Ted cruz says bitcoin mining can

Sen. Ted Cruz (R-Texas) thinks he has found a way to stabilize Texas’ electric grid in case another deep freeze hits the state. He wants to use the power of bitcoin.

“Because of the ability of bitcoin mining to turn on or off instantaneously, if you have a moment where you have a power shortage or a power crisis, whether it’s a freeze or some other natural disaster where power generation capacity goes down, that creates the capacity to instantaneously shift that energy to put it back on the grid,” Cruz told the Texas Blockchain Summit last week.

There are a few reasons why what he said doesn’t add up. But let’s start with his assumptions. First, large bitcoin-mining operations use hundreds or thousands of powerful computers, which create a demand for power.

It bought the town’s 32-foot-tall Christmas tree. Rockdale Mayor John King noted the company funds livestreaming for the high school sports events and donates fireworks for graduation.

Expansion plans are in the works to more than double the plant’s capacity and make it the biggest bitcoin mining facility in the world, according to Whinstone U.S. CEO Chad Everett Harris.

The city has found itself at the center of Texas’ ambitions.
In recent years, Texas has rapidly drawn more and more in the cryptocurrency industry as state and federal lawmakers try to lay the groundwork for a blockchain technology explosion. Industry leaders say they are drawn to the state’s cheap energy and aversion to regulation.

“I would like to see Texas become the center of the universe for bitcoin and crypto,” U.S.

Ted cruz says bitcoin mining can

For politicians like Cruz, Texas’ abundance of energy makes it fertile ground for an industry where bitcoin mining alone uses about as much energy annually as the Netherlands, according to the Cambridge Bitcoin Electricity Consumption Index.

“For bitcoin, you need a lot of energy,” Cruz said at the summit. “If there’s one thing Texas has in large amounts, if there’s one thing Texas knows about, deeply, it is energy.”

But Texas saw its power grid overloaded during a deadly winter storm earlier this year, raising questions about whether the grid can handle major growth in such an energy-intensive industry.

Industry advocates describe a symbiotic relationship between bitcoin miners and the Electric Reliability Council of Texas, the state’s grid operator.

But new blocks of bitcoins are released every 10 minutes, and miners compete to obtain them through a process by which they solve complex math problems to validate transactions. Those processes occur on blockchains, a public series of decentralized, anonymous blocks where the details get recorded.

The more computers a miner has competing in the process, the more bitcoins they can acquire, which makes mining an energy-intensive process.

Whinstone U.S. hosts over 25,000 miners, or computers programmed to mine bitcoin. Power runs through large transformers connected to those buildings, where miners line racks upon racks.
On the other side of those racks, an evaporative cooling wall pulls ambient air and coolant, dissipating the hot air emitted by the computers like a chimney.

To Texas Republicans and entrepreneurs, Texas and cryptocurrencies are a perfect pair.

Greg Abbott met with the Texas Blockchain Council. He tweeted afterward that the state soon “will be #1 for blockchain & cryptocurrency.”

A “very natural synergy”

Cryptocurrencies are digital assets that can be used to buy certain products and services without an intermediary like a bank.

Bitcoin is largely considered the first decentralized, peer-to-peer payment network powered by its users, though many cryptocurrencies exist. Its worth isn’t backed by any government, but transactions are tracked on a public ledger.

While it can be used in certain retail situations, many people are using it as an investment.
Still volatile, the price of bitcoin increased over the last year from $11,500 per coin to a record high of $66,000 just last week before dropping back below $60,000.

Most people buy bitcoin on public exchanges.

The measure made Texas the third state to amend the laws regulating financial transactions as such. HB 1576 established a 16-member working group that will recommend policies relating to blockchain matters.

Abbott signed both bills into law in June.

Energy, environment and market volatility

China — where about two-thirds of the country’s electricity comes from coal — has long been the world leader in bitcoin mining. But the government there has recently cracked down on those efforts, in part due to concerns about the industry’s impact on climate change.

Texas state leaders have shared few, if any, such concerns.

The Whinstone U.S.

mine has a capacity of 300 megawatts — one megawatt is enough electricity to power 400-900 homes in a year — and hopes to reach a maximum capacity of 750 megawatts upon expansion.

Ted Cruz, R-Texas, said at the Texas Blockchain Summit, where 700 attendees, according to organizers, met in Austin on Oct. 8. There, Republican politicians made the case for the industry alongside a lineup full of entrepreneurs and researchers.

The budding industry has its doubters.

Skeptics worry about the massive amounts of energy required to mine bitcoin, which has spurred both environmental concerns and fears about how the strain could affect Texas’ already fragile power grid.

And the growth in Rockdale has come in fits and starts. In 2018, a Chinese company that designs specialized computers for cryptocurrency mining promised hundreds of jobs and a $500 million investment into the shuttered Alcoa smelter.

By the end of 2018, with the price of bitcoin falling, those plans weren’t fully realized.

But Texas leaders are pressing forward.

Just last week, Gov.

If extreme weather is pushing the grid to its limits, he says, crypto mining could get in the way of residents being able to keep their lights on. Just a few weeks ago, the weather was so hot that crypto miners were asked to get off the grid to prepare for inevitable usage spikes.

[Related: Crypto companies are getting into carbon credits. But can they actually help the climate?]

Texas has been courting tech businesses, Rhodes says, attracted to the state’s low energy prices. Rhodes doesn’t feel the politicians in power in Texas are very interested in dealing with the fact that crypto mining is negatively affecting the grid, he adds. Texas Sen. Ted Cruz has suggested that crypto mining keeps the grid more stable because they can simply turn it on and off as needed to support demand from varying too much.

Tan Parker and Gio Capriglione, both Republicans, endorsed the idea in a conversation with Bratcher at the summit.

At the summit, lawmakers and advocates even explored the idea of using blockchain technology beyond the world of finance. In addition to being used for property taxes, the technology could help secure health care records and even protect elections, they said.

“You guys are pioneers on the front lines of an extraordinarily bright new future,” Parker told the audience. “When you think about the transformational impact of the internet from 20-25 years ago, I think blockchain will have a greater impact.”

In Rockdale, the impact has brought “a lot of interest in our community,” King, the mayor, said.

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ROCKDALE — Late last decade, the town of Rockdale appeared on the verge of economic ruin. The Alcoa aluminum plant here, which provided nearly 1,000 jobs, closed in 2008.

The Luminant coal-fueled power plant shut down in 2017.

But now a new industry has come to the town of about 5,300.

North America’s largest bitcoin mine — owned and operated by Whinstone U.S. — sits just down the road from the old aluminum plant, about 60 miles northeast of Austin. The facility, which has added about 145 jobs, hasn’t fully filled the void created by Alcoa. But Whinstone U.S., which is owned by Riot Blockchain, is fast working to become a staple of the community: It helped rebuild the local dog shelter. It installed lights at the high school softball and football fields.

In addition to the local labor the companies use, King said the international publicity they’ve brought now has other companies considering locating there.

“They’ve all been good neighbors from that standpoint,” King said. “They haven’t had [a] real negative impact at all. If anything, it’s been positive.”

Disclosure: The University of Texas at Austin has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors.

Financial supporters play no role in the Tribune’s journalism.

According to Carey King, research scientist and assistant director of the University of Texas at Austin Energy Institute, it’s unclear how adding more power consumers to an already-stressed grid helps even if they can shut off at a moment’s notice.

“Mining is a consumptive use of electricity, not a generator, so this doesn’t make sense to me,” King said. “I don’t need a middle man (the miner) in between the generator and the consumer to provide electricity.”

Cruz also brought up Bitcoin mining that uses waste gas products as a power source. As the top crude oil producing state in the country, the state is also home to a slew of oil and gas wells and refineries that (often illegally) flare excess methane in order to relieve pressure build-ups.

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