The biggest Bitcoin mining migration in America is coming to an end

The biggest Bitcoin mining migration in America is coming to an end

The local Peter King knew his small town of Rockdale, Texas, had landed on the global crypto map when three Chinese bitcoin miners showed up at City Hall unannounced this summer.

Then came the phone calls to the City Chamber of Commerce, from investors asking about power hookups, to connect mining equipment they planned to ship from China. None ever had set foot inside the rural West Texas community with a population of roughly 5,600 people.

I knew nothing about China when king said his first phone call, which was the worst thing. There are lots of smaller miners that are pulling together and trying to come over here now.

The interest sparked by the crypto mining crackdown in China is poised to give Rockdale a significant lift as miners scan the globe for new opportunities, setting off an exodus dubbed the greatest Bitcoin mining migration. From neighboring Canada and the United States to Russia, Chinese players are scrambling to find real estate to rehouse their servers, shifting crypto power dynamic away from a country which’s long been home of more than half of the world's bitcoin miners.

The demand is much larger than the supply because all of our capacities are gone now. We are building one more data center which will be commissioned in October and is already booked, said Didar Bekbauov, founder of Xive, which helps miners relocate to Kazakhstan. I think every spare kilowatt is already booked in Kazakhstan. Right now a lot of Chinese are reaching us almost every day asking for capacities. During the migration, cheap electricity has become a key driver in the migration, mainly because the crypto mining process where new coins are entered into circulation consumes enormous amounts of energy. The Cambridge Center for Alternative Finance estimates energy usage to total roughly 110 Terawatt Hours per year, roughly equivalent to annual energy consumption by small countries such as Sweden or Malaysia.

The state of Texas is an attractive alternative with some of the world's cheapest energy prices, in part because of the state's deregulated power grid allows providers to choose between providers. The cost of electricity is nearly a quarter of where it is elsewhere in the country, according to Riot Blockchain CEO Jason Les, who acquired Whinstone U.S. just outside Rockdale, owner and operator of the largest bitcoin mining and hosting facility in North America.

Les said the structure of the Texas grid allows bitcoin miners to 'act like a virtual power plant' by securing long term power purchase agreements up front, with the flexibility to sell some of that power back to the grid, when the market price of energy becomes very high during peak demand.

'It's sort of an economic calculation for miners. They see, 'oh wow, the price of energy is going up'. I used bitcoin for last one and now not only does it not make sense to mine bitcoin anymore, but it actually makes sense for me to take the power which I own back to the grid, Les said. 'When you have reliable generation sources like wind and solar, loads like Bitcoin mining help provide that intermittent demand.

The increasing abundance of renewable energy has also contributed to the Boon, as miners face scrutiny over their carbon emissions. Roughly 20% of Texas' energy is generated from wind power, though fossil-fuel generated natural gas accounts for nearly half of the energy mix.

'It really depends on the company. It really depends on the market itself. If a company comes into Texas and starts mining bitcoin, they can choose to buy all of their energy from renewable sources if they want to, said Josh Rhodes, a research associate at the University of Texas at AustinTexas at Austin Energy Institute. If they go through what is on the market. about half of their energy is going to be from fossil fuels, just i.e.

And the Hong Kong-based BIT Mining has already invested $26 million in a 57 megawatt capacity power center in Texas, according to Nikkei Asia, while Bitmain plans to expand capacity at its Rockdale facility by 20,000 additional servers, according to King.

Whinstone is looking to capitalize on the mining rush, by adding an additional 400 megawatts to its facility or 200,000 servers total, to potentially host additional miners who enter the market.

'We have talked to a number of people and we see how the hosting market looks like, said Les. 'What we are focused on is creating capacity on that site, to kind of leave optionality there.

Lawmakers have also attempted to take advantage of the exodus as aggressively as well. Earlier this year, Texas Governor Greg Abbott signed a law to establish a legal framework for cyptocurrency investment in the state. In a subsequent tweet, Abbott declared that 'blockchain is a booming industry Texas needs to be involved in.

For all the excitement surrounding Texas' bitcoin boom, there are concerns about the impact the accompanying electricity usage is likely to have on the state infrastructure, which suffered major outages during peak energy use this winter.

Rhodes conducted a study on grid's ability to stop demand through 2035 and said much of the viability concerns largely depend on the miners' ability to remain flexible and shut down operations during peak demand.

According to Rhodes, lowering the carbon footprint can also lead to lower emissions.

'If they run 24 hours or 12 hours, they increase carbon emissions on the grid because we are using more energy and some of the energy that was produced in Texas is made from coal and natural gas, he said. 'If they are willing to be flexible, if they are willing to reduce their usage roughly 20% over the year at key times that can actually reduce net, negative carbon emissions. Because the grid builds a lot of wind and solar to handle energy that these data centers or these mining facilities would want to consume.

Back in Rockdale, King said the city is struggling to keep up with demand. The city can't build out power substations quickly enough to distribute the electricity, as miners continue to take up real estate in his town.

'All the power stations are taken up. There's no option to hook into a utility without building a substation and that's where the holdup will be, King said. 'It is nobody's fault. However, King has gambled Rockdale's future on crypto mining's success in part because he said there's no real alternative. The town built its fortune on aluminum for decades as the home to Alcoa's largest smelting operations. Since production has ceased operations seven years ago, it's been difficult to find a replacement.

'We don't have an industry left there, said King who recently enrolled in an online course at MIT to learn more about blockchains. 'We welcome the possibility of industry here of any sort, but I think, based on what is going on I think technology is where we're going to end up being.