Foundry USA
A war is brewing among states to attract bitcoin miners, and new data shows that a whole lot of them are headed to New York, Kentucky, Georgia, and Texas.
Within the U.S., 19.9% of bitcoin’s hashrate – that is, the collective computing power of miners – is in New York, 18.7% in Kentucky, 17.3% is in Georgia, and 14% in Texas, according to Foundry USA, which is the biggest mining pool in North America and the fifth-largest globally.
A mining pool lets a single miner combine its hashing power with thousands of other miners all over the world, and there are dozens from which to choose.
“This is the first time we’ve actually had state-level insight on where miners are, unless you wanted to go cobble through all the public filings and try to figure it out that way,” said Nic Carter, co-founder of Castle Island Ventures, who presented Foundry’s data at the Texas Blockchain Summit in Austin on Friday. “This is a much more efficient way of figuring out where mining occurs in America.”
But as Carter points out, the Foundry dataset does not account for all of the U.S. mining hashrate, since not all U.S.-based mining farms enlist the services of this pool. Riot Blockchain, for example, is one of the largest publicly-traded mining companies in America, with a huge presence in Texas. They don’t use Foundry, so their hashrate is not accounted for in this dataset – which is part of the reason why Texas’ mining presence is understated.
Though the dataset only captures a portion of the country’s domestic mining market, it does point to nationwide trends that are reshaping the debate around carbon’s footprint.
Many of the states ranking the highest are epicenters of renewable energy, a fact which has already begun to recast the narrative among skeptics that bitcoin is bad for the environment.
While Carter acknowledges that U.S. mining isn’t wholly renewable, he does say that miners here are much better about selecting renewables and buying offsets.
“The migration is definitely a net positive overall,” he said. “Hashrate moving to the U.S. will mean much lower carbon intensity.”
Where did all the miners go
When Beijing decided to kick out all its crypto miners this spring, about half of the bitcoin network went dark practically overnight. While the network itself didn’t skip a beat, the incident did set off the biggest migration of bitcoin miners ever seen.
The Foundry dataset shows the biggest bitcoin mining operations are in some of the states with the most renewable – a game changer for the debate around bitcoin’s environmental impact.
Because miners at scale compete in a low-margin industry, where their only variable cost is typically energy, they are incentivized to migrate to the world’s cheapest sources of power – which also tend to be renewable.
Take New York, which leads Foundry’s ranking. A third of its in-state generation comes from renewables, according to the latest available data from the U.S. Energy Information Administration.
New York counts its nuclear power plants toward its 100% carbon free electricity goal, and critically, New York produces more hydroelectric power than any other state east of the Rocky Mountains. It was the third-largest producer of hydroelectricity in the nation, as well.
New York’s chilly climate – plus its previously abandoned industrial infrastructure ripe for repurposing – have also made it an ideal spot for bitcoin mining.
Crypto mining company Coinmint, for example, operates facilities in New York, including one in a former Alcoa Aluminum smelter in Massena, which taps into the area’s abundant wind power, plus the cheap electricity produced from the dams that line the St. Lawrence River. The Massena site, at 435 megawatts of transformer capacity, is billed as one of – if not the – largest bitcoin mining facility in the U.S.
New York was weighing legislation this year to ban bitcoin mining for three years so it could run an environmental assessment to gauge its greenhouse gas emissions. Lawmakers have since largely walked it back.
“Bitcoin mining in New York is actually very low in carbon intensity, given its hydro power, and, as a consequence, if New York were to ban bitcoin in-state, it would probably raise the carbon intensity of the bitcoin network overall,” said Carter. “It would be the complete opposite of what they wanted.”
Other states capturing a large share of America’s bitcoin mining industry include Kentucky and Georgia.
Beyond the fact that Kentucky’s governor is friendly to the industry, having just passed a law this year that grants certain tax exemptions to crypto mining operations, the state is also known for its hydroelectric and wind power.
Connecting rigs to otherwise stranded energy, like natural gas wells, is another power source. Although coal is also a big player in the energy mix, many mining operations there gravitate to renewables.
And then there’s Texas
Texas may rank fourth according to Foundry’s data set, but many experts believe there is no question that it is the leading jurisdiction for miners right now.
Some of the biggest names in bitcoin mining have set up shop in Texas, including Riot Blockchain, which has a 100-acre site in Rockdale, and Chinese miner Bitdeer, which is right down the road.
Orders for new ASICs – the specialty gear used to mint new bitcoin – show that tens of thousands more machines are due to be delivered in Texas, according to The Block Crypto.
The appeal of Texas comes down to a few big fundamentals: Crypto-friendly lawmakers, a deregulated power grid with real-time spot pricing, and perhaps most importantly, access to significant excess energy which is renewable, as well as stranded or flared natural gas.
The regulatory red carpet being rolled out for miners also makes the industry very predictable, according to Alex Brammer of Luxor Mining, a cryptocurrency pool built for advanced miners.
“It is a very attractive environment for miners to deploy large amounts of capital in,” he said. “The sheer number of land deals and power purchase agreements that are in various stages of negotiation is enormous.”
Some miners plug straight into the grid in order to power their rigs. ERCOT, the organization that operates Texas’ grid, has the cheapest utility-scale solar in the nation at 2.8 cents per kilowatt hour. The grid is also rapidly adding wind and solar power.
“You just can’t beat the cost of power in West Texas, and when you couple that with a skilled power management company that can manage your demand response programs, it’s almost unbeatable anywhere else in the world,” continued Brammer.
Deregulated grids tend to have the best economics for miners, because they can buy spot energy.
“They can participate in economic dispatch, which means that they stop buying electricity when prices get high, so you have far more flexibility if you are active in the spot markets,” explained Carter.
Another major energy trend in the bitcoin mining business in Texas is using “stranded” natural gas to power rigs, which both reduces greenhouse gas emissions and makes money for the gas providers, as well as the miners.
Carter says that if this is fully exploited, flared gas in Texas alone could power 34% of the bitcoin network today – which would make Texas not only the clear leader in bitcoin mining in the U.S., but in the world.
Source: CNBC