In the middle of rural Texas, a cryptocurrency mine is currently under construction.
Hundreds of machines more powerful than the average computer will soon be housed in this 320-acre mining facility in Dickens county, where they will work day and night to solve a complex series of algorithms. If successful, the reward will be newly minted bitcoin, currently worth about $44,000 each.
All the machines need to thrive are spaces to sit and electricity – lots of it.
Kevin Brendle, Dickens county’s top elected official, embraced the idea of the mine when Argo Blockchain, a Canadian cryptocurrency mining company, first approached him with the idea of building a facility in the area. Dickens county, population 2,300, “is mostly improved pasture and grassland”, Brendle said.
“It’s wide-open range land, it’s cattle country with a little farming,” he said. “We don’t have a lot of economic development.”
A mine could help stimulate the economy, creating jobs and improving the county’s tax base. And in return, the mine will be powered by some of the cheapest electricity in the world.
To be profitable, mining cryptocurrency requires lots of cheap energy. China was once the main hub for mining, with over half of the world’s mining taking place in the country, precisely because its electricity is cheap. But earlier this summer, local governments in China began to shut down bitcoin mines as the country works to develop its own, better-controlled digital currency. The bitcoin hashrate – the processing power used to produce bitcoin – halved after the crackdown.
Miners have since been scouring the globe for places where electricity is cheap, and many have settled on Texas as their destination.
Texas’s power grid is deregulated, which means customers can choose between different power providers and providers are thus incentivized to provide low rates.
Mining facilities can set up long-term contracts with power providers that allows them to purchase electricity at a fixed price for many years, says Jason Les, CEO of Riot Blockchain, a US-based cryptocurrency mining company.
Riot Blockchain recently acquired Whinstone US, the largest bitcoin mining facility in the US based in Rockdale, Texas, for $80m. Whinstone says its facility can produce 500 bitcoin per month – worth a total of $22m at bitcoin’s current value.
When demand for electricity goes up, particularly in the summer months, Texas power companies will actually pay mining facilities to lower their energy usage.
“If you were a miner that has a long-term power purchase agreement, then you own power at a fixed price … you’re committing to buying energy for years no matter what,” Les said.
“As a bitcoin miner, you essentially own that power, and that allows you to work like a virtual power plant. You can take the power that you agreed to buy at a fixed lower price, and then you can sell that back to the grid.”
In recent months, Texas leaders have been vocal about their support of cryptocurrency mining coming to their state.
In June, Governor Greg Abbott signed into law a bill that puts cryptocurrency under commercial law, making it easier for cryptocurrency businesses to operate in the state. In the same month, Abbott, tweeted: “Texas will be the cryptocurrency leader!” after the Texas grocery chain H-E-B announced that it will be putting cryptocurrency kiosks in some of its stores.
Also making the state attractive to miners is that 20% of its energy comes from wind power, making mining in Texas a much greener alternative than mining in China, where about two-thirds of electricity comes from coal. Tesla’s CEO, Elon Musk, halted his company’s acceptance of bitcoin transactions, citing the “rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel”. Musk said that Tesla will resume accepting bitcoin once there’s confirmation that about half of the energy used by miners will be from clean energy.
While states like Kentucky and Louisiana also have cheap power, and others like Wyoming – which recently made it easier for cryptocurrency businesses to become LLCs – have politicians that are cryptocurrency-friendly, Texas is the only state that seems to offer miners the best of both worlds.
“We’ve seen a good combination of political will with the reality of the electricity market there that have led people to start building in Texas,” said Josh Goodbody, chief operating office of Qredo, a digital asset management company. “Increasingly, people are looking at Texas as a friendly place to build crypto businesses.”
Along with the Argo and Whinstone facilities, BIT Mining, a Chinese mining company, has invested $25m to build a mine in Texas.
An influx of interest from cryptocurrency businesses does not come without risk, though. Bitmain, a China-based company, said in 2018 that it would invest $500m to build a huge mining facility in Rockdale, bringing jobs to a community that has seen huge job losses after a coal plant closure in 2008. But after the price of bitcoin dropped to just over $3,000 in the fall, the company pulled out of the project.
Brendle, of Dickens, said that his optimism is cautious. He has hope that cryptocurrency mining will be able to bolster his county’s economy and give stable jobs to some of his residents, but he notes that long-term sustainability is important.
“We see movement now, we see a lot of interest. We understand why that interest is there. But we just don’t know what the future of bitcoin mining is,” Brendle said. “I think that’s the biggest concern right now is how long, how well the industry will sustain itself.”