Two companies are joining forces to mine Bitcoins using renewable energy and strengthen El Salvador’s budget. Much of the report is confusing and even misleading. But it remains an enormously fascinating point.
Nothing was heard from El Salvador and President Nayeb Bukele’s Bitcoin mission for a long time. Most of the big-mouthed announcements were lost in the sands of time. But now there is new news with the launch of Lavapool.
Volcano Energy, an energy producer in El Salvador, and Luxor Technology, a mining pool and software developer, late last week announced Lavapool, the first Bitcoin mining pool from El Salvador. This should pay 23 percent of its income to the government of El Salvador. The start is accompanied by pithy words:
“Lavapool is another example of the benefits El Salvador is reaping from being a first mover as a nation-state in the Bitcoin ecosystem,” explains Volcano Energy CSO Gerson Martinez. Volcano Energy’s vision is “to be a vertically integrated energy and Bitcoin mining company.” And Luxor COO Ethan Vera announces that the lava pool will strengthen the ethos of Bitcoin mining, which “is about geographical decentralization turns.”
Will this make the plan that President Nayib Bukele announced in June 2021, namely to exploit the country’s rich geothermal resources and put them into mining, a reality? Does Bitcoin finance the expansion of renewable energies, as has long been promised?
It’s a little more complicated. First of all, Volcano Energy is not a state-owned utility, but a startup run by Max Keizer, an early adopter known for his flashy appearances at Bitcoin conferences and now advising El Salvador’s president. Volcano Energy is financed, among other things, by Tether, the publisher of the stablecoin of the same name, which, according to a press release, took part in an investment worth a total of one billion dollars in June 2023. Apparently only $250 million has been paid out so far.
Then Volcano Energy does not get its electricity from the geothermal sources of the country’s volcanoes, as the name suggests, but from wind and sun. “Electricity generation,” writes Volcano Energy in June, “is divided into 169 megawatts of photovoltaics and 72 megawatts of wind power.” This paves the way “for the establishment of one of the largest mining farms in the world, with more than 1.3 EH/ s starts.”
To put it into perspective: In total, Bitcoin miners currently generate around 413 exahash and, according to Cambridge, consume 14.8 gigawatts. Lavapool would therefore provide 0.3 percent of the hashrate, but require 1.6 percent of the electricity. The numbers are obviously not consistent, which could be for a variety of reasons.
23 percent of Lavapool’s income will go to the government of El Salvador, 27 percent to investors and 50 percent to the expansion of further electricity and mining capacities. These should also include geothermal energy sources, even if Volcano Energy remains very vague about this.
Much of the report is misrepresented or exaggerated in some media, starting with the illustration of a volcano. Lavapool is neither a state pool nor does it use geothermal energy nor is it a “public partnership” or anything like that. But there remains a fascinating core that doesn’t need such exaggerated representations: With Volcano Energy, a mining provider is building up its own renewable power supply on a significant scale for the first time.
And so, you can twist and turn this as much as you want, a promise actually becomes reality: mining becomes an incentive to develop renewable energies. It happened!