El Salvador uses Volcanic Geothermal Energy For Bitcoin Mining
El Salvador, known for its volcanoes, is now tapping volcanic geothermal energy for Bitcoin mining. President Nayib Bukele has pledged to attract cryptominers by providing cheap renewable power with zero carbon footprint.
Tether, an established stablecoin issuer, recently invested $250 million to launch a 241 megawatt power generation park.
Geothermal Energy
Bitcoin mining requires immense amounts of electricity to verify and confirm transactions, with most of this energy currently coming from fossil fuels which leave a massive carbon footprint and negate climate efforts around the globe. Now, however, geothermal mining from volcanic sources promises to significantly cut energy costs for miners.
El Salvador President Nayib Bukele has expressed support for this project, making Bitcoin legal tender last September and encouraging El Salvadorans to use renewable energies such as geothermal electricity from volcanoes for powering Bitcoin mining services. In fact, LaGeo (state-owned geothermal electric utility) was directed immediately by Bukele to offer Bitcoin mining services utilizing geothermal energy produced across El Salvador as energy for Bitcoin mining services.
At a geothermal power plant near Tecapa volcano, 300 computers operate constantly as miners to verify bitcoin transactions – essential parts of its ecosystem – but have come under criticism for using excessive energy that leads to large environmental footprints.
Mining is an essential element of Bitcoin economy and will only continue to gain importance as more people adopt cryptocurrency. But with increasing demand from miners comes increasing electricity demands that need to be met using sustainable solutions.
Volcano Bitcoin Mining is a pioneering new solution that uses renewable energy and the natural cooling provided by volcanoes to lower crypto miners’ energy costs and carbon footprints while creating jobs and driving economic development in El Salvador.
Volcano Energy, Lava Pool and Luxor Technology have joined forces to form a public-private partnership in El Salvador that will give back 23% of their preferred profits back to the Salvadoran government – this will allow it to invest in energy transmission infrastructure to support its digital economy development.
This project’s 241 MW of capacity will be divided among 169 MW of photovoltaic solar and 72 MW of wind energy; together these sources will deliver computing power of more than 1.3 EH/s, ranking among the top 20 mining pools globally.
Luxor Technology
Bitcoin mining has come under intense criticism for its environmental footprint. Mining activities use up a considerable amount of power, prompting many supporters to call for more renewable energy-based operations.
El Salvador recently took an exciting step toward this end, by unveiling its inaugural local Bitcoin mining pool – Lavapool – powered by renewable geothermal energy provided by Volcano Energy. This announcement marks an exciting development for El Salvador, having made history by becoming the first nation to officially recognize Bitcoin currency back in 2022.
Government-backed venture has already garnered investment interest from major players in the crypto industry, with Tether committing $1 billion. Paolo Ardoino, Tether’s CTO explained that Tether’s commitment is due to their unwavering dedication towards sustainability and innovative energy initiatives.
Volcano Energy also announced their partnership with Luxor Technologies, a Bitcoin mining tech company which specializes in harnessing renewable energy for cryptocurrency mining. They plan to form one of the world’s largest cryptocurrency mining pools that will likely use Conchagua volcano as power.
Furthermore, the partners aim to establish a 24-megawatt solar and wind energy park in Metapan to be used as the backbone for cryptocurrency mining operations.
Partners aim to establish a business, known as Luxor ASIC Trading Desk, that will buy and sell Bitcoin mining hardware required for this project at discounted rates, providing miners the chance to trade their rigs in an open market environment.
This new business will have its own ISIN and will be classified as a financial security, meaning its issuance will be overseen by the Securities and Exchange Commission of El Salvador. Trading should commence later this year on public markets.
Public-Private Partnerships
El Salvador’s announcement to become a “Bitcoin City” made international headlines, but less is known about its dual nature as both a geothermal energy project and cryptocurrency mining hub. Sitting between two tectonic plates, El Salvador boasts more than 30 active volcanoes that produce geothermal energy–perfect for running computers that verify bitcoin transactions! Volcanic power provides clean energy production without high carbon emissions – perfect for powering bitcoin mining rigs!
Mining requires costly electricity consumption and therefore many industrial miners have turned to cloud mining services for lower rates and faster scaling, leading to a decline in bitcoin mining activity overall. But creating a local mine in El Salvador could reverse this trend and encourage more miners back into the industry.
Plan B’s strategy includes the formation of a public-private partnership, in which the government outsources some of its responsibilities to private companies in exchange for an agreed share of profits linked to performance. This arrangement seeks to utilize private sector expertise while freeing up capital that could otherwise be spent improving public assets or services; they’re an invaluable way of increasing economic growth and expanding infrastructure.
This new project will involve a partnership with Luxor, who are developing software to automate risk management processes that reduce bitcoin mining operations costs while increasing efficiency. Furthermore, Luxor will offer its services to El Salvador government for an initial preferred share of 23% net revenues from this venture, with profits going back into energy transmission infrastructure to support technological and economic development within their country.
This venture will also highlight El Salvador’s “exceptional solar and wind energy yields”, which the company estimates can generate 241 megawatts (MW). This electricity production would power a mining farm capable of creating new cryptocurrency ecosystems across Central America.
Economic Impact
At night in El Salvador’s small trailer near Tecapa volcano, 300 computers use complex mathematical calculations to verify Bitcoin transactions – this process, known as “mining”, validates and records money moving between addresses. Environmentalists have often criticised mining as wasteful and harmful to the environment; however, one new project aims to reduce these effects by tapping energy from underground rather than traditional fossil fuel sources.
Volcano Energy and El Salvador have launched a joint initiative, funded by cryptocurrency investor Tether and supported with $250 million pledged for a 241 megawatt renewable energy park that uses solar photovoltaic and wind power generation for mining operations and local communities.
Utilizing geothermal energy, the facility will feature a geothermal power plant with deep shafts dug thousands of feet underground to tap steam and hot water to produce electricity, which will feed directly into the national grid with any excess being sold to other businesses – including other cryptocurrency miners. Operating under public-private partnership rules, El Salvadoran government will play an integral role in its planning and execution while receiving preferred participation of 23% in profits according to Volcano press releases. These profits will then be reinvested back into mining facility’s technical growth as well as economic expansion.
This project has garnered much interest among both cryptocurrency enthusiasts and global investors, following El Salvadoran government efforts to make bitcoin legal tender. El Salvadoran leaders also aim to position their country as a pioneer of blockchain technology.
This project has drawn comparisons with Iceland, where its abundant volcanic energy has long been harnessed for Bitcoin mining operations. Yet the differences are obvious; while Iceland boasts an immense energy surplus, El Salvador can only just cover domestic demand with the resources currently available to it.