“When the crypto company needed to hire contractors for various projects, it hired locally.” — Steve Young (Milam County Judge)
China was once the world's largest cryptocurrency mining hub. But, the country imposed a series of restrictions on Bitcoin trading and mining. These arose as it began to develop its digital currency. As a result, Bitcoin mining companies must move to other areas.
Many who have been scouring for other enabling environments moved to Texas. Interestingly, the United States' second-largest state is popular for its hospitality. Texas is gladly welcoming the relocating Bitcoin miners.
Texas government has also been promoting the state's reputation to attract mining companies. Approximately 30 mining companies have arrived in the last decade. Dozens more are also expressing interest in relocating to Texas.
With the ongoing relocation, it seems China’s Bitcoin mining ban led to an unintended gift to the US. Texas may be the biggest winner.
The Exodus of Miners from China
Previous estimates suggest China accounted for 65% to 75% of the world's Bitcoin mining centers. Four major Chinese provinces hosted Bitcoin miners during their time in the country.
They include Sichuan, Inner Mongolia, Yunnan, and Xinjian. The hydropower of Sichuan and Yunnan makes them renewable energy hubs. On the other hand, many of China's coal plants are in Xinjiang and Inner Mongolia.
However, China announced a drastic clampdown on Bitcoin mining and trading in May 2021. Provinces gave Bitcoin miners two months to leave. This was after they fell short of Beijing's climate targets. Cryptocurrency mining took all the blame for the province's energy shortages.
The two-month period was for miners to liquidate their assets. But they may move their machines away from China. Of course, they can set up their businesses anywhere else. This brought about a colossal migration of miners to other favorable countries, and many chose Texas for good reasons.
Why Miners are Choosing Texas Rural Counties
There are a few reasons why more Bitcoin miners are moving to the US, particularly Texas.
Deregulated Energy Sector/Cheap Electricity
Mining cryptocurrency requires a lot of cheap energy to be lucrative. This is why China was once the world's mining hub. However, Texas makes a good alternative.
The power grid in Texas is deregulated. This means that customers can choose from different power providers. Providers are also incentivized to offer low rates.
Moreover, Texas has plenty of open land and abundant renewable energy sources. 20% of its power comes from wind.
According to Brandon Arvanaghi, an erstwhile Gemini cryptocurrency exchange security engineer:
“Texas not only has the cheapest electricity in the U.S. but some of the cheapest in the globe.”
The figure above shows that Texas has one of the lowest electricity costs in America. Again, the US is one of the countries with cheaper electricity costs globally. The figure below depicts the US energy cost versus other countries.
Pro-Crypto Political Climate
Another reason why mining companies are moving to Texas is the crypto-centric political leaders. What better place to establish a crypto business than in an environment governed by pro-crypto leaders?
In a tweet, Texas Governor Greg Abbot announced his enthusiasm last year about how Texas is becoming the next “crypto leader.” The tweet was spurred by the grocery shops’ move to incorporate crypto kiosks.
According to the governor,
The crypto enthusiasm of Texas political leaders is common knowledge. With such enthusiasm, it makes sense that mining companies want to move to Texas. This is in contrast to China and other countries with strict crypto rules.
Darin Feinstein, a co-founder of Core Scientific blockchain company, told reporters that the company was drawn to Texas for various practical reasons. These include abundant land, renewable energy, and sustainable resources. But, the Texas community played a significant role in Core Scientific's decision to extend its business to Texas.
Feinstein said the Governor of Texas has built a "world-class business-friendly environment that encourages entrepreneurialism and technology but has been welcoming to the blockchain industry."
For Feinstein, crypto businesses need crypto-friendly leaders like Governor Abbot. A leader opposed to crypto would undoubtedly be detrimental to business.
Incentives
Interestingly, many rural counties offer incentives like tax breaks to entice crypto companies.
Steve Young, the judge of Milam County, said the County offered Riot Blockchain a 45% tax reduction for ten years. Earlier, they lost an Alcoa aluminum plant which was their biggest employer. The company engaged almost 1,000 workers during its best day but shut down in 2008.
Oppositions and Concerns
Bitcoin mining has always faced opposition because of its power consumption and the resulting carbon footprint. Also, since China evicted miners because of power consumption, it is expected that natives will worry about the new companies’ impact on Texas electricity supply.
Some communities have reacted already. One notable mention is a group in Navarro County. They rallied some citizens to oppose Riot Blockchain's proposed Bitcoin facility. The group claims Bitcoin mining would pollute the environment through large electricity consumption.
However, it appeared the group didn't get the facts about Bitcoin's environmental impact. They may have consumed much of the propaganda the media pushes against Bitcoin.
We all agree that "mining" Bitcoin requires a significant amount of electricity. But the worrying effect occurs when it is done with fossil fuels. However, alternative energy sources exist with less harm to the environment.
Bitcoin mining will have a lower environmental impact in Texas. This is because the State's renewable energy sources would produce cleaner power.
However, there hasn't been any widespread opposition so far. Commission Shift’s Executive director, Virginia Palacios, stated:
“I don’t know anyone who is actually making a case against it or has done any research.”
On the other hand, note that Texas’ power grid crashed in February last year following a strong winter storm. Millions of Texans were thrown into darkness for days, and hundreds died. Concerns about the grid’s capability to handle the extra demand have been raised.
Some time ago, a Texas research associate at University College London's Centre for Blockchain Technologies, Angela Walch, also tweeted her concerns regarding the percentage of Texas electricity used for Bitcoin mining. She highlighted that her family had to minimize air conditioner use, not run washing machines & dryers, etc.
However, according to experts from the Energy Reliability Council of Texas (ERCOT), the state's power transmission companies will not permit large power users like Bitcoin mining companies to connect to the grid if there is no surplus power supply.
Like other industries, crypto companies can stop working when there is high electricity demand. Notably, ERCOT asked Texans to conserve electricity this summer, given the tight grid conditions. The President of the Blockchain Council in Texas, Lee Bratcher, confirmed crypto companies shut down quickly following the request.
“There are over 1,000 megawatts' worth of Bitcoin mining load that responded to ERCOT's conservation request by turning off their machines to conserve energy for the grid.”
This shows that Bitcoin mining companies won’t be much of a bother to their host communities. ERCOT and the state power transmission companies will make sure.
Benefits for Rural Counties
Texas comprises 254 counties. Populations range from over 4 million to around 100 people in some areas. The state provides several local development programs to assist local economies. But the influx of crypto-mining companies can also create a significant impact.
This impact will range from job creation and tax boost to county development services and other innovations.
Job Creation and Tax Boost
These are the most obvious benefits. When new establishments enter a region, job opportunities are likely to grow.
Argo Blockchain opened its mining facility in Dickens County and has employed a few dozen locals. And according to Kevin Brendle, the county judge, the company added $17M to the local tax base.
Riot Blockchain, on the other hand, is based in Milam County. It has bought hundreds of new jobs and increased the local tax base by several million dollars.
According to Young,
“When the crypto company needed to hire contractors for various projects, it hired locally.”
Also, the tax boost has enabled the county government to fund basic services such as road improvements.
County Development Services
Bitcoin mining companies will likely bring other benefits in the form of development services to their host counties.
For instance, Argo Blockchain has helped to renovate the county-owned public pool that was closed more than a decade ago.
Also, Riot Blockchain has assisted in the rebuilding of the local animal shelter. It has also helped set up light installations at the County’s sports fields.
It is great that these companies aren’t just taking. They are consciously giving back, just as it should be. Jobs come with employee incentives, including training, paid healthcare, and 401K Benefits. These would be a welcome development for any rural community, even outside Texas.
However, it is not strange that many are unaware of these Bitcoin miners' migration benefits. But with time, people will begin to understand what has come to stay with them. They will appreciate the job creation, county services, and innovation these companies bring.
Conclusion
Texas has embraced Bitcoin mining companies. Due to its low taxes and cheap power, the state has become a suitable region for Bitcoin mining companies relocating from China and other places. A favorable political stance also boosted the companies' will to move to Texas.
Now, the companies are not only bringing about a tax boost but also creating jobs and innovations. They are also engaging in county development services.
Moreover, the companies won’t be burdensome to the state. They are willing to comply with conservation requests from grid operators in tight grid conditions.
It is safe to say that Texas is the new Bitcoin mining hub, an unintended gift that has turned out so well so far.
