Bitcoin mining operations are springing up in Texas for a variety of reasons, including the obvious advantages of wind and acreage. Here are some of the reasons why the state is gaining popularity.
Texas, the country’s second-largest state and home to southern hospitality, is welcoming a slew of Bitcoin (BTC) miners who have recently migrated to the area. Following China’s crackdown on cryptocurrency mining in May, a number of Bitcoin mining firms have relocated to Texas to conduct business.
This, however, should not be surprising. Due to apparent reasons such as its deregulated power grid, expanding renewable energy, and overtly pro-crypto government leaders, Texas could very well be the best place for Bitcoin mining. With the recent inclusion of cryptocurrency kiosks in grocery stores, Texas Governor Greg Abbott recently tweeted his excitement about Texas becoming the next “crypto leader.”
While all of these factors entice Bitcoin miners to set up shop in Texas, rural areas seeking economic growth have emerged as a less-publicized characteristic that is enticing mining companies to the state.
Counties in Texas are welcoming Bitcoin miners to help bolster the economy.
According to Chad Harris, CEO of Whinstone Inc., the operator of North America’s largest crypto facility, which was recently acquired by Riot Blockchain, his team came to Rockdale, Texas to build Whinstone after reading an article in Wired Magazine detailing the failure of China’s Bitmain mining facility there in 2019:
“We didn’t want to leave Rockdale as soon as we arrived. Whinstone was erected in 183 days. We began in January 2020 and completed the project in June 2020. We now have three buildings, 300-megawatt substations, and four new buildings that will contribute 400 megawatts.” While Texas’ abundant wind and deregulated power infrastructure have aided the company’s growth, Harris also credits Rockdale, a small town in Milam County with a population of around 6,000 people, for a large part of Whinstone’s success.
And, while it may not be obvious, Harris stated that, aside from the cost of power in Texas, the state’s workforce has been the most significant benefit for Whinstone. “Whinstone is different from other mining firms in that we have our own team of 120 people with paid healthcare and 401(k) plans.” He continued, “We also use Texas employee incentives and send our employees to Temple College in Texas for training and certification in areas like construction and human resources.”
Texas is divided into 254 counties, with populations ranging from over 4 million to a little over 100 persons in certain parts. While the state of Texas offers a variety of local development programs to help local economies, the entry of cryptocurrency mining businesses is having a significant impact.
Judge Steve Young of Milam County, for example, told us that Whinstone has become a vital component of Rockdale and Milam County. “Whinstone has made a concerted effort to be a part of the community by participating in local activities,” he stated. Harris and the Whinstone founding team arrived in Milam County with little money, but with daring and determination, they built the largest Bitcoin mining business in North America, according to Young.
While Whinstone was one of the first Bitcoin mining operations to do this, others are already following suit. Argo Blockchain has started ground on a highly anticipated renewable energy-focused 200-megawatt bitcoin mining plant in Dickens County, Texas, according to Peter Wall, CEO of Argo Blockchain.
Argo was initially interested in mining cryptocurrency in West Texas because of the abundance of local renewables, which allowed Argo to host renewable energy at the site, according to Wall. “Because there is no local load,” Wall explained, “we are boosting the economics for local renewable producers and allowing for even more renewable development.”
Equally significant, Wall stated that Dickens County is a “Qualified Opportunity Zone,” which means that the area is in financial crisis. Wall continued, ”
“Argo’s Dickens County activities will benefit the local community. We believe that by creating jobs, we can revitalize the community, and we will continue to look for ways to assist and promote Dickens County while positioning it as a leader in redefining energy for a better, cleaner, sustainable future.”
The establishment of Argo’s mining operations, according to Wall, will be a significant growth opportunity for both Argo and the Dickens County region. Argo’s facility is slated to be completed in the first half of 2022, according to Wall. Argo has started applying for an initial public offering in the United States, in addition to expanding in West Texas.
Core Scientific, a Bitcoin mining operations firm based in Austin, Texas, has joined the ranks of Whinstone and Argo by announcing that it is going to purchase Blockcap, a BTC mining startup based in Austin. Core Scientific is also slated to go public on Nasdaq in the near future.
Darin Feinstein, the co-founder of Core Scientific, a blockchain infrastructure firm, told us that the firm was lured to Texas for a variety of reasons, including the enormous quantity of land, renewable energy, and sustainable supplies. Core Scientific’s decision to expand its operations to Texas was influenced by the Texas community.
Texas Governor Rick Perry has built a “world-class business-friendly atmosphere that not only supports entrepreneurship and technology but has also been accommodating to the blockchain industry,” according to Feinstein. Feinstein believes that crypto-friendly politicians, such as Governor Abbot, are required to deploy capital.
This is an important aspect to address given the size of the Bitcoin mining industry. One Bitcoin transaction, according to the Digiconomist’s Bitcoin Energy Consumption Index, takes 1,720 kWh to complete, which is nearly 59 days of power for the average U.S. home. “A crypto mining operation demands a lot of capital, and you have to make smart business partners and long-term growth decisions,” Harris explained.
With long-term success in mind, Texas’ electricity grid operator, the Electric Reliability Council of Texas, or ERCOT, has begun paying Whinstone for an agreement to stop buying power during times of high energy demand, which generally comes during the state’s scorching summers. According to Harris,
“Historically, in the ERCOT market, we may expect to power down between 50 and 72 times between June and September, depending on grid circumstances. Consider a Bitcoin miner to be a virtual power plant; with the touch of a button, we can really provide power (by not consuming it) in under 5 seconds. Traditional generating suppliers can take hours to power up in order to support additional demography.
Although Texas is friendly, the mining industry faces new hurdles.
Despite its friendly environment and supposedly ample natural resources, large Bitcoin mining businesses moving to Texas will undoubtedly confront new obstacles, which will be exacerbated by the COVID-19 outbreak.
Commodity shortages, according to Harris, are the largest difficulty the crypto mining business is now facing. “Transformers, wiring, and other parts are really tough to get by right now. We started ordering supplies 6-8 months ago to expand Whinstone this summer, so we were ahead of the game. Everything was ordered in October of last year.”
Businesses blamed COVID-19 interruptions in production and supply chain operations for commodities shortages and price hikes for things like agricultural products and building materials, according to the Federal Reserve’s quarterly Beige Book poll. “Instead of 14 weeks, pre-engineered building products will be delivered in 32 weeks. It takes 64 weeks for large transformers at substations to arrive. “Every company that wants to develop a crypto mining plant today is going to have a delivery material problem,” Harris pointed out.
Despite this, it’s vital to remember that bitcoin mining remains mainly decentralized. As a result, huge Bitcoin mining operations aren’t the only ones that contribute to the hash rate. In fact, the hash rate distribution is rapidly favoring small, anonymous miners, according to data.
Furthermore, the Chinese restriction on Bitcoin mining has helped huge mining corporations. According to Sam Tabar, chief strategy officer at Bit Digital, a publicly-traded miner, China’s Bitcoin mining restriction resulted in an unanticipated gift to the US. “Now, along with significant capital investment, energy innovation, and jobs, the mecca of Bitcoin generation has shifted from China to North America.”