The Hard-Luck Texas Town That Bet on Bitcoin—and Lost
Bitmain, a Chinese company that makes specialized computers for “mining” cryptocurrency, said it would invest $500 million in what was to be the world’s largest bitcoin-mining facility at the closed Alcoa smelter, which, crucially, was still connected to massive electrical lines. The large buildings where aluminum was made, called potrooms, would be filled with shipping containers stocked with 325,000 mining machines. Most important for Milam County, Bitmain promised to create between 400 and 600 jobs. New industry would replace the old.
In August, James Kyle, Bitmain’s vice president of North American business development, appeared in front of county officials considering a tax abatement. Seeking to make Bitmain feel at home, Steve Young invited Kyle to his 1,300-acre ranch that night. “We’ll feed you and water you,” he promised. Young, 67, had won the Republican primary for county judge-executive and was weeks away from an election that, in a red county, was considered a formality.
Young picked up brisket from Thorndale Meat Market, a barbecue joint lauded byTexas Monthly, and stocked his stainless steel refrigerator with Shiner beer. Some 40 guests, including Kyle, the sheriff, and the district attorney milled about on a long patio overlooking a pasture where cattle gnawed on Bermuda grass. Towering silver transmission lines cut across the property, connecting to the former Alcoa site and future Bitmain home. Observing the scene, Kara Clore, the executive director of Rockdale’s Municipal Development District, thought of theSaturday Evening Postarticle. “I was like, ‘This looks exactly like that picture,’” Clore says. “Just like 50 years later or 60 years later.”
As Kyle sipped Shiner, Young remembers him talking about how Bitmain’s facility could someday feature more than mining. Kyle said Bitmain may later invest in the development of artificial intelligence for self-driving cars.
“They had a lot of great ideas,” says Young, a tall, sturdy man who often sports a cowboy hat over his curly white hair. “And I think, ‘Shit, if they do half of what they’re talking about, it will put Milam County on the cutting edge of technology.’”
Instead, Milam County and other communities have learned a real-life lesson about the elusive promise of virtual currency.
Power Draw
Bitcoin mining conjures the image of a college sophomore pecking at a laptop while taking rips from a bong. But that hasn’t been the case for a while. At least not for anyone who wants to make a profit.
Successful crypto miners use custom machines that solve the puzzles required to build a blockchain and unlock the limited supply of bitcoins that become available roughly every 10 minutes. The more mining machines you have, the better the odds of winning. (Operators sometimes combine into profit-sharing collectives known as pools.)
The process consumes enormous amounts of energy, and cheap electricity is a must. One of the most popular machines, Bitmain’s AntMiner S15, draws about 1,600 watts of power. That’s about equal to the energy consumption of a microwave oven. But mining machines aren’t used on occasion. To optimize the chance of earning coins, the top mining operators run hundreds or thousands of miners 24/7. Imagine your electricity bill if you were constantly zapping instant oatmeal in hundreds of microwaves all day, every day. In Rockdale, Bitmain’s planned facility was supposed to consume 500 megawatts, enough to power more than 400,000 average US homes.
Rockdale was hardly the only, or first, place that caught the bitcoin bug, as its value soared 20-fold in 2017, to $20,000 that December. Central Washington, with its cheap hydropower, was a natural draw; by 2018, there were more than 50 mining operations in the region. Dennis Bolz, a commissioner for the Chelan County Public Utility District, recalls a Japanese businessman flying in on a private jet and announcing he wanted energy on the spot. “It was like a gold rush,” Bolz says.
Upstate New York, also home to cheap hydropower, was another landing spot. In March 2018, the city council in Plattsburgh, New York, enacted the first crypto-mining moratorium in the US after heavy electricity use by miners caused residents’ rates to skyrocket. Several communities in Washington followed Plattsburgh’s lead. In Lake Placid, New York, before crypto-mining had even taken hold, local officials called for a moratorium in May 2018. Speaking to the Lake Placid village board, one resident said of bitcoin miners, according to the AdirondackDaily Enterprise, “I don’t mean to sound sharp, but I think they would come here and rape our electric department.”
Opponents of crypto-mining questioned whether communities received enough benefits for the electricity that was devoured. Anyone who understood mining realized the potential for employment was minimal. The machines run on their own and require minimal support. But as bitcoin’s value rose along with concerns about energy consumption, companies started promising massive investments and job creation.
In Massena, New York, Blockchain Industries proposed a $600 million facility that would create 500 jobs—if it could get subsidized hydropower. The plan was scuttled in March 2018 when the New York Power Authority, concerned about whether mining operations would create enough jobs, imposed its own moratorium on bitcoin miners. A c
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