Bitcoin

Is Texas Planning on Becoming the Bitcoin Capital of the US?

is it really that unrealistic to ask the question: could the state of texas become the official capital of bitcoin?

at first glance, it would appear that all the elements to support the argument are in place. well let’s explore some of those arguments for texas, bitcoin miners and more.‍

Reading: Texas plans to become bitcoin capital

what makes texas ideal for bitcoin mining? blockchain technology

texas seems to have many of the attributes needed to achieve bitcoin nirvana. If bitcoin adoption continues to grow as fast as the Internet did in the 1990s, and favorable sentiment from citizens, state, and local government continues to be positive, there could be no limits to what can be achieved in Texas. So could Texas really become the “Bitcoin Capital”? we’re about to find out.

texas is the largest energy producer in the united states

Between crude oil and natural gas, Texas accounts for 43% of the nation’s leading energy resources. Its natural gas production accounts for 26% of all production in the country, and what’s more, Texas produces almost twice as much total energy as the second largest energy producer, Florida.

largest producer of wind power & largest producer of solar energy in the united states

texas accounts for 32% of all turbines and 34% of all wind power in the united states, reported by the us energy information administration. continues to break records by bringing new solar power capacity online. Some of the world’s largest players in low-carbon energy production, such as Tesla, are bringing more solar power generation online in Texas.

offers some of the cheapest energy costs in the united states

the electric reliability council of texas (ercot) managed the flow of energy to more than 26 million texas customers, over 8 million commercial and residential metered installations, representing 90% of the electrical load of the condition. ercot quotes energy on the daily market (dam). it is a voluntarily and financially binding forward energy market. Essentially, it is a place where electricity buyers and sellers meet to agree on tomorrow’s electricity price and agree to buy a certain amount of electrical load at a specific market price. ercot also provides a kind of exchange for long-term agreements that can be made between two parties. the price is negotiated directly between buyers and sellers for these longer-term deals.

Bitcoin miners solve a longstanding headache for Texas renewable energy providers

Bitcoin provides a novel solution to a long-standing problem. investing in renewable energy infrastructure is a grueling process of assessing all the potential risks/rewards over a very long time horizon.

One of the most important factors is obviously the income generated by electricity consumers. bitcoin miners provide a constant demand for energy all day, every day. In other words, bitcoin miners are powerful buyers of last resort. This completely changes the traditional calculation involved in investing in renewable energy infrastructure as a result of this new source of constant, reliable and growing income.

Bitcoin miners in Texas also face a significant operational challenge in the volatility of electricity demand throughout the day/night cycle and seasons throughout the year. miners provide a novel solution to the load balancing problem faced by renewable energy providers. load balancing is a technique used to balance the volatility of power demand throughout the day.

Simply speaking, bitcoin miners can scale back if the midday summer heat creates extreme demand to keep homes cool and ramp up at night while nature takes its course. In addition, as a result of the Ercot-supplied dam, miners are able to sell power during that peak demand at a hefty price. is a perfect solution to a persistent problem faced by all renewable energy producers.

ercot & dam minimizes financial impact during downscaling for bitcoin miners

ercot and the day-ahead market for reselling power to the grid provide invaluable flexibility to bitcoin miners looking for low-cost, reliable renewable energy sources. In terms of power purchase, Texas Dam offers low-cost, long-term contracts to ensure years of growth in your business.

In terms of energy sales, Texas offers an unregulated energy market that allows participants to sell energy at market prices. For miners, this provides an ideal solution to the negative effects of downsizing because they would typically only need to scale down during peak demand situations. therefore, natural market demand would drive prices up and bitcoin miners could subsidize the cost of downsizing their mining operations.

See also: Physical Bitcoins | Is There a Physical Bitcoin? | Currency.com

Scaling up or down operations in the mining industry is actually a relatively straightforward event compared to many other industries. the only real cost is the opportunity cost of not contributing hash to your mining pool or mining for a block reward.

The flexibility to make up for that lost revenue makes Texas a unique and valuable partner for a long-term business relationship.

status & local political leaders support bitcoin

on June 18, 2021, texas governor greg abott posted on twitter: “texas will be the leader of cryptocurrencies”. while a local supermarket chain may have been referenced as adding cryptocurrency machines to its stores, the sentiment is undeniable. it’s a strong endorsement from the highest ranking government official in the state of texas and a testament to future expectations. Texas House Bills 1576 and 4474 went into effect on September 1, 2021 after Governor Abbott signed them into law in June 2021. 1576 establishes an official task force to explore blockchain technology. 4474 brings the state of texas on par with rhode island and wyoming by updating the uniform commercial code to recognize cryptocurrency. in parallel, the commissioner of the texas banking department authorized all banks authorized by the state of texas to the custody of cryptocurrencies.

reasons to be cautious before bitcoin miners invest in texas

risk of federal legislation against bitcoin mining or blockchain technology

Perhaps the most pertinent risk for miners considering Texas is the possibility of unforeseen legislative change.

As of this writing, the federal government has yet to pass a clear and comprehensive regulation that would affect how Americans buy, sell, or mine bitcoin and other cryptocurrencies. however, some steps are being taken, talks are taking place, and the government is starting to take crypto more seriously. on march 9, 2022, president biden signed an executive order on “ensuring the responsible development of digital assets” while biden’s marching order did not restrict industry activities, some government bodies have taken a more confrontational stance . the central bank and the treasury department have publicly raised concerns about various stablecoins in the market. Gary Gensler, head of the Securities and Exchange Commission (SEC), has reiterated his concerns about protecting investors in cryptocurrency markets, but has yet to outline his solutions in detail.

much of the attitude now seems to be one of uncertainty. Recently, the central bank has become accustomed to CBDCs (Central Bank Digital Currency), which could be a government-issued cryptocurrency. In January 2022, they published an official white paper “Money and Payments: The United States.” dollar in the age of digital transformation”, outlining his official views on digital currency. Even high-ranking officials, like Sen. Cynthia Lummis, have convened bipartisan groups in Washington to enact laws that allow “industry to move forward.”

risk that local or state legislation changes against bitcoin & adoption of blockchain technology

the legal status of bitcoin in the united states under state law is a changing landscape. much more than at the federal level. in 2014, the state of hawaii, for example, banned all crypto operations, only to go back only a couple of years later with sb 3082, and finally switch to leadership status in february 2020 by creating a group working to support blockchain technology.

right now new york is probably one of the most difficult states to do business in if you are trying to innovate in the cryptocurrency space. At the moment, only about 30 cryptocurrency organizations are allowed to enter New York and many coins are prohibited from trading within state limits.

The bottom line is that states are still trying to understand and adjust to this new industry. each jurisdiction must consider the impact of this global technology on its local constituents. that does not exclude the texas state legislature in any way. As we saw with Hawaii, things can change in either direction in just a few years as people change seats in public office.

energy fud & existential threat to bitcoin mining and blockchain technology in texas

The narrative that bitcoin is a destructive force for our planet due to its energy use has proven to be a catchy headline. however, it should be noted that many of the studies suggesting this negative impact on the environment have since been discredited. A study for the Harvard Business Review noted how variable estimates can be and how much more research needs to be done before drawing conclusions.

Unfortunately, this is an issue the bitcoin community deals with on a regular basis. efforts to take facts out of context when an idea contradicts the beliefs of a constituent group can be difficult to counter. many people prefer information that supports their pre-existing views. the only defense against fud (fear, uncertainty and doubt) energy is sadly simple but complicated.

It’s simple because the industry needs to continue to collect data and present undeniable empirical evidence that bitcoin mining incentivizes additional investment in renewable energy. needs to provide more evidence that it generates positive but intangible social externalities for many communities that work and live near a facility.

See also: Cheapest Way to Buy Bitcoin: Ultimate 2022 UK Guide

The tricky part is getting everyone in the industry involved in data collection and sharing. the bitcoin mining council is one such organization whose sole purpose is to act as an impartial broker that collects data from willing participants and presents the data for free public consumption.

is texas the only candidate in the race to attract the bitcoin mining industry?

bitcoin mining is totally independent of where you are, as long as you have access to cheap and reliable power and an internet connection. Countries like Iceland, Canada, China, and Russia have various risk/reward profiles, but they all have one thing in common. they all have cheap and reliable power sources.

iceland and canada historically have cooler climates which act as a strong incentive, as bitcoin mining generates a lot of heat as a by-product. however, the political environment may be more critical in presenting sentiment around bitcoin’s energy usage.

China and Russia, as another example, have extremely cheap and reliable electricity, but suffer from a very real and costly political risk. In 2021, China completely banned bitcoin mining, a stark reminder of how far regulation can go. Russia cannot seem to figure out which side of the fence it is on regarding the politics surrounding mining and the use of cryptocurrencies in its country.

fierce competition to be the capital of bitcoin

There are also many other states with outspoken civil servants like the “bitcoin lady” of the beltway. cynthia lummis, a republican senator from wyoming is as strong an advocate for bitcoin as ever. she has been known to make references to bitcoin as “it’s freedom money”.

Senator Lummis’ support and leadership are making great strides in setting a precedent in the banking and financial industry. The Wyoming Division of Banking is breaking new ground by providing official guidance on how to deal with digital asset custody if you are a state-chartered bank. wyoming could be a great place to call home if you’re working in fintech, building layer 2 and layer 3 applications to support the bitcoin network.

texas, on the other hand, is exceptionally attractive not only because it provides some of the cheapest and most abundant energy supplies, but also has publicly adopted bitcoin, bitcoin mining, and cryptocurrencies, reducing the risk that entities well-funded invest millions in your state.

texas attracts next generation bitcoin miners

argo blockchain, one of the largest bitcoin mining companies in north america, is a bitcoin mining company that decided to make a big bet on the future of texas by building its helios facility in west from Texas.

helios will be the largest enterprise-scale bitcoin mining company in North America built to support immersion cooling technology.

Were it not for the attractive economic and political factors that Texas uniquely offers, investments like Helios may never have materialized.

author

michael bogosian is a bitcoin & Blockchain analyst who has an MBA from Loyola University Quinlan School of Business in Chicago. he has been researching and writing about bitcoin & blockchain technology since 2018.

See also: Comment acheter Bitcoin sans frais ? – BeinCrypto France

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