Hundreds of Bitcoin mining machines will soon be set to task in Dickens County, Texas, a county with a population of 2,203 at last count. The hundreds of mining machines will work around the clock, solving complex algorithms. If the solution is correct, the miner will be rewarded with a freshly minted Bitcoin, which today is worth over $47,000.
The only thing Bitcoin mining machines need is space to accommodate their footprint and plenty of electricity.
The county’s top elected official was open to the idea when first approached by Argo Blockchain, a crypto mining company founded in Canada. Kevin Brendle quickly embraced the proposal, noting that Dickens County was little more than grassland and pastureland.
Brendle noted that the county is a wide-open range consisting of farming and the raising of cattle. The one thing the county does not have is much in the way of economic development. A crypto mine would provide much-needed stimulus for the local economy, improving the tax base and providing job opportunities. In return, the power required to run the mining equipment is amongst the cheapest in the world.
Bitcoin Mining Requires Cheap Energy
Mining crypto requires a great deal of inexpensive electricity. Before being shut out of the country, China was home to more than half the world’s crypto mining. The reason was simple. Electric power is cheap.
To support the development of its digital currency, China shut down existing Bitcoin mines. After the crackdown, the hashrate, which is the power required to produce Bitcoin, was cut in half.
Bitcoin mining operations have since been scouring the world, looking for places that can offer inexpensive electricity. Many have found, and are settling, in Texas.
The power grid in Texas is deregulated. Deregulation provides customers an opportunity to pick and choose between different power providers. As a result, power providers have ample incentive to offer low rates.
Crypto mining facilities are well-positioned to establish long-term supply agreements with power providers. These agreements allow for the purchase of power at a fixed price over several years.
Riot Blockchain, a crypto mining company based in the United States, has recently acquired Whinstone U.S. The company, located in Rockdale, TX., is the largest U.S. Bitcoin mining facility. Whinstone was purchased for $80 million and has sufficient facility to mine 500 Bitcoins monthly. Using Bitcoin’s current value, this amounts to $22 million.
During the summer months in Texas, the demand for electricity increases considerably. Power companies in the state will pay mining facilities to reduce their energy use.
As a mining concern that has entered into a long-term supply contract, they own power at a fixed, negotiated price. According to Jason Les, CEO of Riot Blockchain, the miner is committing to the purchase of energy for a negotiated number of years no matter what. The mining concern essentially owns the power, allowing them to operate as a virtual power provider. The company can take the power they agreed to take at a fixed price and sell it back to the grid.
Texas Supports Crypto Mining
Leaders in Texas have been very vocal about their support for crypto mining in the state.
Governor Abbot signed a bill in June putting cryptocurrency under commercial law. This move makes it considerably easier for crypto firms to operate in the state. Also, in June, Abbot tweeted, “Texas will be the leader in cryptocurrency.” This came after H-E-B, a local Texas grocery chain, announced that they would install crypto kiosks in some of their stores.
Another factor that makes Texas an attractive destination for crypto miners is that 20 percent of the energy in the state comes from wind power. This fact makes crypto mining far “greener” than when the mining was done in China, where over 60 percent of electricity comes from coal-fired power plants.
It is not only Texas that has inexpensive power, so does Kentucky, Louisiana, and Wyoming. Cheap power is one thing. Crypto-friendly politicians are another. Texas is the only state that offers miners both.
Increasingly, mining concerns are eying Texas as a friendly place to build their businesses. As well as the Argo and Whinstone operations, a Chinese mining company has put $25 million into building a mine in the state.