In recent weeks, there has been a resurgence in discussions about the environmental impact of bitcoin mining, sparked by a Texas bill that aims to restrict its grid participation and an article in the New York Times that denounced the industry. According to data from Cambridge University’s Centre for Alternative Finance, bitcoin mining consumes approximately 145 terawatt hours (TWh) of electricity annually, which is equivalent to the amount of energy used by Sweden, as reported by the International Energy Agency.

While some consider bitcoin's proof-of-work algorithm to be deliberately wasteful, advocates argue that it is necessary for maintaining network security and decentralization. However, a third group sees bitcoin's energy consumption as an opportunity to promote sustainability. To this end, various products and companies are implementing innovative solutions to help miners become more environmentally friendly, such as creating market incentives to encourage "green" bitcoin and improving data center efficiencies to reuse generated heat.

Here are 5 potential ideas paving the way for Green Bitcoin Mining:

1. Finding "Green" Solutions with Tradable Environmental Assets

Crypto lender BlockFills and fund Isla Verde Capital have developed a product that assists not only miners but investors in finding “green” solutions for their energy use. This comprises tradable environmental assets in the form of carbon emissions offsets and Renewable Energy Credits (RECs). The latter represents ownership of the sustainability of electricity generated. BlockFills and Isla Verde Capital tailor the purchase of RECs and carbon credits to miners’ needs and retire them later, enabling them to claim to be using renewable energy sources. The RECs also target bitcoin investors, helping asset managers follow sustainability mandates.

2. Incentivizing Sustainable Mining with Decentralized Lending Protocols

Another initiative aiming to promote sustainable mining is Switzerland-based Block Green, which uses a decentralized lending protocol to incentivize such operations. The platform allows liquidity providers seeking bitcoin-native investments to purchase future hashrate or computing power over a specified period. Block Green's platform provides "know-your-miner" information about a miner's financials, operational data, and energy sourcing and strategy. The platform's market mechanisms incentivize sustainable mining, as liquidity providers select miners with sustainable operations, reducing their cost of capital. Block Green is working with major miners in the US and Canada and integrating with asset managers, custodians, and exchanges to offer transparent and scalable bitcoin returns.

3. Financial Incentives for Clean Bitcoin Mining

Clean Incentive and Sustainable Bitcoin Protocol (SBP) are two companies that offer financial incentives to promote the investment in "clean" bitcoin. They create new blockchain-based assets that miners can trade to capitalize on their use of renewables. These assets are ideal for investors who want to own verifiably environmentally-conscious bitcoin. SBP enables miners to verify their use of clean energy with third-party auditors and be added to a registry. As a result, for every block reward they receive, they get a Sustainable Bitcoin Mining Certificate, a blockchain-based asset that they can sell to institutional investors. SBP completed its first transaction of a sustainable bitcoin certificate in February.

Clean Incentive, on the other hand, collects, validates, and tokenizes ESG attributes from a network of miners. The startup, which is still in stealth mode, has already onboarded several miners, according to its founder and CEO Casey Martinez, a data scientist with experience in renewable energy. In November, Clean Incentive partnered with a small-scale miner from Canada, Ocean Falls Blockchain.

4. Hardware and Software-Based Solutions for Sustainability

Firms are offering both hardware and software-based solutions to promote sustainability in bitcoin mining. For instance, LiquidStack provides an immersion cooling hardware solution that can reduce the energy used by bitcoin mining computers by 40% and land use by one third, as per the company's March announcement.

LiquidStack's solution uses only 0.02 MW of cooling energy for every MW of energy used for computing, while other options use 0.1 MW to 0.7 MW. LiquidStack, an early player in the market, secured funding from Trane Technologies (TT) in March. Trane is a 150-year-old firm in the heating and cooling industry that generated $16 billion in revenue in 2022.

“What made LiquidStack attractive was its potential to improve sustainability for data centers, including bitcoin mining, and its innovation,” said Amber Mulligan, VP of Strategic Sales and Marketing, Commercial HVAC Americas at Trane.

According to Mulligan, LiquidStack's technology simplifies heat reuse and enhances its efficiency, creating various synergies for miners. Because liquid cooling manages heat differently from air cooling, capturing and directing the heat to other uses is easier.

5. Lincoin's Rails: Efficient Bitcoin Mining Management Software

On the software front, Vancouver-based mining services firm Lincoin has developed a program called Rails that miners can use to manage their operations more efficiently and profitably. This includes participation in demand response programs and heat reuse activities. Demand response is when a miner or another energy consumer shuts down their operations during periods of peak demand, often receiving payment for doing so. Heat reuse involves using excess heat from mining for other activities, such as greenhouse farming. Rails collects real-time data from over 20,000 grid nodes in 9 deregulated electricity markets in the U.S. and Canada, according to a press release.

“Large scale miners use Lincoin to monitor real-time profitability, manage and optimize their operations, streamline tasks and participate in grid ancillary services while smaller miners use Lincoin to innovate by managing heat in greenhouses, monetize their surplus solar energy generation, or simply mine intelligently,” said CEO Medi Naseri in an email interview with CoinDesk.