In the past few months, the world’s been shrinking fast for Bitcoin miners. After China expelled the industry in June, the exiles moved on to Iran and Kazakhstan, only to get booted again when their giant appetite for electricity stretched power grids to the breaking point, causing blackouts that sparked angry protests in Tehran and Almaty. Since then, nation after nation that fear the same fate are joining the ban-Bitcoin movement. In December, India proposed a law slamming the gates, and in Sweden, two top officials advocated a full EU ban, arguing that “clean Bitcoin” powered by the nation’s wind and solar farms is still a bad deal. Soon after, regulators in Norway agreed. If Bitcoin’s robbing loads of Europe’s energy, the warning goes, its nations won’t have enough power to produce cars, steel and semiconductors, and light homes, as its nations make the transition from fossil fuels to renewables. Most of the world is saying, if you don’t want cities going dark and need to reach climate goals, dump Bitcoin mining.
Yet one economic powerhouse that famously suffered a power catastrophe last winter, and operates a notoriously wobbly grid, is welcoming miners with a rowdy bear hug and souvenir ten gallon hat. Texas now reigns as the fastest-growing destination for the giant data centers that mint the king of cryptos. In two years, the Lone Star’s state on course to become the world’s largest producer, dwarfing any foreign nation and the combined output for the rest of the U.S. Texas politicians love the new jobs and the extra tax revenue that Bitcoin brings, and even buy the argument that that producers’ ability to power down in seconds during times of peak usage will make their energy backbone stronger. In June, Governor Greg Abbott tweeted, “It’s happening. Texas will be the crypto-leader.” At the Texas Bitcoin Summit in October, Senator Ted Cruz––who by the way, just disclosed that he’d bought as much as $50,000 in coins on the recent dip––described a future where Bitcoin propels wind and solar energy production. “The beauty of Bitcoin,” declared Cruz, “is that you can derive value from those renewables that would be impossible otherwise.”
Texas already accounts for as much as 7% to 8% of global output, and it’s just getting started
To get a full view of what the players are already producing, their plans for expansion, and the projects announced by newcomers, I spoke to Lee Bratcher, president of the Texas Blockchain Council. Bratcher noted that a tiny hamlet north of Austin is probably the biggest crypto boomtown on the planet. It’s Rockdale (pop: 5500), where the two largest mines in North America sit side by side on the former site of the free world’s largest aluminum plant, operated by Alcoa. In terms of production, the larger of the two operations for now is the Whinstone facility. Whinstone sprawls over 100 acres, and packs towering racks of computers into three buildings that, all together, cover the area of more than three football fields. In May, Riot Blockchain, Inc. of Colorado, a miner then operating chiefly in New York State, bought Whinstone from a group including the young founders who built it from scratch. Purchase price: $651 million.
Whinstone is mainly a hosting facility that provides power and services to third-party producers. It’s now home to Riot’s own mining operations. Also minting coins at Whinstone is Rhodium Enterprises, an industrial-scale outfit that in mid-January filed for a $100 million IPO. All told, Whinstone now uses roughly 400 megawatt hours of electricity, and aims at reaching 750 MWh later this year. That’s big. Cambridge University reckons that all worldwide Bitcoin uses 14,300 MWh, or around twenty times that amount, though the global total is growing fast.
Across the road in Rockdale, at the old Alcoa smelter site, stands a mine owned by Bitdeer of Singapore. In January of 2021, billionaire Jihan Wu split Bitdeer from Beijing’s Bitmain, the giant producer of mining equipment that Wu co-founded. In January, Wu announced plans to take Bitdeer public through a spac at a $4 billion valuation. Bitdeer owns five facilities in the U.S. and Norway, but the Rockdale farm is the biggest. Although little information on its energy comsumption is available, Bracther estimates that the campus is now using about 400 MWhs; it’s been reported that the facility can support 700 MWhs in capacity and plans to get there, reaching the same league as its neighbor Whinstone.
In West Texas, Compute North of Minnesota is hosting 100,000 mining machines for Marathon Digital Holdings of Las Vegas, one of America’s largest producers (market cap: $2.9 billion). Bratcher puts current power input at less than 100 MWh, but says Compute’s set a goal of several hundred. Marathon will draw electricity primarily from wind and solar sources in the area. Also in the western tier, HODL Ranch, built by Dallas data center developer Skybox, is unearthing Bitcoin on a 150 acre campus, deploying 150 MWh in wind and solar power channeled through its onsite substation.
Two top industry players have major projects under construction, notes Bratcher. Core Scientific of Austin (market cap: $3.6 billion) is planning a farm in Denton near Dallas that will start at 300 MWh, and eventually reach 800 to match or even surpass Whinstone. Argo Blockchain of London is building a data center in West Texas slated to grow to an eventual 400 MWh. As for Marathon, Argo’s big draw is cheap and plentiful electricity from wind farms clustered on the vast plains.
A big mystery is future for Layer1, run by PayPal founder Peter Thiel. In early 2020, the startup opened a plant in the tiny West Texas town of Pyote (pop: 138) at just 100 MWh, but launched with grand ambitions. Thiel unveiled his goal of “repatriating U.S. Bitcoin mining” and pledged to exceed 30% of the total global “hashrate,” or production of random codes that win bitcoin, by the end of 2021, in a quest to “offset China’s dominance.” Since then, Thiel has apparently put the blueprint on hold.
In the end, it was a dramatic crackdown that ended China’s status as the world hub for Bitcoin production. And now, Texas is poised to fulfill Thiel’s vision on its own and supplant the world’s most populous nation as the world leader in Bitcoin mining.
How big will Texas get?
Today, Bratcher estimates that Texas is marshaling 900 to 1,100 KWh to produce Bitcoin. At the higher number, that’s already 7.6% of the world’s consumption. “In the U.S., we’re in a tie with New York State,” he says. “But the political scene has turned negative in New York. They’re not growing, and we’re growing like crazy.” Within two years, Bratcher expects Texas to reach 3,000 to 4,000 KWh. Brad Jones, chief of Energy Reliability Council of Texas (ERCOT), the grid that supplies 90% of the state’s energy, thinks the number will reach 5,000 in the next couple of year––and declares himself “pro Bitcoin.” Two years from now, total Bitcoin energy usage will be a lot higher than the current 14,000-plus MWh as ERCOT, since solar and especially wind are growing rapidly, as if the population of Texas. Even so, at Bratcher’s high figure of 4,000 MWh, Texas would be home to almost 25% of the global industry. If the ERCOT estimate plays out, Texas could be making one-third of the world’s Bitcoin. “We’ll also be well over 50% of all the production in the U.S.,” adds Bratcher.
Here’s the potential problem: ERCOT is now running at around 50,000 MWh serving ninety percent of the state. Bitcoin could easily absorb 6% of everything Texas produces, or an even a bigger slice, in a couple of years. That might not be a burden if Cruz is right, and mining adds to total capacity by bringing loads of wind and solar online that wouldn’t be there without it, and hence provides additional power to the grid when miners don’t need all of it. But what if that doesn’t happen? Then Texas could experience a replay of the cataclysms that drove the likes of Iran and Kazakhstan to heave Bitcoin like an angry bull sheds a cowboy.
Texans are revered as great adventurers who ignore the crowd and go their own way. A crowd of nations that once loved Bitcoin turned hostile in a hurry. In Texas, the romance is just beginning. We’ll soon see if the big Texas welcome to an increasingly unwelcome guest worldwide proves a winner––or, as the once-smitten crowd experienced, soon turns sour.