5 things to know about cryptocurrency mining in Texas

5 things to know about cryptocurrency mining in Texas
5 things to know about cryptocurrency mining in Texas

As members of Congress question state officials about cryptocurrency mining in Texas, here are some questions and answers about the rapidly growing industry.

What exactly are cryptocurrencies?

Bitcoin and other cryptocurrencies are sometimes referred to as “virtual currency”. They can be used to conduct financial transactions without requiring the use of banks, credit card companies or other intermediary agents. They rely on a technology called blockchain. In the case of Bitcoin, for example, miners are rewarded with cryptocurrency after creating and adding new blocks by solving complex computational problems. Companies build massive computing facilities to solve these complex problems in order to earn Bitcoins.

Are any of these operations located in Texas?

Yes – big time. A Bloomberg article from earlier this year cited estimates from mining platform Luxor Technologies that Texas has the most mining activity of any state, up to 25% of the US total. Easily available land, cheap electricity, and friendly regulators have all been cited as reasons why the state is so attractive to crypto miners. State officials have taken steps to hail the operations and encourage even more to follow. Governor Greg Abbott

that “The Lone Star State is poised to become a global blockchain and cryptocurrency leader.” The state is already home to about 10 large-scale facilities that are connected to the grid and more are on the way.

That sounds like a lot more jobs and tax revenue, so what’s the deal?

Mining operations require a lot of electricity to power all those computers. Sen. Elizabeth Warren, D-Mass., and other Democrats sent a letter last month to Pablo Vegas, the new CEO of the Electric Reliability Council of Texas, raising concerns about crypto mining and its electricity consumption. They wrote that large-scale installations already connected to the grid regularly use more than 2 gigawatts, the equivalent amount needed to power all the residences in the city of Houston twice. They also wrote that ERCOT’s longer-term projections continue to grow, with over 27 GW of crypto load to be interconnected over the next four years. Energy researchers described this as an “astronomically impossible” amount to add in such a short time, according to the letter.

Critics worry that placing such additional demand on the power grid could threaten its reliability and result in higher costs for other system ratepayers. Castle Rock, Colorado-based Riot Blockchain has faced local opposition over plans to build a massive mining facility in Corsicana. Climate activists have also raised concerns about carbon emissions associated with the generation of electricity used to power mining facilities.

Will Congress do anything about the situation?

Maybe. In their letter last month, Warren and his colleagues suggested that it was irresponsible for ERCOT to encourage cryptocurrency mining given the downsides associated with operations. They requested detailed information from the network operator about the crypto-mining operations and their interactions with the network last Monday. ERCOT should provide its response soon. Democrats could decide to hold hearings on the situation or propose related legislation, though it’s unclear how those efforts would play out in a new Congress if Republicans regain control, as expected. Any discussion of the Texas power grid and its reliability is politically charged after the February 2021 storm that caused statewide outages and hundreds of deaths.

Related:Texas ERCOT’s Response to Lawmakers’ Bitcoin Mining Concerns Still Ongoing

What is the industry saying?

Texas Blockchain Council President Lee Bratcher said in an interview that crypto miners are able to sustain the network by providing flexible demand that can be easily scaled down in an emergency. In this way, mining operations act as a “demand-side battery” and can improve grid reliability. Bratcher also said mining operations can help the climate by supporting new renewable energy projects. In a statement this week regarding Warren’s letter, Bratcher said maintaining a strong and healthy network is important to the industry and that he has a good working relationship with Texas leaders.

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