A war is brewing between states to attract bitcoin miners, and new data shows many of them are going to New York, Kentucky, Georgia, and Texas.
The US is home to 19.9% of Bitcoin’s hashrate – the largest mining pool in North America and the fifth largest in the world.
A mining pool allows a single miner to combine their hashing power with thousands of other miners around the world, and there are dozens to choose from.
“This is the first time we’ve actually seen the miners’ plight at the state level, unless you wanted to sift through all the public records and try to find 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 to find out where mining is happening in America.”
However, Carter points out that the Foundry record does not account for the entire U.S. mining hashrate because not all U.S.-based mining farms use this pool’s services. Riot Blockchain, for example, is one of the largest publicly traded mining companies in America with a large presence in Texas. They don’t use a foundry, so their hashrate is not included in this dataset – which is one of the reasons why the mining presence in Texas is underestimated.
Although the dataset only captures a portion of the country’s domestic mining market, it points to nationwide trends that are reshaping the carbon footprint debate.
Many of the top ranked states are epicentres of renewable energy, a fact that has already started to change the narrative among skeptics that Bitcoin is bad for the environment.
While Carter acknowledges that U.S. mining is not fully renewable, he says the miners here are much better at picking renewable energy and buying offsets.
“Migration is definitely a net positive overall,” he said. “Moving the hashrate to the US will mean much lower carbon intensity.”
Where did all the miners go?
When Beijing decided to kick out all of its crypto miners this spring, about half of the Bitcoin network went dark practically overnight. While the network itself didn’t miss a beat, the incident sparked the largest migration of bitcoin miners ever seen.
The Foundry dataset shows that the largest Bitcoin mining operations are located in some of the most renewable energy states – a turning point in the debate about Bitcoin’s environmental impact.
As miners compete on a large scale in a low margin industry where their only variable cost is usually energy, they are encouraged to switch to the cheapest sources of energy in the world – which are usually renewable energy sources as well.
Take New York, which tops the Foundry rankings. According to the latest available data from the US Energy Information Administration, one-third of the state’s generation comes from renewable energy.
New York has nuclear power plants as its 100% carbon-free electricity destination, and most importantly, New York produces more hydropower than any other state east of the Rocky Mountains. It was also the third largest producer of hydropower in the country.
New York’s cool climate – and previously abandoned industrial infrastructure ripe for repurposing – have also made it an ideal place for Bitcoin mining.
The crypto mining company Coinmint, for example, operates facilities in New York, including one in a former Alcoa aluminum smelter in Massena, which taps the region’s abundant wind power and cheap electricity from the dams on the St. Lawrence River. The Massena location with 435 megawatts of transformer capacity is billed as one of the – if not the – largest Bitcoin mining facilities in the US
New York this year weighed legislation banning Bitcoin mining for three years so it can conduct an environmental assessment to measure its greenhouse gas emissions. The legislature has since largely withdrawn it.
“Bitcoin mining in New York is actually very low carbon intensity given its hydropower, and if New York were to ban Bitcoin in the state, it would likely increase the overall carbon intensity of the Bitcoin network.” said Carter. “It would be the complete opposite of what they wanted.”
Other states that are conquering a large part of the American bitcoin mining industry are Kentucky and Georgia.
Aside from the fact that the Kentucky governor is industry-friendly and just passed a bill this year granting certain tax exemptions for crypto mining operations, the state is also known for its hydro and wind power.
Connecting oil rigs to otherwise stranded energy, such as natural gas wells, is another energy source. Although coal is also an important player in the energy mix, many mining companies there rely on renewable energies.
And then there is Texas
Texas may rank fourth according to Foundry data, but many experts believe it is the leading jurisdiction for miners right now.
Some of the biggest names in Bitcoin mining have settled in Texas, including Riot Blockchain, which has 100 acres in Rockdale, and Chinese miner Bitdeer, just down the street.
Orders for new ASICs – the special equipment used to mint new Bitcoin – show that tens of thousands more machines are to be shipped in Texas, according to The Block Crypto.
Texas’s appeal rests on a few big fundamentals: crypto-friendly lawmakers, a deregulated power grid with real-time spot prices, and perhaps most importantly, access to significant surpluses of renewable energy and 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 designed for advanced miners.
“It’s a very attractive environment for miners to deploy large amounts of capital,” he said. “The sheer number of land deals and power purchase agreements that are in various stages of negotiation is enormous.”
Some miners plug directly into the power grid to power their drilling rigs. ERCOT, the organization that operates the Texas grid, offers the cheapest solar power supply in the country at 2.8 cents per kilowatt hour. The grid is also quickly adding wind and solar power.
“You can’t beat the cost of electricity in West Texas, and when you combine that with a knowledgeable energy management company that can manage your demand-response programs, it’s almost unbeatable anywhere in the world,” continued Brammer.
Deregulated grids tend to be the best economy for miners because they can buy spot power.
“They can participate in the economic dispatch, which means that they no longer buy electricity when prices rise. So you have a lot more flexibility when you are active in the spot markets, ”explains Carter.
Another major energy trend in the Bitcoin mining business in Texas is the use of “stranded” natural gas to power oil rigs, which both reduces greenhouse gas emissions and makes money for gas suppliers and miners alike.
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 the clear leader in Bitcoin mining not only in the US but worldwide.