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How bitcoin miners help U.S. oil producers cut flaring

In the United States, vast oil patches stretch from the Rockies to the Great Plains. And now, driving from one to the next you might see a trailer hitched to the back of a truck. On that trailer is what looks like a metal shipping container.
The shipping container is actually a mobile data center equipped with sophisticated computers.

EZ Smartbox 3.0

Their purpose? These computers mine Bitcoin.

The receiving oil pads could be any one of the 9,000+ oil and gas (OAG) producers in the U.S. Without them, the OAG industry would remain in crisis. Natural gas flaring is under political and regulatory fire, but flaring bans have come without solutions to do away with the unsellable natural gas.

Bitcoin miners are helping U.S. OAG producers cut and even eliminate flaring by utilizing their unsellable natural gas on-site. No new infrastructure is needed. The impact this will have on the OAG industry will compound every day as new flaring bans and regulations roll out.

Why is natural gas flared?

OAG producers already know the conundrum of flaring natural gas at a total loss. The methane-rich natural byproduct of oil drilling could be used to generate electricity, though. In fact, natural gas accounts for over 40% of U.S. energy use. So why is it flared away?

Of the 9,000+ OAG producers in the United States, only a small fraction have access to the natural gas infrastructure (including processing plants and pipelines) to transport natural gas to market.

Without being able to transport and sell the natural gas, however, the “solution” to gas accumulation has been to flare it—or burn it away—at a loss. This is bad for oil miners, bad for local grids, and devastating for the environment.

Miners and flaring – what is the connection?

Today, Bitcoin mining and the energy sector are feathering one into the other like a beautifully dovetailed box. In the short term, this means fast-moving innovation as Bitcoin miners look for more affordable sources of energy.

Bitcoin miners’ relationship with the grid, as it turns out, is one no one wants to revisit. Miners’ access to energy on the grid is too costly to stay competitive and is also something that miners can’t control.

For example, if mining operations set up shop in a fixed-location warehouse and use energy from the local grid, as soon as energy prices go up they could be priced right out of business.

Additionally, a high concentration of Bitcoin mining in certain geographic areas has led to power problems, like the massive outage in China earlier this year. The Chinese government cracked down on Bitcoin mining in May 2021 as a result.

Bitcoin Mining Map of China
Source: University of Cambridge

Energy production and consumption is a point of debate on the political stage as well as in the Bitcoin mining field.

Fortunately, Bitcoin miners’ voracious appetite for the cheapest energy has led to innovation in renewable energy and stranded energy:

  • With the costs of renewable energy like wind and solar coming down, Bitcoin miners can now subsidize the buildout of renewable energy infrastructure, benefitting their industry as well as local communities
  • With unique cases of stranded energy like natural gas in the OAG industry, Bitcoin miners have also innovated new ways to utilize energy that is otherwise wasted, for example helping oil miners eliminate natural gas flaring

The prices of cryptocurrencies, especially Bitcoin, have fluctuated significantly since the start of the pandemic. The recent crackdown on Bitcoin mining in China had its own impact on the market, too. 

The result has been an exodus of miners from China to other nations.

The U.S. cryptocurrency market has benefitted in a big way from miners leaving China. More miners setting up in the U.S. has given local industries—especially OAG—more opportunities to see the symbiotic Bitcoin-OAG relationship to new groundbreaking heights.

The cost-benefit of an oil mining machine used to mine Bitcoin is clear:

  1. The oil miner no longer loses the income from natural gas, rather sells it for instant productive use (right on the oil pad)
  2. The oil miner also meets regulatory requirements related to natural gas flaring by instantly reducing carbon emissions
  3. The oil miner is also able to do away with flaring, a practice where just one stack costs as much as $62,500 a year

Who created this idea?

Using natural gas that would otherwise be flared (and wasted) to power Bitcoin mining is a true “free lunch” for every player on the field.

Natural gas flaring, of course, is not new. Anyone wondering how to mine natural gas only has to look back on the history of oil drilling, or about 160 years. As long as we’ve drilled for oil, natural gas has been released as a byproduct.

Originally, the natural gas that couldn’t be captured and transported to processing plants was simply “vented” (or released into the atmosphere). With the advancement of environmental science, however, the harmful and long-lasting effect of methane in natural gas required the OAG industry to come up with a better solution.

Natural gas flaring was actually a solution to the original problem of natural gas venting, which in some parts of the world still takes place. 

The ideal solution would have been to sell that natural gas to market, however, the infrastructure has never existed to give most OAG producers access to the pipelines and plants they need.

Building out the natural gas infrastructure has become increasingly cost-prohibitive for OAG producers. Most would not be able to make their investment back until at least 10 years after a hypothetical pipeline was built.

Instead, science and a new practical application have presented an unexpected opportunity for OAG producers to do away with flaring once and for all.

As far back as 2018, Sergii Gerasymovych of EZ Blockchain remembers his early conversations with OAG producers about the possible partnership with the Bitcoin industry. At the time, there was no interest. He recalls conversations that repeatedly led to the same dead ends. 

The technology and idea, however, have been ready and waiting since then.

While EZ Blockchain continued to develop new iterations of their own mobile data center since 2018, the world was quickly changing. Bitcoin prices were climbing. The world was hit with a pandemic. Energy consumption was suddenly down and the OAG industry was in trouble. 

Meanwhile, more regulations were cracking down on CO2 emissions from every direction.

No one inventor came up with the idea of mobile data centers and converting stranded energy (natural gas, specifically) into electricity for Bitcoin mining. EZ Blockchain did benefit, however, from being at the front of the pack.

While other companies are still repurposing shipping containers to jump on the trend right now, EZ Blockchain is multiple manifestations into its EZ Smartbox smart crypto miner design. Every detail has been optimized for high performance and energy efficiency.

How does gas crypto mining work?

One of the biggest appeals to cryptocurrency is how it’s decentralized. This means each virtual coin is exchanged without middlemen like a central bank. Extracting those coins from cyberspace, however, is a complex to-do.

Because of the decentralized nature of cryptocurrency, computers all over the world work day and night to solve complex equations that validate crypto coin ownership and transactions. The equations have become increasingly complex as more coins have been introduced into the market.

Solving these complex validation equations requires vast amounts of electricity. The supercomputers solving the equations are also racing against other miners because the one who solves an equation unlocks a new vault with a new coin. 

At the time of writing this article, one Bitcoin is valued at $53,305, making the work well worth it.

Remarkably, the computer work required to mine just that one coin is in a delicate balance with the energy required to do it. That’s why Bitcoin miners need access to more affordable energy to stay viable. Disrupt that balance, and the computer power needed is too much.

That’s where mobile data centers come in.

Mobile data centers are just that: mobile. Once they’re installed to “plug-and-play” at an oil pad, the natural gas electric generator powers gas crypto mining with the natural gas that would have otherwise been flared.

Once installed at an oil pad, this is how the natural gas generator works:

  1. First, the natural gas travels from pipes to a burner
  2. Then, the burner heats the gas into a vaporous state
  3. That hot vapor is used to boil water, which turns into steam
  4. That steam builds pressure in another chamber
  5. Once suddenly released, the steam forces a turbine to turn over and spin
  6. The turbine, connected to a generator, creates electricity
  7. That electricity powers the most sophisticated computers while they mine Bitcoin

EZ Blockchain signed an agreement back in 2019 with KTS Engineering, one of the biggest distributors of Jenbacher natural gas electric generators. KTS and EZ Blockchain both saw the future coming, and the high-functioning Smartboxes, optimized for gas crypto mining, is the result.

How natural gas generator works
Source: Edison Tech Center

Does it work in the US now?

Mining for cryptocurrencies has attracted innovators and critics. Environmental groups have been particularly vocal in recent months about the footprint left by Bitcoin mining.

Proponents of Bitcoin mining, however, highlight the new opportunities to further develop sustainable energy infrastructure. Next to the changing legal landscape, the industry is now at a tipping point.

Oil mining machines are scattered around the U.S. with concentrations in oil-rich states like North Dakota, Montana, Texas, and Alaska. Many of those states have shaped their tax policy in favorable ways to encourage Bitcoin mining investments.

No federal law explicitly prohibits Bitcoin mining. Instead, states have made individual decisions based on their local needs. States that have passed legislation that encourages Bitcoin mining include:

  1. Rhode Island
  2. Kentucky
  3. Iowa
  4. Montana
  5. North Dakota
  6. Wyoming

North Dakota and Wyoming, in particular, passed laws in 2021 that give tax breaks to oil miners that provide natural gas to data miners. Other states like Pennsylvania have passed laws that encourage Bitcoin mining through energy consumption laws.

Texas, too, has attracted a great deal of attention of late in the Bitcoin community. A growing number of OAG producers in the state are adopting plug-and-play mobile data centers to utilize (and monetize) natural gas. In fact, the state has recently been described as one of the most “crypto-friendly” states in the union.

Benefits to Bitcoin mining in Texas include Bitcoin-friendly politicians, a deregulated power grid, and access to many oil fields now looking to mobile data centers as a solution to flaring. For these and other reasons, EZ Blockchain opened an office in Texas in 2021.

Look at the EZ Blockchain case studies to see where Bitcoin miners are helping U.S. oil producers cut or eliminate flaring right now.

It’s been more than 160 years since natural gas was first released as a byproduct of oil drilling. For most of that time, a distressful volume of natural gas has been vented or flared away—in other words, totally wasted.

That natural gas could have been a source of revenue for OAG producers. It could have provided energy to local electric grids. It could have been used productively.

Today, flared natural gas has moved into greater global relevance with technology perfectly positioned to put it to use instead.

Keep reading to learn more about the full capacity and specifications of the EZ Smartgrid.

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