Green Crypto Mining Industry Startup Tips for Consolidation

  • Sustainable bitcoin has become increasingly important to the global financial industry.
  • Swiss crypto miner Cowa thinks 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 hampered by a variety of issues that have slowed its widespread adoption, including its impact on the environment.

The energy-intensive cryptocurrency mining process, which has come under criticism from crypto advocate and future Twitter owner Elon Musk, requires a lot of computing power to solve complex mathematical problems.

This energy is often generated by fossil fuels. Research from the University of Cambridge, for example, estimated that bitcoin mining created more than 40 billion tons of carbon dioxide in the United States alone in 2020.

The environmental cost of crypto mining has spawned a wave of new startups promising to make the practice sustainable. Kryptovault in Norway, Argo Blockchain in Texas, and Cowa in Switzerland have all set out to drastically reduce the carbon footprint of crypto.

As a result, big tech companies, hedge funds, crypto exchanges, and financial services firms have all started circling startups in hopes of decoupling blockchain from its polluting reputation.

“Companies like Revolut, Klarna, Block, they need clean bitcoins on their balance sheets, while Visa and Mastercard are looking to enter the space, and they could be potential buyers,” said Fiorenzo Manganiello, a former analyst hedge fund company who is now CEO of Cowa, Insider said.

“It’s an industry that’s headed for consolidation, and we know that’s going to happen in the next six to 12 months.”

Cowa describes itself as an eco-friendly bitcoin mining company and pushes for most mining energy to come from renewable sources. The company plans to power its mining processes using only clean energy like hydro and, eventually, wind.

Musk’s statement last year that Tesla would stop accepting bitcoin payments for sustainability reasons helped draw attention to the energy consumption of cryptocurrency mining. The same goes for the limitations China has imposed on companies’ ability to mine crypto there.

As a result, companies are looking for a stream of bitcoins from a diverse options field with more sustainable options at a higher price, no surprises.

Manganiello believes companies are willing to pay premiums of 5-10% on the spot price of bitcoin to secure sustainably mined alternatives.

Many hedge funds and crypto exchanges also now have ESG mandates — shorthand for environmental, social and governance priorities — making the rush for bitcoin mined outside of China’s coalfields much more hyped.

“Mining must be done in a sustainable way,” Manganiello added. “If there is a ban on the use of fossil fuels, then that will be a priority.”

Estimates differ, but the trend is for more bitcoin to be mined sustainably. According to one estimate, in 2019 around 39% of cryptocurrency mining was done using renewable energy.

Insider understands Cowa closed a Series A round at a significant valuation, but the company declined to comment on details of the deal. More than 200 companies and individuals launched the Crypto Climate Accord last year, committing to net zero operations by 2030, primarily by switching to renewable energy sources.

Evidence of this shift has already begun to emerge with the signing of Jack Dorsey’s Block to inaugurate a bitcoin mining operation in Texas that would use Tesla’s solar power and storage technology.

Manganiello said consolidation in the mining industry is expected to continue this year as big miners seek to increase capacity in new areas. Energy companies looking to leverage their own crypto and fintech offerings to achieve profitability are also likely to drive acquisitions in the sector as well, the Cowa co-founder said. He added that Cowa had been approached by many companies for acquisition.

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