San Antonio Express-News (Sunday)
TEXAS: THE BITCOIN STATE
GOP says industry a fit for state’s values, resources
ROCKDALE — Late last decade, the town of Rockdale appeared on the verge of economic ruin. The Alcoa aluminum plant, which provided nearly 1,000 jobs, closed in 2008. The Luminant coal-fueled power plant shut down in 2017.
But a new industry has come to the town of about 5,300.
North America’s largest bitcoin mine — owned and operated by Whinstone U.S. — sits just down the road from the old aluminum plant, about 60 miles northeast of Austin. The facility, which has added about 145 jobs, hasn’t fully filled the void created by Alcoa. But Whinstone U.S., which is owned by Riot Blockchain, is working fast to become a staple of the community: It helped rebuild the local dog shelter. It installed lights at the high school softball and football fields. It bought the town’s 32-foot-tall Christmas tree. Rockdale Mayor John King noted the company funds livestreaming for high school sports events and donates fireworks for graduation.
Expansion plans are in the works to more than double the plant’s capacity and make it the biggest bitcoin mining facility in the world, according to Whinstone U.S. CEO Chad Everett Harris.
The city has found itself at the center of Texas’ ambitions. In recent years, Texas has rapidly drawn more and more business in the cryptocurrency industry as state and federal lawmakers try to lay the groundwork for a blockchain technology explosion. Industry leaders say they are drawn to the state’s cheap energy and aversion to regulation.
“I would like to see Texas become the center of the universe for bitcoin and crypto,”
U.S. Sen. Ted Cruz, R-Texas, said at the Texas Blockchain Summit, where 700 attendees, according to organizers, met Oct. 8 in Austin. There, Republican politicians made the case for the industry alongside a lineup full of entrepreneurs and researchers.
The budding industry has its doubters. Skeptics worry about the massive amounts of energy required to mine bitcoin, which has spurred both environmental concerns and fears about how the strain could affect Texas’ already fragile power grid.
And the growth in Rockdale has come in fits and starts. In 2018, a Chinese company that designs specialized computers for cryptocurrency mining promised hundreds of jobs and a $500 million investment in the shuttered Alcoa smelter.
By the end of 2018, with the price of bitcoin falling, those plans weren’t fully realized.
But Texas leaders are pressing forward. In late October, Gov. Greg Abbott met with the Texas Blockchain Council. He tweeted afterward that the state soon “will be #1 for blockchain & cryptocurrency.”
‘Very natural synergy’
Cryptocurrencies are digital assets that can be used to buy certain products and services without an intermediary like a bank.
Bitcoin is largely considered the first decentralized, peer-topeer payment network powered by its users, though many cryptocurrencies exist. Its worth isn’t backed by any government, but transactions are tracked on a public ledger.
While it can be used in certain retail situations, many people are using it as an investment. Still volatile, the price of bitcoin increased over the past year from $11,500 per coin to a record high of just more than $66,000 on Oct. 20. This past week, it set more records, nearing $68,000 Tuesday.
Most people buy bitcoin on public exchanges. But new blocks of bitcoins are released every 10 minutes, and miners compete to obtain them through a process by which they solve complex math problems to validate transactions. Those processes occur on blockchains, a public series of decentralized, anonymous blocks where the details get recorded. The more computers a miner has competing in the process, the more bitcoins they can acquire, which makes mining
“I would like to see Texas become the center of the universe for bitcoin and crypto.”
U.S. Sen. Ted Cruz, R-Texas
an energy-intensive process.
Whinstone U.S. hosts more than 25,000 miners, or computers programmed to mine bitcoin. Power runs through large transformers connected to the buildings housing them, where miners line racks upon racks. On the other side of those racks, an evaporative cooling wall pulls ambient air and coolant, dissipating the hot air emitted by the computers like a chimney.
To Texas Republicans and entrepreneurs, Texas and cryptocurrencies are a perfect pair. There is a “very natural synergy,” Cruz said, between blockchain and the state’s ethos, which he described as “give me a horse and a gun and an open plain, and I can conquer the world.”
Texas, he added, “lionizes” entrepreneurs. The state’s antiregulatory laws appeal to the industry, which values privacy. The cryptocurrency community, Cruz argued, is built on “individual freedom, individual responsibility” and a lack of government dependence.
“We came here because of power and the deregulated market,” Harris said. “We knew power was a competitive component. And we knew at large scale, we could get power at a lower price.”
This year, the state Legislature took several steps toward growing the industry.
HB 4474 recognized cryptocurrency in the state’s Uniform Commercial Code in an effort to set standards that clarify the rights of people who control the currency and make it possible to resolve disputes over ownership. The measure made Texas the third state to amend its laws regulating financial transactions as such. HB 1576 established a 16-member working group that will recommend policies relating to blockchain matters. Abbott signed both bills into law in June.
Energy market volatility
China — where about twothirds of the country’s electricity comes from coal — has long been the world leader in bitcoin mining. But the government there has recently cracked down on those efforts, in part due to concerns about the industry’s impact on climate change.
Texas state leaders have shared few, if any, such concerns.
The Whinstone U.S. mine has a capacity of 300 megawatts — one megawatt is enough electricity to power from 400 to 900 homes in a year — and hopes to reach a maximum capacity of 750 megawatts upon expansion. For politicians like Cruz, Texas’ abundance of energy makes it fertile ground for an industry where bitcoin mining alone uses about as much energy annually as the Netherlands, according to the Cambridge Bitcoin Electricity Consumption Index.
“For bitcoin, you need a lot of energy,” Cruz said at the summit. “If there’s one thing Texas has in large amounts, if there’s one thing Texas knows about, deeply, it is energy.”
But Texas saw its power grid overloaded during a deadly winter storm earlier this year, raising questions about whether the grid can handle major growth in such an energy-intensive industry.
Industry advocates describe a symbiotic relationship between bitcoin miners and the Electric Reliability Council of Texas, the state’s grid operator. They suggest the proliferation of blockchain technology would help stabilize a Texas power grid that has increasingly come under fire for failures during a storm that left an estimated 70 percent of Texans without power for an average of 42 hours in February.
The increased demand brought by mining could incentivize new sources of power to come online, they say. Bitcoin mining is not continuous, said Lee Bratcher, president of the Texas Blockchain Council. The mines can be turned off at times of high strain on the grid — and ERCOT actually pays bitcoin mining companies to cease activities in such moments. That unused power from their base load demand is then pushed back into the grid, Bratcher added.
“Bitcoin mining is a load that will purchase energy 24/7. However, it is unique in that it has the flexibility to turn off in highdemand hours,” Riot Blockchain CEO Jason Les said. “And by participating in the grid with different services for large loads in the grid, we help stabilize that grid as well.”
Joshua Rhodes, a research associate at the University of Texas at Austin who has consulted for a bitcoin mining company, said flexibility is key. If cryptocurrency mines are willing to reduce their energy demand during times of great stress on the grid, he said they could have