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The Cryptic Promise of Bitcoin Mining in Rural Texas

Nondescript warehouses have begun to dot the rural Texas landscape in a silent gold rush. Passersby might mistake them for agricultural units or manufacturing plants. But instead of manufacturing tangible products, these featureless facilities make digital money—mostly bitcoin—through cryptocurrency mining, the large-scale computing operation that validates certain digital currencies through a decentralized ledger known as the blockchain. 

Texas’ business-friendly reputation and abundance of energy have made it a magnet for these mining companies. Indeed, state officials have embraced bitcoin entrepreneurs, with interim ERCOT CEO Brad Jones telling Bloomberg that the electrical grid operator plans to make Texas a leader in crypto mining over the next decade. 

Legislators sealed the deal in 2021 by formally recognizing digital assets as legal tender through House Bills 1576 and 4474. But with the grid failure from Winter Storm Uri, mounting criticism of bitcoin mining’s environmental impact, and the recent bankruptcy of FTX, the fate of this industry and its impact on the environment and economic development of rural Texas remains unclear.

The boom has undoubtedly brought jobs and investments to rural areas. Texas cities such as Fort Stockton, Rockdale, McAdoo, and Corsicana have rapidly become crypto mining hubs. However, much of this boom stems from China’s recent ban on cryptocurrency that caused companies to jump ship and flee to Texas in 2021. Additionally, many of these companies received lucrative tax breaks from county judges. 

Most of these facilities mine bitcoin and essentially profit from the difference in the value of the coin and the price of electricity. Thus, miners have flocked to numerous parts of Texas in search of the cheapest energy, often hooking up to fossil fuel power plants. In Granbury, Texas, Compute North announced plans to build a 300MW mining facility right next to a gas plant. 

An interagency report from the White House strikes a more moderate, yet still alarming, tone, noting that ERCOT’s demand response program to pay crypto miners to shut down operations during peak electricity demand establishes “misaligned incentives between crypto-asset miners and grid operators.” Indeed, in many cases these demand response programs would not be necessary in the first place without the increased energy demand from crypto mines. 

Nevertheless in mid-November, one week after the major crypto exchange FTX lost billions of dollars in customer assets and filed for bankruptcy, the Texas Blockchain Council wrapped up a two-day conference featuring speakers such as Ted Cruz and Andrew Yang, with the council president Lee Bratcher proclaiming that crypto growth needs “light touch regulatory frameworks that protect consumers and provide clarity for businesses.”  

In contrast to the bold claims coming from the Texas Blockchain Council at the AT&T Conference Center in Austin, officials from economic development organizations and rural Texas cities were more pragmatic at “The Future of Rural Texas” conference occurring over the same two-day period 400 miles away in Lubbock. During a panel on job growth, Lillian Salerno, Rural Development State Director for Texas at USDA, noted that economic development experts in Texas prefer “about 2 or 3 companies instead of betting the entire farm, so to speak, on one big employer.” 

Other panels focused on the need to attract young people, invest in broadband, fund public schools, continue to invest in Texas’ powerful agricultural sector, maintain healthcare facilities, and support numerous other initiatives to promote sustainable economic development. Although no panelists explicitly spoke out against crypto, none echoed the bullish megaphone of the crypto summit in Austin. This cuts to the heart of the tension between rural Texas and the crypto industry: how “decentralized” can this industry truly become?  

Some crypto experts, along with environmental groups Greenpeace and Environmental Working Group, advocate shifting from the Proof-of-Work validation method currently used by bitcoin miners to the less energy-intensive Proof-of-Stake model to reduce the carbon intensity of mining operations. Ethereum, the second biggest cryptocurrency by market capitalization behind bitcoin, recently converted to a Proof-of-Stake validation method. Additionally, miners say crypto mining in West Texas can stimulate the growth of renewable energy by providing a market for the excess wind energy that would otherwise go to waste. 

Still others go so far as to argue that such mining operations empower marginalized communities by giving them the opportunity to accrue wealth outside of a financial system that has historically excluded them. However, as Public Citizen Texas director Adrian Shelley put it in a debate at UT Austin, “1/10 of one percent of the [crypto] companies…own 50% of the mines” in Texas, and their use of renewable energy actually dis-incentivizes ERCOT from investing in transmission to bring affordable, clean energy to population centers. 

Arguments that crypto mining empowers rural communities mirror the energy poverty narrative propagated by the oil and gas industry—the claim that fossil fuels are necessary to alleviate global suffering and elevate human prosperity. Indeed, in known fossil fuel propagandist Alex Epstein’s blog, “Energy Talking Points,” he goes so far as to say that the “fastest way to decrease energy poverty and overall poverty is to…reject any proposal to outlaw reliable fossil fuels and nuclear in favor or unreliable ‘renewable’ energy.” 

Yet Bitcoin has its own 1%. And today, the majority of wealth held in several of the top cryptocurrencies is concentrated in the hands of only a few entities–not unlike the modern financial system. From the disgraced Sam Bankman-Fried to Elon Musk, who has announced plans to build a solar-powered bitcoin mining operation in Texas, billionaires have become experts in selling new crypto schemes as a ‘public good’ to accelerate their accumulation of capital.

In some ways, it is no surprise that crypto mining has exploded in Texas. The lone star state prides itself on nurturing a mythologized pioneering spirit through free enterprise, with the booming tech industry successfully appropriating this romantic vision for its own purposes. But after decades of continued disinvestment, it remains to be seen whether the roughly three million rural Texans will embrace crypto mining as a silver bullet solution. As companies rush in to gobble up cheap Texas energy and secure highly volatile digital assets, they face a populace that has been burned for decades from the boom-and-bust cycles of fossil fuel dependency. Their future in rural Texas is anything but certain.

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