Big Oil's gas problem

Stranded no more? Bitcoin miners could help solve Big Oil’s gas problem

Can Bitcoin mining be part of the solution for greenhouse emissions rather than part of the problem?

The energy usage and environmental impact of Bitcoin (BTC) mining have been frowned upon and been under the scanner by various international financial institutions. The International Monetary Fund (IMF) mentions how Bitcoin mining consumes “vast amounts of computing power and electricity.”

Bitcoin mining is an energy-consuming process, as it is a proof-of-work (PoW) blockchain network that involves providing cryptographic proof to the network that a quantified amount of a specific computational effort has been used. The information used to verify this is stored in a block to be accepted into the network by other participants. 

Elon Musk, one of the richest men in the world and the co-founder and CEO of Tesla, in February 2021 announced that the car manufacturing company will accept Bitcoin as payment for its products and services. 

But, in May of that same year, Tesla discontinued its support for the acceptance of Bitcoin payments, citing the company’s concerns about the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal.” This also led Musk to hail Dogecoin (DOGE) as a better means of payment than Bitcoin due to the high environmental cost of BTC transactions.

However, a new solution seems to be emerging that has the potential to address the narrative that has permeated the mainstream conscience. 

Associated natural gas is a byproduct of oil drilling, the volume of which is often outweighed by the costs of getting it to a refiner, leaving it “stranded” at the well. Thus, it is often just burned off at the oil derrick, earning it the moniker “flare gas.”

On Feb. 17, CNBC reported that the oil giant ConocoPhillips is running a pilot program in Baken, North Dakota. Instead of burning associated gas, the company is selling it as fuel to third-party Bitcoin miners.

The idea of using associated gas to mine Bitcoin is not new. Back in 2019, Brent Whitehead and Matt Lohstroh started the company Giga Energy Solutions, which mines Bitcoin with electricity generated from such gas. The firm delivers a shipping container that is full of Bitcoin mining equipment to an oil well and then diverts the stranded natural gas into generators that convert the gas to electricity, using it to mine Bitcoin.

Crusoe Energy is another company that uses the energy from flare gas to mine Bitcoin. The firm has grown to become one of the biggest players in the space and has also received investment from one of the oldest cryptocurrency exchanges in the world, Coinbase and Winklevoss Capital, a company founded by the Winklevoss twins, the founders of crypto exchange Gemini.

A report from Crusoe Energy Systems claimed that using this gas to mine Bitcoin reduces CO2-equivalent emissions by about 63% compared to the continued flaring of the gas.

Cointelegraph spoke with Ethan Vera, chief financial officer and chief operations officer at Viridi Funds, a company that offers crypto investments to Bitcoin miners, about the impact of ConocoPhilips involvement in the innovation. 

Ver said, “While ConocoPhillips is one of the major energy companies that have publicly announced their entry into Bitcoin mining, there are many other energy companies that have already started the process of setting up mini-test sites. If the economics of Bitcoin mining increase and total mining revenue on a USD basis grows, many of the large energy producers will look to enter the space in a bigger way.”

Energy impact of Bitcoin mining could be overrated

As per the University of Cambridge’s Cambridge Bitcoin Electricity Consumption Index metrics, the estimated power demand for the Bitcoin network is 15.57 GW (GigaWatts) which annualizes at 136.48 TerraWatt hours (TWh). The look at historical data of power demand for the network reveals that this demand is continuously increasing through the years as the network grows.

Despite this increase in demand for power, the environmental impact could be overrated. A report from CoinShares released in January this year attempted to gauge the carbon emissions caused by Bitcoin mining. Contrary to popular belief, the report’s findings suggest that Bitcoin mining only accounts for 0.08% of the world’s carbon dioxide, or CO2, production. The report found that the network emitted 42 megatons (Mt) (1Mt = 1 million tons) of CO2 in 2021 out of the world’s total emissions of 49,360 Mts of CO2.

Sam Tabar, chief security officer of Bit Digital, a publicly-traded Bitcoin mining company, told Cointelegraph:

“The environmental impact of Bitcoin mining is massively exaggerated by traditional financial authorities (IMF, etc.) because they know they can divide a new counterculture movement by using fake environmental arguments. They are trying to gaslight us against each other. They gaslight the world with fake green arguments, and I understand why: They don’t want to lose influence over the levers of power of a system that only works for the elite.”

Related: Are we misguided about Bitcoin mining’s environmental impacts? Slush Pool CMO Kristian Csepcsar explains.

In this regard, Vera mentioned that gauging the environmental impact of Bitcoin is a highly nuanced topic and is one that can’t simply be explained by the energy consumed metric. He said that “In many cases, Bitcoin mining incentivizes the development of renewable energy which will have profound impacts on long-term energy infrastructure and environmental impact.”

Oil giants could lead the change to make Bitcoin green

Considering that using stranded natural gas to mine Bitcoin could reduce the net carbon emissions of mining, as well as reduce emissions from flare gas, other major oil companies could soon jump on the opportunity, especially as governments and regulators have been cracking down on gas flaring.

In November 2020, Colorado regulators gave the initial okay to ban gas flaring in order to curb methane pollution. 

Regulators in the state of New Mexico imposed a rule in March 2021 that requires oil operators to gradually eliminate gas flaring. The rule dictates that 98% of the nature-stranded gas should be captured by April 2022 instead of flaring.

However, such decisions are highly difficult to pass in a country where both sides of the government are heavily dependent on lobbying from big oil companies. In October 2021, Bloomberg reported that President Biden’s crackdown on methane emitters is set to stop short of imposing a ban on flaring.

An outright ban on gas flaring would be good news for the Bitcoin mining industry as that oil producers would have either of two options. First, to reduce the production output of oil which wouldn’t be economically viable. Or, second, utilize excess stranded natural gas on-site, which is where Bitcoin miners could step in to create synergies with big oil companies like ExxonMobil, British Petroleum (BP), Chevron or Valero Energy.

Vera stated that “With high oil prices, the majority of these producers are turning to utilize the stranded gas on-site such as Bitcoin mining, instead of burning it up. We expect the trend to continue in the future as more governments regulate the ability for oil companies to flare excess gas.”

The World Bank also has its own initiative to help reduce gas flaring around the world. The Global Gas Flaring Reduction Partnership (GGFR) is a multi-donor trust fund that comprises governments, oil companies and multinational companies that are committed to reducing gas flaring. Bitcoin mining pools and companies could enter collaborations with this trust fund to further this initiative.

However, oil companies could have a two-faced approach to the issue at hand, thus, raising questions on their intentions. For example, in 2020, BP urged regulators in Texas to ban the routine flaring of natural gas. But, in January 2021, the Texas Railroad Commission passed 121 of the company’s requests for flaring.

With regulators and governments around the world cracking down on gas flaring, the Bitcoin mining industry has an opportunity to reduce the CO2 emissions and methane pollution in the atmosphere. Vera concluded on this synergy, stating that “Bitcoin miners are a natural partner to all energy producers including renewable and oil and gas. Bitcoin mining improves the ability for these companies to manage and utilize their resources in the most profitable way.”

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