Texas Republicans want to make the state the center of the cryptocurrency universe | The Texas Tribune

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Rockdale: At the end of the last decade, the city of Rockdale seemed to be on the brink of financial ruin. Alcoa’s aluminum plant here, which provided nearly 1,000 jobs, closed in 2008. The Luminant coal-fired power plant closed in 2017.

Reading: Ahead blockchain bitcoin texas

But now a new industry has arrived in the city of about 5,300 inhabitants.

the largest bitcoin mine in north america, owned and operated by whinstone u.s. — is located just down the street from the old aluminum plant, about 60 miles northeast of austin. The facility, which has added about 145 jobs, has not fully filled the void created by Alcoa. But riot blockchain-owned Whinstone U.S. is quickly working to become a community staple — it helped rebuild the local dog shelter. installed lights on the high school’s softball and soccer fields. bought the city’s 32-foot-tall Christmas tree. Rockdale Mayor John King noted that the company funds the live broadcast of high school sporting events and donates fireworks for graduation.

Expansion plans are in the works to more than double the plant’s capacity and make it the world’s largest bitcoin mining facility, according to whinstone u.s. executive director chad everett harris.

the city has found itself at the center of texas ambitions. In recent years, Texas has increasingly attracted the cryptocurrency industry as state and federal lawmakers try to lay the groundwork for an explosion in blockchain technology. industry leaders say they are drawn to the state’s cheap power and aversion to regulation.

“i would like texas to become the center of the universe for bitcoin and crypto”, usa. uu. sen. Ted Cruz, R-Texas, said at the Texas Blockchain Summit, where 700 attendees, according to organizers, gathered in Austin on October 1. 8. There, Republican politicians defended the industry along with a list full of businessmen and researchers.

The fledgling industry has its skeptics. Skeptics worry about the massive amounts of energy required to mine bitcoin, which has raised environmental concerns and fears about how the strain could affect Texas’ already fragile power grid.

and 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.

At the end of 2018, with the price of bitcoin falling, those plans were not fully realized.

but the leaders of texas keep going. just last week, Gov. Greg Abbott met with the Texas Blockchain Council. he later tweeted that the state will soon “be #1 for blockchain & cryptocurrency.”

a “very natural synergy”

Cryptocurrencies are digital assets that can be used to purchase certain products and services without an intermediary such as a bank.

Bitcoin is widely considered the first decentralized peer-to-peer payment network powered by its users, although many cryptocurrencies exist. its value is not backed by any government, but the transactions are recorded in 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 surged over the past year from $11,500 per coin to a record high of $66,000 last week before falling below $60,000.

Most people buy bitcoins on public exchanges. but every 10 minutes new blocks of bitcoins are released, and miners compete to obtain them through a process by which they solve complex mathematical problems to validate transactions. those processes happen on blockchains, a public series of anonymous decentralized blocks where details are recorded. the more computers a miner has competing in the process, the more bitcoins they can acquire, making mining an energy-intensive process.

See also: Blockstream secures 266 million CAD at 4 billion valuation to monetize the Liquid Network | BetaKit

whinstone usa. uu. it hosts more than 25,000 miners or computers programmed to mine bitcoins. power passes through large transformers connected to those buildings, where miners line rack upon rack. on the other side of those racks, an evaporative cooling wall draws in ambient air and coolant, dissipating the hot air emitted by the computers like a chimney.

for texas republicans and entrepreneurs, texas and cryptocurrencies are a perfect match. There is a “very natural synergy,” Cruz said, between blockchain and the spirit of the state, which he described as “give me a horse and a gun and an open plain, and I can conquer the world.”

texas, he added, “exalts” entrepreneurs. the state’s anti-regulatory laws appeal to the industry, which values ​​privacy. The cryptocurrency community, Cruz argued, is based on “individual freedom, individual responsibility” and a lack of dependency on the government.

“We came here for the energy and the deregulated market,” Harris said. “We knew that energy was a competitive component. And we knew that on a large scale, we could get energy at a lower price.”

This year, the Texas Legislature took several steps to grow the industry here.

hb 4474 recognized cryptocurrency in the state’s uniform commercial code in an effort to establish standards that clarify the rights of people who control currency and allow disputes over ownership to be resolved. The measure made Texas the third state to amend the laws that regulate financial transactions as such. hb 1576 established a 16-member task force that will recommend policies related to blockchain matters. Abbott signed both bills in June.

energy, environment and market volatility

China, where roughly two-thirds of the country’s electricity comes from coal, has long been the world leader in bitcoin mining. But the government recently cracked down on those efforts, in part because of concerns about the industry’s impact on climate change.

Texas state leaders have shared few or none of these concerns.

whinstone usa. uu. mine has a capacity of 300 megawatts (one megawatt is enough electricity to power 400 to 900 homes in a year) and expects to reach a maximum capacity of 750 megawatts after expansion. For politicians like Cruz, Texas’ abundance of energy makes it fertile ground for an industry in which bitcoin mining alone uses 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 is one thing that Texas has in large quantities, if there is one thing that Texas knows 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 significant growth in an energy-intensive industry.

Industry advocates describe a symbiotic relationship between bitcoin miners and the texas electrical reliability board, the state grid operator. They suggest that the proliferation of blockchain technology would help stabilize the Texas power grid that has come under increasing criticism for failures during a storm that left an estimated 70% of Texans without power for an average of 42 hours.

The increased demand generated by mining could encourage the start-up of new energy sources, they say. Bitcoin mining is not continuous, said Lee Bratcher, president of the Texas Blockchain Council. Mines can be shut down at times of high network stress, and ercot actually pays bitcoin mining companies to shut down during those times. That unused power from your baseload demand is fed back into the grid, bratcher added.

“Bitcoin mining is a load that will buy energy 24/7. however, it is unique in that it has the flexibility to turn off during peak hours,” said Riot Blockchain CEO Jason Les. “And by participating in the network with different services for large loads on the network, we also help stabilize that network.”

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 power demand during times of high network stress, he said they could have a beneficial impact on network reliability.

harris, the whinstone u.s. CEO, said his company can be considered a “virtual power plant” that feeds power back into the grid at times of high demand. the company has even disabled its use at times when it would have been cheaper to continue mining. why? Because for a large electricity user like Whitstone U.S., he said, grid stability is incredibly important.

The industry’s extensive use of energy also raises environmental concerns. The Texas Environmental Advocacy Group has opposed efforts by politicians to promote the industry, both over issues of power capacity and the emissions created by producing power to support miners.

See also: Bitcoin Regulation: What Is Happening and What to Expect? – Softjourn

CEO Luke Metzger noted that some industry advocates suggest they will locate their companies in areas with a surplus of renewable energy. But, Metzger said, such a glut of renewable energy doesn’t exist in Texas.

“We are very concerned about the environmental impacts of simply adding an industry that is so energy-intensive that it could be consuming energy that could be used for more important purposes,” Metzger said.

metzger also raised concerns about electronic waste in an industry that relies heavily on IT equipment.

Even Tesla CEO Elon Musk, a Bitcoin advocate who received applause at the summit after Cruz toasted Tesla’s recent announcement that it would move its headquarters to Austin, has had reservations. In May, Musk announced that Tesla had halted purchases of its vehicles with Bitcoin, citing concerns about the fossil fuels used to mine it.

bratcher suggested that texas’ greener energy choices make mining in the state more sustainable than in china. Although he said that he is aware of the environmental impact, he said that bitcoin mining in texas is 30% dependent on renewable energy. Twenty percent of the state’s power comes from wind power. Less than 15% of bitcoin mining in the state uses coal, he added.

but those numbers aren’t good enough, according to benjamin a. Jones, an economics professor at the University of New Mexico who has researched the environmental impact of cryptocurrency mining. He pointed to a University of Cambridge study from September 2020, which estimated that 39% of mining is powered by renewable energy. Jones said that figure would put Texas below the world average when it comes to renewable mining. coal and natural gas represent 38% and 36% of energy sources, respectively.

His own research, he said, found “very high” environmental and climate damage associated with mining operations with 20% to 30% renewable energy use.

looking forward

Industry leaders are determined to transform the political landscape for blockchain technology.

on Oct. At the Aug. 8 summit in Austin, David Zell, head of policy and public affairs at Bitcoin magazine, announced the launch of a superpac dedicated to influencing public opinion on cryptocurrencies.

“Bitcoin has a narrative problem,” he said.

bratcher shared plans for a future amendment to the texas constitution that would allow texans to pay property taxes in bitcoin. State Representatives Tan Parker and Gio Capriglione, both Republicans, backed the idea in a conversation with Bratcher at the summit.

At the summit, legislators and advocates even explored the idea of ​​using blockchain technology beyond the world of finance. In addition to being used for property taxes, the technology could help protect health care records and even protect elections, they said.

“You are pioneers on the front lines of an extraordinarily bright new future,” Parker told the audience. impact.”

in rockdale, the impact has generated “a lot of interest in our community,” said king, the mayor. In addition to the local labor the companies use, King said the international publicity they’ve brought in now has other companies considering locating there.

“everyone has been a good neighbor from that point of view,” king said. “They haven’t had [a] real negative impact at all. in any case, it has been positive.”

Disclosure: The University of Texas at Austin has been a financial supporter of the Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations, and corporate sponsors. financial backers play no role in tribune journalism. find a full list of them here.

See also: Bitcoin Cash – Peer-to-Peer Electronic Cash

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