Texas, the new El Dorado for bitcoin mining

Since China banned the manufacture of major cryptocurrencies a year ago, huge “data centers” have fled to Texas, where electricity is cheap. Because bitcoin mining is swallowing up energy resources in astronomical amounts. But this industry, which energizes some rural towns, poses a danger to the environment. a report.

“This is the most photographed place on our site!” Chad Harris, CEO of Whinstone, is proud to tell us about the heart of his mine. Here, there are no coal-draft faces, but a huge sterile barn over 150 meters long and 6 meters high, thousands of computers lined up, processors overheating. Upon entering the deafening sound of fans picking up heat and expelling it outside through a “cathedral” – a huge hall in the center of the building. Welcome to the largest bitcoin mining factory in the United States.

Chad Harris, chief executive of Whinstone, is in a room called the “cathedral” where heat from the processors is evacuated. The Bitcoin industry alone will use more energy than countries like Sweden or Poland. April 21, 2022, in Rockdale, Texas. © Valérie Defert for France 24

Mining is the name given to the process of creating the main cryptocurrency. Since the value of traditional currencies is secured by the metal from which they were counterfeited, trust in bitcoin is secured through a “blockchain”, i.e. a cryptographic format that secures bitcoins and their transactions. This algorithm is calculated by thousands of computers around the world, in particular, in the small town of Rockdale.

In the middle of rural Texas, an hour-and-a-half’s drive from Austin, it’s hard to imagine this lackluster city of 5,600 residents is home to the latest world-class technology. The main street is full of abandoned houses and stores with curtains for a long time. However, there is a change coming. Evidenced by the renovation work going on in this way. “It’s related, it’s unrelated at the same time,” says John King, Mayor of Rockdale. “There has been a lot of traffic in the city since the rise of the bitcoin factories, but the money for road repairs is coming from Texas.”

An aerial view of Main Street in Rockdale, Texas on April 21, 2022.
An aerial view of Main Street in Rockdale, Texas on April 21, 2022. © Béric Laurent for France 24

Because here, public money receipts are limited. The two massive bitcoin miners settled in 2019 a ten-minute drive away, outside the area where the city collects property taxes. When you go there by car, it is, first of all, the network of the electrical network that you see. In contrast, on the other side of this rural road is an abandoned aluminum factory now occupied by the Chinese bitcoin maker Bitdeer.

China's Bitdeer turns its local steel mill into a data center, in Rockdale, Texas, on April 21, 2022.
China’s Bitdeer turns its local steel mill into a data center, in Rockdale, Texas, on April 21, 2022. © Valérie Defert for France 24

Just a few dozen meters away, its direct competitor, the Chad Harris Company, has taken its seven huge hangars housing nearly 50,000 “miners” off the ground. “When we use the term ‘miners,’ we’re really talking about processor-infused computers that process the bitcoin algorithm and create this coin,” sums up the Whinstone CEO, explaining the radioactive hard drives being installed in a new fold. “Every miner for this model reaps $25-30 a day.”

computer
A computer “mines” bitcoins at the factory located in Winston, North America’s largest crypto-mining site. Each therapist earns $25-30 per day, April 21, 2022, in Rockdale, Texas. © Valérie Defert for France 24

Fireworks and American football

Bitcoin was invented in 2009, and it reached new heights, with the exchange rate reaching $67,000 per unit last October. Currently around $40,000, it’s still very attractive. In Whinstone, in March, computers running at full speed “forged” 511 bitcoins, or more than $20 million. The president discovered the easy money a simple machine could make thanks to his son Ashton. In 2019, he advised her to invest in Chad’s first “miners” in his office. “I could not believe my eyes,” recalls the businessman. “I just plug in a machine, and it tells me if it’s OK to have a green or a red light, and it makes me $60 a day at the time. I was like, ‘Let’s buy more machines!'” “Six machines, then 30, then 100 … and this is where the problems begin: not enough electricity, too much heat.”

Chad Harris, CEO of Whinstone, at 1 of 7
Chad Harris, CEO of Whinstone, is in 1 of 7 Whinstone “data centers,” where more than 38,000 processors mine Bitcoin. April 21, 2022, in Rockdale, Texas. © Valérie Defert for France 24

Then this Louisiana businessman put together a team responsible for finding solutions at scale. Today, 220 people work on the site. A group of well-paid jobs that mitigate disasters in the community. “That’s why I do all this,” sums up the entrepreneur, who is on the verge of tears. “To see people’s lives improve and that the children of my employees get a good education.”

The mayor, whose son works with a rival Bitdir, rubbed his hands: “Winston paid for equipment to broadcast our NFL matches on YouTube. And in high definition, not bad quality. They also displayed fireworks on the Fourth of July and school graduations.” Benefits that may seem anecdotal, but represent tangible improvements in the daily lives of residents.

John King, mayor of Rockdale for ten years, sees bitcoin mining as a great development opportunity for his town of 5,000 residents, on April 21, 2022, in Rockdale, Texas.
John King, mayor of Rockdale for ten years, sees bitcoin mining as a great development opportunity for his town of 5,000 residents, on April 21, 2022, in Rockdale, Texas. © Valérie Defert for France 24

An environmental disaster?

A fairy tale took a new turn when China banned bitcoin mining from its territory last year. In the Middle Kingdom, electricity comes mainly from coal-fired power plants. Too polluted to feed a hypothetical industry, at a time when Beijing has become aware of climate issues.

Expelled from their country, Chinese entrepreneurs are knocking on the door of Texas, the main producer of electricity in the United States, where taxes are low, environmental standards are virtually non-existent, and the energy market is unregulated and particularly attractive.

“At the time, we were getting 3 or 4 calls a week,” the mayor of Rockdale recalls. “We should have about 50 requests from Chinese companies to install 20,000 miners each. But to be able to respond to it, you have to be able to easily connect to the power grid. Capacity, and it would have taken 16 months to build the necessary infrastructure. Entrepreneurs cannot The Chinese have been waiting all this time with computers crashing.”

Because bitcoin mining is swallowing up energy resources in astronomical amounts. Thus, Winston needs 400 megawatts of capacity, or half the electricity a nuclear reactor produces, to power its computers.

Whinstone employees are installing new processors.  The factory produced 512 bitcoins last month and brought in about $20 million.  April 21, 2022, in Rockdale, Texas.
Whinstone employees are installing new processors. The factory produced 512 bitcoins last month and brought in about $20 million. April 21, 2022, in Rockdale, Texas. © Valérie Defert for France 24

“Bitcoin’s algorithm is not a simple mathematical equation to solve. It is somewhat comparable to a betting or lottery system that puts computers in competition, and creates an escalation of action for machines,” explains Rolf Scar, of the NGO Greenpeace. This is called a “proof of work” protection system. On the contrary, other virtual currencies have a “Proof of Stake” system that reduces electricity consumption by 99%. For this reason, Greenpeace is calling for a structural change to the code that secures Bitcoin to reduce its environmental impact. “Because if you simply ban bitcoin mining in one country, the entire industry will move elsewhere in the world and become more polluting,” asserts Rolf Schkar.

Bitcoin mining professionals in Texas object that a growing portion (about 25%) of the electricity produced in this state comes from renewable sources, the vast majority of which is wind power. That is, if the power grid is too stressed – as was the case in 2021 during a historic winter storm – computers could shut down in seconds, returning excess electricity back to the local grid (at a very affordable price) for miners).

“I’m sure those who work in Texas are convinced that they are making a positive impact,” admits Rolf Scar. “But would they say the same about coal-fired bitcoin miners, in Pennsylvania, in Kentucky? Or in Montana, where they’re even restarting coal-fired plants? A systemic problem we’re posing.”

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