As bitcoin continues to make headlines and create new billionaires, most people only focus on the price. However Bitcoin can be used to finance renewable energy projects and completely transform the world’s energy grids to become 100% renewable energy.
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What makes Bitcoin Special?
Bitcoin is the world’s first monetary system created by harnessing electricity to create value, independent of a government or third party. This means bitcoin’s money supply can not be manipulated, inflated, nor deflated. In addition, bitcoin’s blockchain can not be shut down because it would require the internet to be turned off – forever. This is just not possible in today’s world.
Without the internet, government employees can’t send emails to each other, corporations can’t access their cloud storage data, and customers cannot shop online. It is unlikely that bitcoin will be banned because corporations such as Microstrategy and Tesla currently own bitcoin on their balance sheet. But that’s not all, El Salvador recently made bitcoin legal tender. Therefore, the 180 countries that are World Bank members must recognize El Salvador’s choice.
El Salvador will use its state-owned geothermal renewable energy to mine bitcoin for the country.
Bitcoin is not going anywhere and it will be used to spread renewable energy.
Explain the Process of How Bitcoin Will make the World Renewable
One may have read some reports that bitcoin is bad for the environment. The bitcoin network uses 10 terawatt-hours per year, similar to the annual energy use of Sweden, according to estimates by the Harvard Business Review. This appears to be a lot, but hear me out because high energy use is the catalyst that will spring renewable energy.
The Importance of Mining Bitcoin
Individuals or companies that process a block of bitcoin transactions are rewarded with 6.25 bitcoin, almost $200,000 USD (as of June 25, 2021). Miners can be anywhere in the world and they will still be paid the same. Therefore if you are in a remote village with a river, you can put a hydro turbine in the river and connect it to a bitcoin mining rig. The village will now have a way to earn income and have access to renewable energy for the village.
This is a stark contrast to many renewable energy projects which are frequently built near large commercial and residential areas. But with bitcoin, renewable energy projects can be built anywhere and bitcoin mining rewards can help pay for any construction loan. El Salvador plans to mine bitcoin with their geothermal power.
What is the Bitcoin Project Finance Concept
You might be thinking, where will the funds come from to construct the renewable energy project? This is a reasonable question because money has to pay for the energy project construction and the mining rig equipment. The funds can come from nonprofits and NGO donations as well as other traditional methods such as Project Finance. Pro forma financial statements and projection models will include bitcoin mining rewards and other avenues to pay off the loan such as residential and commercial monthly use. But that’s not all because once the construction loan is paid off, the energy project will still be mining bitcoin rewards.
Solar panels can be placed anywhere in the world to power the local area and any construction loan can be paid back with bitcoin mining. The community can also keep the mining rewards as well.
Legal Strategy Needed for Bitcoin Project Finance
When a large-scale energy project is built, a legal entity called the Special Purpose Entity (SPV) will own the energy project. This will also apply to bitcoin project finance. The SPV is responsible for holding the funds to build the project; constructing the solar, wind, or hydro project; and operating the project once it is completed.
All parties sign a contract with the SPV. These contracts include:
- Equity Agreements for the shareholders of the project;
- Financial Agreements,
- Construction Agreements,
- Operating Agreement,
- Supplies Agreement,
- Concession Agreement,
- Power Purchase Agreement, and potentially many more.
The Future with Bitcoin Project Finance
The continued global adoption of bitcoin and the world’s pursuit for cleaner energy allows for renewable energy projects to be built faster with bitcoin than without. The sun, wind, and water are fairly reliable, and harnessing their power will benefit everyone. In addition, bitcoin allows the world’s unbanked to enter the financial system on a level playing field as everyone. Technology such as bitcoin allows a new monetary system to not only improve the financial status of everyone but also incentives renewable energy.
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