Yesterday afternoon, Salvadoran President Nayib Bukele posted a short video of workers installing a shipping container full of cryptocurrency mining rigs at a geothermal power plant surrounded by thick jungle. “First steps … #Bitcoin,” the president tweeted.
— Nayib Bukele 🇸🇻 (@nayibbukele) September 28, 2021
There is still a deep vein of skepticism about El Salvador’s bitcoin project. But taken at face value the video shows progress towards its second stage. The first came in early September when the Central American country made bitcoin legal tender. Now Bukele wants to harness the country’s potentially huge supply of clean, renewable energy to mine more of the cryptocurrency.
The implications, not just for crypto but for geopolitics, could be huge. El Salvador sits on the edge of the Pacific “Ring of Fire” and has 20 “potentially active” volcanoes, according to VolcanoDiscovery.com. They run the length of the entire country and have been harnessed to generate 21.7% of the country’s energy, according to the U.S. International Trade Association. (For comparison, all renewable energy sources together comprise only 12% of U.S. energy.)
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Even this large proportion represents only a fraction of the energy that could potentially be drawn from El Salvador’s volcanoes. But some potential sites sit miles away from population centers like San Salvador and San Miguel. Connecting them to the power grid would require extensive infrastructure buildout, much of it in inhospitable conditions.
Bitcoin miners, by contrast, can be installed on even the remotest site, and connected to the Bitcoin blockchain wirelessly. As bitcoin adoption continues to grow, this has the potential to radically upend the logic of energy generation, including the utilization rate of “stranded energy” like El Salvador’s remote volcanoes, wasted outputs like the methane flares produced by natural gas mining or unneeded energy from off-peak wind or hydroelectric generation.
El Salvador’s push illustrates why the most powerful benefits will likely accrue to renewable energy sources: They’re generally cheaper than fossil fuel sources. A volcanic power plant is simplicity itself. Basically, you drill a few big holes in the ground and use the heat to drive turbines. Compare Iceland’s Krafla volcanic power station, which resembles a red barn with a couple of tubes coming out, to the towering, tangled monstrosity that is an average natural gas power plant, and you can see the cost savings with your naked eye.
Some argue this makes bitcoin a potential driver of further renewable energy development, as laid out in the new documentary “This Machine Greens.” El Salvador may become a case study. If Bukele follows through, bitcoin could subsidize development of a much greater proportion of the country’s previously dormant power resources. In the long run, not all of that new energy will go to mining bitcoin – nearby communities could also benefit, and other new industries could even grow from the availability of cheap, clean power.
That’s where geopolitics comes in. El Salvador’s immense supply of volcanic energy has never been fully harnessed for the betterment of the nation because of technological limitations. By making energy portable, bitcoin has the potential to improve the economic standing of many nations with underutilized clean power resources. Guatemala, next door to El Salvador, has its own volcanic bumper crop: No surprise that nation, too, is thinking about bitcoin.