An American town in the bit era: Mine hunters

EAST WENATCHEE, Wash. — With his hands on the wheel and his eyes on the winter sun, Lauren Miehe drove his Land Rover as he told me how he first spotted gold for a bitcoin mine in 2013, when he was just a new techie from Seattle and discovered this sleepy rural community.

The only sight to see was the Columbia River, which we could see a few blocks to the left. Bitcoin mining consumes an inordinate amount of electricity, and thanks to five dams spanning this stretch of the river, about three hours east of Seattle, miners can buy this energy more cheaply than anywhere else in the United States. Miehe and his colleagues realized long before locals had even heard the words “cryptocurrency” or “blockchain” that this semiarid agricultural region called the Mid-Columbia Basin was the best place in the United States, if not the world, to mine Bitcoin.

The trick to prospecting is finding a place where all that cheap power can work. You need an existing building, because in those days, when Bitcoin was worthless, no one could afford to build anything new. You need room for hundreds of high-speed computer servers, and you need heavy-duty cooling systems to keep them from melting down as they consume the trillions of calculations Bitcoin requires. Most importantly, you need a site that can handle a lot of power — maybe a quarter of a megawatt, or even half a megawatt, enough for a few hundred homes.

The best places to mine are old fruit warehouses in a basin known for its apples and power generation. Miehe, a tall 38-year-old, will go on to build a string of mines here and try other solutions. He’ll roam the streets and back roads, checking out businesses that have long since moved away, like an old machine shop. A shuttered convenience store. Or this: Miehe slows his Land Rover and points to a shuttered car wash next to a Taco Bell restaurant. That’s a good spot, he says. With pumps and heaters around, “there’s probably a lot of electricity distributed around here,” Miehe tells me. “This is a place to mine.”

These days, Miehe said, a stereotypical miner wouldn’t bother checking out such a site. Bitcoin’s soaring price has attracted thousands of new players around the world, and the algorithm at the heart of the cryptocurrency has grown increasingly complex. Generating a single bitcoin requires more servers than ever before, and they need to be more powerful. Today, Miehe said, a half-megawatt mining farm is not a behemoth at all. The commercial miners now pouring into the valley are building farms with tens of thousands of servers and power loads as high as 30 megawatts, enough to power 13,000 nearby homes. And in the arms race of cryptocurrency mining, even these operations will soon be seen as child’s play. He knows that the big mining farms in the valley are backed by investors from Wall Street, Europe and Asia, and their exploration strategy is to “throw checks at them.”

For years, few residents really knew their region’s appeal to miners, who mostly kept their machines quietly tucked away in warehouses and basements. But those days are gone. Over the past two years, especially in 2017, when the price of a bitcoin jumped from $1,000 to more than $19,000, the region has taken on a boomtown vibe. In the Mid-Columbia Basin towns of Chelan, Douglas and Grant, orchards and farmland are dotted with mining operations of all sizes, from industrial-scale plants to repurposed warehouses to shipping containers and even backyard sheds. These outsiders are eager to turn the basin’s electricity into cryptocurrency, and this winter, several would-be miners from Asia flew their private plane to the local airport, rented a car and drove to a local dam, where, according to a utility official, they politely told the staff, “We want to see the dam manager because we want to buy some power.”

A river runs through town | Hydroelectric dams on the Columbia River, which produce some of the cheapest electricity in the U.S., have spurred a boom in mining for bitcoin and other cryptocurrencies that is transforming the Mid-Columbia Basin, three hours east of Seattle.

The Mid-Columbia Basin isn’t the only place where cryptocurrencies have collided with the power and real estate sectors. In places like China, Venezuela and Iceland, cheap land and even cheaper electricity have created booming mining industries. But the basin has become one of the biggest boom areas, thanks to its early start. By the end of 2018, miners here were estimated to account for perhaps 15 to 30 percent of all bitcoin mined worldwide, and a staggering share of other cryptocurrencies like Ethereum and Litecoin. As with any boomtown, that success has created tensions. There have been bankruptcies and bribery attempts, lawsuits between miners and locals, and even a fierce infighting between the local utility and a group of underground miners who set up their servers in basements and garages and max out the local grid.

More broadly, hydroelectric power, one of the region’s biggest natural resources, is being siphoned off by an industry that barely existed five years ago and is often derided as the next dot-com bubble to burst, or this century’s Dutch tulip bubble, or, as New York Times columnist Paul Krugman put it in January, a Ponzi scheme. Indeed, even as Miehe was flexing his prospecting muscles, the price of bitcoin had bottomed out, hitting $5,900 in recent days, raising widespread doubts about the future of the virtual currency.

Even as cryptocurrency enthusiasts flock to the area, many locals remain skeptical about what the bitcoin boom will mean for the region's economy. Here, a wholesale store in downtown Wenatchee.

Local crypto enthusiasts still believe that not only will cryptocurrencies make them personally very wealthy, but that this formerly remote region is truly poised to become the epicenter of a coming technological revolution—perhaps its only epicenter—while gainful employment and tech-driven prosperity typically flow only to gilded “knowledge” hubs like Seattle and San Francisco. Malachi Salcido, a local construction contractor who entered the Bitcoin industry in 2014 and is now the basin’s biggest virtual currency player, told me that the basin is “building a platform that the whole world is going to use.”

As both conflicting narratives circulate in communities across the Mid-Columbia Basin, residents find themselves anxiously trying to answer a question that, to most of us, remains only an intriguing abstraction: Is Bitcoin real?