Will Texas steer become Bitcoin bulls? Welcome to my Bitcoin versus Texas post!
I don’t think I’m alone in thinking that blockchain technology is easily one of the most important and transformative technologies in the 21st century… this of course, wouldn’t be possible without the big daddy of them all, Bitcoin.
We’re all aware that Bitcoin takes a ton of energy to maintain the network. The Bitcoin difficulty is now at an all time high with the hash rate up 45% in the last 6 months.
While I’m excited that Bitcoin and cryptocurrency mining offers new opportunities in helping to pay for remote renewable energy projects and/or advances in energy storage battery technology (I love the idea of solar batteries incorporating crypto miners to use up excess energy) the truth is that Bitcoin mining companies are really just going to where the cheap energy is right now.
I don’t know about you… but I never loved that China held such a huge a large percentage of the mining pools. There was always the potential that the Chinese government could force a double spend (not a brute force 51%) attack and create a side-chain of blocks that erodes trust in the network. I was rapt when China banned Bitcoin mining and Bitcoin transactions in China in June 2021. The word on the street was that the Chinese government was worried about it destabilizing their financial system, and that they were getting ready to push their own digital yuan.
Despite the huge and sudden decrease in Bitcoin mining in China, the network held up really well, and a lot of the Chinese Bitcoin miners moved to nearby freezing Kazakhstan (gotta keep those mining rigs cool) to take advantage of the cheap energy…
Which went great until… um…
Yeah, it was just a month ago that the Kazakhstan people rioted all over the place after the government removed the petrol prices cap and fuel prices immediately doubled. The internet shut down, Russian-led troops were everywhere, it was massive.
Kazakhstan had lots and lots of cheap coal and therefore lots of energy for Bitcoin miners, maybe even 87,000 mining rigs, but when they shut the internet down for 5 days, miners lost $4.8 million every 24 hours… and then Kazakhstan cut off crypto miners from electricity until the end of January.
So, ah, yeah, Bitcoin miners can’t stay in Kazakhstan…. so it’s obviously extremely lucky for them that Texas is super welcoming!
Texas will be the bitcoin capital of the world in the next two years.Poolin CEO Kevin Pan
Sure… Texas isn’t necessarily known for being super tech savvy… they’re all steaks and freedom and bigness and enthusiasm…
… but Austin is a total hub for tech and Dallas-Fort worth is the fastest growing city in America.
I was honestly really excited that Bitcoin miners were coming to the US. I thought it would help encourage Federal regulation of crypto and therefore encourage innovation in blockchain technology… but what I forgot about is that Texas might just have the worst power grid in the country.
While I’m sure that a lot of Texans are proud that their power grid has escaped the tyranny of the Federal Government and been deregulated since the 90s. They might not have loved receiving a $15,000 power bill for the month.
Just to be crystal clear… the outages last year absolutely were not due to frozen wind turbines and solar panels, they were due to the unregulated natural gas plants that US Feds had warned in 2010 that they wouldn’t cope with heavy winter storms. Texas’ unregulated power grid is not connected to the rest of the country, so when things get bad, no one can help them.
So… in a world where more extreme weather events are only going to get more common, and a state whose power plants had not been keeping up with Federal weatherization requirements…
Power plants, transmission operators and local utilities had to submit a sworn affidavit showing a weatherization plan was in place. Eight companies didn’t. The fines totaled $7.5 million.KVUE
… and whose power grid won’t be able to support unusual power demand (in winter or summer), why would Abbott create legal framework for crypto investments to encourage Bitcoin mining companies to land there?
It’s working! Texas already has 20% of Bitcoin hashrate and ERCOT reckons cryptocurrency consumption could increase 5 times over the next year.
That is…. phew… quite the power demand for big ol Texas. Yeehah!
So, um, why?
Ted Cruz and Greg Abbott are hoping that Bitcoin mining will solve the power grid problems by using up excess power and by the miners themselves increasing demand so that new power plants are built in Texas.
Essentially Cruz and Abbott are hoping that Bitcoin miners will stop mining when the grid is struggling and hoping that more power plants are attracted to the state.
It’s such a bad plan.
Who on Earth solves a problem by making it way worse and hope someone else fixes it?
So what’s the answer?
It’s hard… Bitcoin miners don’t do a lot for the location they move into. It’s not like they offer thousands of jobs or build infrastructure for the area.
I think US states can use PoW mining to offset the costs of renewable projects.
When the batteries are full of all your solar, wind and hydropower then you turn on the mining to generate additional income for the power plants. To me it’s the perfect solution.
But, you’d need governments to incentivize or regulate to make this happen… because Bitcoin miners will always just use the cheapest energy they can, clean or not.
So what do you think? Are you happy with Texas’ plan? Got better ideas? Let me know in the comments.
Thanks for reading my Bitcoin versus Texas post.
If you like it when I have opinions, check out my Not Financial Advice post.
Please note : The above post may contain affiliate links.
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