Investing in ESG-Stamped Crypto ETFs?

Cryptocurrency mining has become the new El Dorado, attracting entrepreneurs and adventurers from around the world who want to mine a digital coin that is said to be the currency of the future.

However, mining operations are known to be energy intensive. Bitcoin mining, for instance, consumes an estimated 104 terrawatt-hour (Twh) per year of energy. This is more than the annual consumption of countries like Kazakhstan and Philippines, according to the Cambridge Bitcoin Electricity Consumption Index.

There's a lot going on in the crypto industry, and the green transition is one of them. Here is how you can invest in a more environmentally friendly crypto economy:

Invest in Crypto mining Industry, with an ESG twist

After Clean Energy ETFs took over as the investment theme of the year in 2020, ESG and Cryptocurrencies are without a doubt the front-runners to claim the spot in 2021, with billions of inflows into ESG (Environmental, Social & Governance) related investments, and more recently the unleashed Bitcoin futures ETF market in the United States. The question is, can they both co-exist in one entity?

Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF or RIGZ, is an actively managed fund that invests in ESG focused companies involved in the cryptocurrency mining industry. The industry includes crypto miners, crypto mining equipment providers, semiconductor producers, hosting and software providers, among others.

Since inception on July 7th, 2021, the fund has grown to $12.53 million in assets under management and generated +54% in returns. RIGZ trades on the NYSE Arca and has an expense ratio of 0.90%.

RIGZ 18 holdings include 8 Crypto Miners:

1. Hut 8 Mining (18.63%)
2. Marathon Digital Holdings inc. (14.04%)
3. Bitfarms Ltd. (11.01%)
4. Hive Blockchain Technologies (5.12%)
5. Digihost Technology (3.9%)
6. DMG Blockchain Solutions (3.12%)
7. Riot Blockchain (3.03%)
8. Bit Digital (1.60%)

We have highlighted the operations of each mining company and most importantly how they power them. This will allow investors to better understand whether RIGZ can provide access to the crypto space in a sustainable way.

HUT 8 Mining (Nasdaq: $HUT)

Hut 8 Mining Corp. is a cryptocurrency mining company in North America with large focus on industrial scale Bitcoin mining operations. It owns and operates 94 BlockBoxes (Bitcoin mining devices) in Alberta. The company has one of the highest installed capacity rates in the industry and is #1 globally in held, self-mined Bitcoin of any crypto miner or publicly traded company. In Q3 2021, the company was mining on average 12 to 14 Bitcoins a day and plans to mine 2 to 4 additional Bitcoins in Q4 2021. 

What’s HUT 8’s power source? 

Hut 8 is very aware that potential investors are looking increasingly at the environmental sustainability of a mining company. Currently, the company uses a total of 109 Megawatts (MW) in energy-rich Alberta, Canada, a province that has been growing its renewable resources while having an abundance of natural gas to generate electricity. By 2023, Alberta hopes to become fully dependent on renewable energy sources, a key aspect for Hut's decision to operate there.

In addition, the Alberta prairies have enabled Hut 8 to take advantage of the flat, free air cooling. The winters are long and cold, and the summers are dry, which allows for the perfect climate for crypto miners, requiring less infrastructure and less energy to cool the equipment.

In 2021, Hut 8 Mining Corp. has entered into a power purchase agreement (PPA) with Validus Power Corp. to support Hut 8's Alberta operations. The PPA represents the latest development in the strategic partnership between Hut 8 and Validus. A portion of the energy production for the project will be generated from captured waste gas and converted to electricity, which will support and advance Hut 8's long-term ESG objectives.

MARATHON DIGITAL HOLDINGS (Nasdaq: $MARA)

Marathon Digital Holdings, Inc. operates as a digital asset technology company that mines cryptocurrencies with a focus on the blockchain ecosystem and the generation of digital assets in the United States.

They currently run a proprietary Data Center in Hardin MT with a maximum power capacity of 105 MW. The Company also owns 2,060 advanced ASIC Bitcoin Miners at a co-hosted facility in North Dakota. Once fully deployed, the Company’s mining fleet will consist of more than 103,000 miners.

What’s Marathon Digital Holding’s power source? 

Marathon Digital Holding is partly owned by utility company Beowulf and uses a coal-fired power plant to run its existing infrastructure. CEO Fred Thiel said that harmful emissions are low because of the quality of the coal and pollution controls, and that the plant would be carbon offset by the end of next year. He said his company is focused on moving towards renewable energy, hoping to become 70% carbon neutral by the end of Q1 2022 and fully carbon neutral by year-end 2022..

BITFARMS LTD/CANADA (TSX: $BITF)

Bitfarms Ltd., a blockchain infrastructure company, mines for cryptocurrency coins and tokens in North America. The company owns and operates server farms comprising computers that primarily validates transactions on the Bitcoin Blockchain and earning cryptocurrency from block rewards and transaction fees. It also provides electrician services to commercial and residential customers in Quebec, Canada and hosting of third-party mining hardware. The company was founded in 2017 and is headquartered in Toronto, Canada. 

Bitfarms owns and operates 5 mining sites in Quebec, Canada with 82 MW of built-out capacity; and expects to have 119 MW built out by the end of Q1 2022 and 382 MW by the end of 2022, including 210 MW in Argentina.

What’s Bitfarms power source?

Bitfarms Canadian facilities are over 99% powered with environmentally friendly hydro power and secured with long-term power contracts. The company's mining facility in Argentina, however, will not run on hydroelectric power but rather on natural gas.

HIVE BLOCKCHAIN TECHNOLOGIES (TSX: $HIVE) 

HIVE Blockchain Technologies Ltd. operates as a cryptocurrency mining company with 55 MW built out capacities in Canada (30 MW), Sweden (20.4 MW), and Iceland (3.8 MW). It engages in the mining and sale of digital currencies, including Ethereum, Ethereum Classic, and Bitcoin.

What’s Hive’s power source?

Hive's Canadian and Swedish operations are 100% powered by hydroelectric power, while its Icelandic operations are powered by geothermal.

DIGIHOST TECHNOLOGY INC (TSX: $DGHI)

Digihost Technology Inc. operates as a blockchain technology company. It has operations in cryptocurrency mining for its own account, as well as providing hosting services to cryptocurrency mining customers. The company maintains a single large-scale cryptocurrency mining operation in Buffalo, New York and currently owns 11,800 miners and growing, with an operating capacity of 42 megawatts. In Q1 2021, the company announced that they have signed an agreement for the purchase of a 60 MW power plant (“Digifactory1”) located in the State of New York, bringing the company’s total power capacity to approximately 102 MW.

What’s Digihost’s power source? 

Currently, 90% of the energy consumed by Digihost operations comes from sources that create zero-carbon emissions, while more than 50% of the energy consumed is being generated from renewable energy sources. To the extent possible, the company intends to source and use renewable natural gas for the operations of Digifactory1 and also engages in the practice of acquiring renewable energy certificates, all in line with the company’s objective to mitigate its carbon footprint.

DMG BLOCKCHAIN SOLUTIONS INC (TSX: $DMGI)

DMG is a publicly traded and vertically integrated blockchain and cryptocurrency company that manages, operates, and develops end-to-end digital solutions to monetize the blockchain ecosystem. It currently manages a 60 MW Christina Lake Data Center, one of Canada’s largest single crypto mining facilities with a maximum power capacity of 80 Megawatts.  

What’s DMG’s power source?

The mining operation is powered by 100% hydroelectric power.

RIOT BLOCKCHAIN (Nasdaq: $RIOT)

Riot Blockchain, Inc., together with its subsidiaries, focuses on Bitcoin mining operation in North America. Their mining operations include a Whinstone U.S.’ facility in Rockdale, Texas and their hosted miners at Coinmint LLC’s Massena, New York facility. Whinstone U.S. is a wholly owned subsidiary of Riot Blockchain and consists of the single largest Bitcoin mining and hosting facility in North America, as measured by its 300 MW in developed capacity. Riot currently utilizes 73 megawatts (MW) of energy and is expected this year to increase their self-mining hash rate capacity, using approximately 83 MW of energy.

What’s Riot’s power source?

According to the company, Coinmint facility draws its energy from 88% zero-emission sources, mainly from hydroelectric power plants.

BIT DIGITAL (Nasdaq: $BTBT) 

Bit Digital is a Bitcoin miner with operations in the United States (Georgia, Texas and Nebraska) and Alberta, Canada. They have currently 32,500 miners with more than 3,086 bitcoins earned to date. The company's fleet aggregated 105 megawatts of maximum power consumption for the three months ended June 30, 2021.

What’s Bit Digital’s power source?

According to the company, 47% of the U.S operations are powered by zero-emission resources while 100% of their Canadian operations are powered by repurposed natural gas. Bit Digital is also working with independent ESG consultants, APEX, to become one of the first publicly listed bitcoin miners to receive an independent ESG rating on their operations.

The Crypto Climate Accord (CCA)

Inspired by the Paris Climate Agreement, the Accord is a private sector-led initiative for the crypto community with the objective of decarbonizing the crypto industry by supporting the entire crypto industry’s transition to net-zero greenhouse gas emissions by 2030. The Accord has two specific objectives:

1. Achieve net-zero emissions from electricity consumption for CCA Signatories by 2030.
2. Develop standards, tools, and technologies with CCA Supporters to accelerate its adoption and verify progress toward 100% renewably powered blockchains by the 2025 UNFCCC COP30 conference.

Among the mining companies listed above, DMG Blockchain Solutions and Bit Digital are signatories.

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