- Sustainable bitcoin has become increasingly important to the global finance industry.
- The Swiss crypto miner Cowa believes financial institutions want to acquire companies in the space.
- The startup is pushing for the majority of mining energy to come from renewable sources.
Bitcoin has been dogged by a variety of issues that have slowed its widespread adoption, not least of all its impact on the environment.
The energy-intensive process of cryptocurrency mining, which has faced criticism from the crypto advocate and soon-to-be Twitter owner Elon Musk, requires high amounts of computer power to solve complicated mathematical problems.
That power is often generated by fossil fuels. Research from the University of Cambridge, for instance, estimated that mining bitcoin created over 40 billion tons of carbon dioxide in the US alone in 2020.
The environmental cost of crypto mining has birthed a wave of new startups promising to make the practice sustainable. Kryptovault and Cowa in Norway, and others, including Argo Blockchain in Texas, have all set about dramatically reducing crypto’s carbon footprint.
As a result, major tech companies, hedge funds, crypto exchanges, and financial-services businesses have all begun circling the startups hoping to decouple blockchain from its polluting reputation.
“Companies like Revolut, Klarna, Block, they need clean bitcoin on their balance sheets, while Visa and Mastercard are looking to enter the space, and they might be potential buyers,” Fiorenzo Manganiello, a former hedge fund analyst who is now CEO of Cowa, told Insider.
“This is a sector going towards consolidation, and we know this is going to happen in the next six to 12 months.”
Cowa describes itself as a nature-friendly bitcoin-mining company and is pushing for most mining energy to come from renewable sources. The company plans to power its mining processes using only clean energy like hydro and, possibly, wind.
Musk’s declaration last year that Tesla would stop accepting bitcoin payments over sustainability concerns helped draw attention to crypto mining’s energy use. So too did China’s limitations on companies’ ability to mine crypto there.
As a result, companies are looking for bitcoin flow from a diversified field of options with more sustainable options coming at a premium, unsurprisingly.
Manganiello estimates companies are willing to pay 5% to 10% premiums on the spot price of bitcoin to secure sustainably mined alternatives.
A lot of hedge funds and crypto exchanges also now have ESG mandates — shorthand for environmental, social, and governance priorities — making the rush for bitcoin mined outside Chinese coal fields much more in vogue.
“Mining should be done in a sustainable way,” Manganiello added. “If there is a ban on fossil-fuel use, then it will be a priority.”
Estimates differ, but the trend is toward more bitcoin being mined sustainably. By one estimate, in 2019 some 39% of crypto mining was garnered using renewables.
Insider understands Cowa has closed a Series A round at a significant valuation, but the company declined to comment on the specifics of the deal. More than 200 companies and individuals launched the Crypto Climate Accord last year, committing to net-zero operations by 2030, mainly by switching to renewable power sources.
Evidence of that shift has begun to emerge already with Jack Dorsey’s Block signing up to break ground on a bitcoin-mining operation in Texas that would use solar energy and storage technology from Tesla.
Manganiello said the consolidation of the mining industry was set to continue this year as large miners looked to add capacity in new regions. Energy companies looking to mine their own crypto and fintechs bidding to reach profitability are also likely to drive acquisitions in the sector too, the Cowa cofounder says. He added that Cowa had been approached by numerous companies to be acquired.