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China Daily reported on August 27 that according to a report by the British "Economist", the central region of the United States is rushing to introduce cryptocurrency mining companies to revitalize the local economy, relying on its low electricity prices and green electricity advantages.
At a 320-acre mining facility in Dickens county, Texas, hundreds of machines more powerful than regular computers will soon run day and night to process a series of complex algorithms. If the processing is successful, they will be rewarded with newly minted bitcoins, which are currently worth about $44,000 each.
All these machines require is space and lots of electricity.
When Canadian cryptocurrency mining company Argo Blockchain first approached Dickens County Mayor Kevin Brendle about building a bitcoin mine in the area, he accepted. Dickens County, with a population of 2,300, is "mostly improved pasture and grassland," Brendle said.
“It’s open rangeland, it’s where the cattle are raised, there are some farms,” he said. “We don’t have a lot of economic development.”
Mining can stimulate economic development, create jobs, and improve the county's tax revenue. In return, miners will enjoy the cheapest electricity in the world.
To mine cryptocurrencies profitably, you need a lot of cheap energy. China was once the center of Bitcoin mining, with more than half of the world's mining taking place in China, thanks to its cheap electricity. But in early summer, as China developed its own, more controllable digital currency, local governments began shutting down Bitcoin mines. Since then, the Bitcoin hash rate (the processing power used to produce Bitcoin) within China has fallen by half.
Since then, cryptocurrency miners have begun searching around the world for new locations with cheap electricity, and many have set their sights on Texas.
Texas's less regulated power grid allows users to choose between different power suppliers, which encourages suppliers to compete to offer low prices. Jason Les, CEO of Riot Blockchain, a U.S. cryptocurrency mining company, said that mining farms can sign long-term contracts with power suppliers to purchase large amounts of electricity at a fixed price for up to several years.
Riot Blockchain recently acquired Whinstone US, the largest bitcoin mining facility in the United States, in Rockdale, Texas, for $80 million. Whinstone says its facility can produce 500 bitcoins per month — a total of $22 million at bitcoin’s current value.
When electricity demand rises, particularly in the summer, Texas power companies actually pay mining facilities to lower their energy usage.
“If you’re a miner with a long-term power purchase agreement, you own the power at a fixed price … you’re committing to buying that energy for multiple years no matter what,” Rice said.
“As a bitcoin miner, you essentially own electricity, and you can act like a virtual power plant, where you buy electricity at a fixed, lower price and then resell it to the grid.”
In recent months, Texas leaders have been publicly vocal about their support for cryptocurrency mining coming to the state.
In June, Texas Governor Greg Abbott signed a bill to include cryptocurrencies in business law, making it easier for cryptocurrency companies to operate in the state. In the same month, Abbott tweeted, "Texas will be a leader in cryptocurrency!" Earlier, HEB, a grocery chain in Texas, announced that it would place cryptocurrency self-service terminals in some stores.
Another reason that makes Texas attractive to mining companies is that 20% of the state's energy comes from wind power, which makes mining in Texas more environmentally friendly than in China, where about two-thirds of electricity comes from coal. Tesla CEO Elon Musk previously suspended Tesla's Bitcoin trading, citing "Bitcoin mining and trading have led to a rapid increase in the use of fossil fuels, especially coal, which has the worst emissions of all fuels." Musk said that once about half of the energy used by mining companies comes from clean energy, Tesla will resume Bitcoin trading.
While states like Kentucky and Louisiana also have cheap electricity, and states like Wyoming (which has recently made a big push to allow cryptocurrency businesses to become LLCs) have crypto-friendly politicians, Texas appears to be the only state that meets both of these criteria.
"We can see that good political will combined with the local electricity market has prompted people to start setting up mining farms in Texas," said Josh Goodbody, chief operating officer of digital asset management company Qredo. "More and more people are looking at Texas as a good environment to set up cryptocurrency businesses."
In addition to Argo and Whinstone's mines, Chinese mining company BIT Mining has also invested $25 million to build a new mine in Texas.
However, the influx of cryptocurrency companies is not without risks. China's Bitmai said in 2018 that it would invest $500 million to build a super mine in Rockdale to create jobs for the local community, which suffered a large number of unemployment after a coal-fired power plant closed in 2008. However, in the fall of the same year, when the price of Bitcoin fell below $3,000, Bitmai withdrew from the project.
Blundell, of Dickens County, said he is cautiously optimistic. He hopes cryptocurrency mining operations can boost his county's economy and provide stable jobs for some residents, but he stressed that long-term sustainability is important.
"We're seeing a lot of people rushing in right now, we're seeing a lot of interest. We understand why they're interested. But we just don't know what the future of bitcoin mining is," Blundell said. "How long can this industry last, how long can it last, I think that's the biggest concern right now." |
