Cryptocurrency in Texas: Why Bitcoin Mining is Taking Off in Lone Star State |  LLP Chance

Cryptocurrency in Texas: Why Bitcoin Mining is Taking Off in Lone Star State | LLP Chance

By its nature, Bitcoin mining is energy consuming and relies on cheap energy to make profits. Bitcoin miners are beginning to flock to Texas due to the current “lockdown” situation of cryptocurrency mining for three main reasons:

  1. The state’s energy infrastructure allows access to cheap energy from the liberalized energy market;
  2. A growing mix of renewable energy sources, particularly wind energy; And the
  3. Its policy supportive and support policy makers.

Bitcoin Mining: Dependence on Texas’ Energy Infrastructure

While bitcoin mining has been criticized for being energy intensive, Texas Governor Greg Abbott, among others, sees bitcoin mining as a solution to other related problems, such as tapping into untapped energy, including natural gas (such as surplus or associated gas) that may be ignited or otherwise vented due to limited infrastructure to transport it to a destination.

It’s no secret that oil and gas companies have struggled for years to solve the combustion problem, not just in Texas but across the United States. Unlike oil, which can be transported by truck or rail, natural gas requires a pipeline infrastructure to get it to market. If the driller has no way to move its gas, either economically or because there is no pipeline infrastructure to do so, it is flaring (or burned), and the environmental impacts are significant.

Instead, crypto miners can take advantage of this surplus gas, whether it’s flared gas or bad grids, and turn it into generators, which can then turn the gas into electricity and then use it to power their supercomputers and high-end servers. according to Argus Media, “Companies see a double benefit – reducing the negative effects of gas flaring and reducing the carbon footprint.” According to research by Crusoe Energy Systems, one of the largest bitcoin mining companies in the United States, the process reduces carbon dioxide.2 Equivalent emissions of about 63% compared to incineration. This opportunity to repurpose and invest stranded energy has been attractive not only to bitcoin miners, but also to oil and gas companies to increase returns on their production while also complying with environmental, social and governance (ESG) initiatives — more specifically the “E” component to reduce the carbon footprint.

Regardless of the energy source for a bitcoin miner, whether the gas to be burned or the energy source from renewables, the bitcoin miner essentially acts as a power plant by purchasing power at an agreed upon fixed price and having the ability to sell the energy back into the grid.

Contrary to Abbott’s position that cryptocurrency mining provides financial incentives to build energy infrastructure and produce more energy, his opponents argue that doing so would also increase demand and put pressure on an already unstable power grid.

However, Abbott’s position is based on the belief that if an extreme weather event, such as Winter Storm Uri in February 2021, causes a significant increase in energy demand, miners will be forced to pause their operations when required to do so. In other words, miners will stop their operations and return power to the grid when demand rises. This concept is not only supported by basic human principles, ethics or morals that power must be redirected to save human lives but is also backed by market dynamism itself. If demand for energy rises – as happened during a winter storm storm – spot energy prices rise (sometimes dramatically) and the miner is therefore physically incentivized to sell the energy back to the grid rather than consuming it.

For miners, the benefits are not only their ability to get cheap energy but also the flexibility and discretion to put that energy back into the grid. For Texas, and particularly ERCOT, the state’s power regulator, the ability for miners to “shut down” during peak demand eliminates the need to run less efficient power plants on demand, allowing ERCOT to install the grid more effectively.

Bitcoin “clean”? Increasing mix of energy sources from renewable energy sources

According to the Texas Blockchain Council, there are at least 27 mining operations in the state with more on the way. This growth is attributed not only to the points discussed above, but also to the larger crackdown on crypto-mining offshore especially in China, which prompted many to flee to the United States.

It is important to note that China relies heavily on “dirtiest” energy sources such as coal, which produces nearly twice as much carbon dioxide.2 emissions as natural gas. Meanwhile, Texas is home to “cleaner” sources such as natural gas and wind energy. Furthermore, within the United States, Texas is the leading wind-powered electricity generation company in the country, comprising about 26% of the country’s total net wind generation.

(Source: EIA)

Altogether, these factors motivated and attracted bitcoin miners to Texas, with the Lone Star state having the fourth-highest hash rate (a measure of how much power is supplied to the bitcoin network) of any state, at nearly 14%.

Bitcoin Miners Call Texas Home — Right Now

From Rockdale, Texas, home of the two largest bitcoin mining companies in the world, to the first city in the United States to mine bitcoin, to Fort Worth, Texas, the Lone Star State welcomes the bitcoin mining industry with open arms!

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