Synergy: Bitcoin Mining and Texas’ Power Grid

Updated: Oct 7, 2021

If you are not familiar with Bitcoin mining, check out this recent mining investment in West Texas.

As Chinese regulators roll out the digital yuan, they have subsequently cracked down on Bitcoin. This comes as no surprise given the decentralized nature of Bitcoin and its challenge to the authoritarian state of China. That loss of central control is bad business for the Chinese Communist Party. The rollout of the digital yuan will allow the government to have more control over the monetary system and those who operate within it, further tightening the state’s grip on economic activities both domestically and internationally.

Why is this crackdown on Bitcoin relevant? In 2020, China was home to a majority of the Bitcoin networks computing power, and with this crackdown, Bitcoin miners are now looking for new locales. Right now, there are few places better than Texas.

Over the past few months, Texas has been not-so-quietly positioning itself as the new place to be for Bitcoin miners and operators in the crypto space.

Texas is an attractive ecosystem for many reasons, most notably its place as a global center for energy and its deregulated energy market.

The devastating winter storm in February of this year brought international attention to the Texas grid and, evidently, brought the attention of Bitcoin miners with it.

“The idea that an influx of Bitcoin miners could actually be good for the Texas grid came up last month, during the first-ever meeting of the so-called Bitcoin Mining Council — a loosely affiliated group of U.S.-based mining firms organized by MicroStrategy CEO Michael Saylor.”

The Bitcoin Mining Council is a voluntary and open forum of Bitcoin miners committed to the network and its core principles. The organization promotes transparency, shares best practices, and educates the public on the benefits of Bitcoin and Bitcoin mining.

Michael Saylor is the CEO of MicroStrategy, the public company with the most extensive bitcoin holdings (as of September 13, 2021, approximately 114,042 bitcoins). Michael Saylor describes bitcoin as the “best money ever created." If it has to do with Bitcoin, you will find Michael Saylor at the center of it.

According to Lee Bratcher, President of the non-profit Texas Blockchain Council, Bitcoin miners can help address overcapacity issues (high supply, low demand) by creating more consistent demand during normal times. Then, during times of exceptionally high demand, they can turn their machines off.

Since Bitcoin miners do not have to run all the time, given the decentralized structure of the network, they can make the grid more efficient by selling contracted energy back to the grid in times of high demand.

In West Texas, for instance, wind energy is spotty at times given wind does not blow 24/7 and you cannot make it blow in times of high demand (i.e., in the evenings when people are returning home, turning on appliances, cranking the A/C, etc.). When demand is higher than the current supply, miners can convert their contracted demand into energy for the grid, turning a profit by selling that contracted energy at a higher price.

The potential synergy between Texas’ grid and miners is wonderful, in theory. As Bitcoin miners invest more in Texas and become more intertwined with its grid, time alone will tell how mutually beneficial this relationship can be. The potential for Texas to be the global center for crypto mining and blockchain development is promising.

Click here for the original article by The Block.

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.