Iowa Cryptocurrency Site Consumes Electricity ::

“About eight miles west of this lies a white Quonset hut humming to the sound of industrial fans.

Unlike other rural outbuildings equipped with fans, this one does not house pigs. It is filled with computers that work all day and night on complex mathematical problems that create bitcoin, the most well-known cryptocurrency.

“I knew there was a place there,” said Jill Krausman, owner of Landmark Bistro at Grundy Center, who does not know much about the place other than whether an employee stops there for lunch. . “I do not know enough about it. It did not affect me.

The Cedar Rapids Gazette reports that this indefinable facility is one of the first – if not the first – large-scale cryptocurrency mining site in Iowa. But the company wants to expand with five more locations in eastern Iowa and take advantage of large spaces, low property taxes and cheap electricity.

Cheap electricity is especially important because cryptocurrencies use a lot of juice. The Grundy County area uses more electricity than all private customers in the Grundy Center, or 2,800 residents combined.

The industry’s massive energy consumption at a time when the world is trying to slow down climate change should be a wake-up call for utilities and Iowa residents, said Kerri Johannsen, director of the Iowa Environmental Council’s energy program.

“There’s a bigger fundamental question as to why we need to use energy in the first place to create cryptocurrency,” she said.

Bitcoin was created in the late 2000s, after the Great Recession, as a way for people to send money directly to each other without a bank or third party. Other cryptocurrencies, such as Ethereum and Litecoin, followed suit.

Bitcoin transactions are verified and monitored by independent computers running a secure algorithm to solve blocks of numbers representing groupings of transactions. These computers, or “miners”, rush to solve every block where the payment is the next block of bitcoins, which is worth hundreds of thousands of dollars.

The Grundy County site is too small to solve blocks alone, so miners work there as part of a mining pool that pays a daily rate based on how much work or “hash” the miners perform. computers, explained JP Baric, founder and CEO of MiningStore, owner of the site.

“Bitcoin is important to me because it is a monetary system that cannot be influenced by the government and cannot be changed,” he said.

Baric, 24, moved from the state of North Carolina in 2017 to Texas, first to Houston and then to Austin, which he calls a “crypto-mining paradise.” Together with his parents and grandparents, Baric invested $ 1 million to start MiningStore, which owns and operates the Grundy County site as a flagship facility.

Currently, each of the site’s 1,900 computers mines $ 17 a day, but that amount fluctuates depending on the value of bitcoin. It was as high as $ 35 a day. But with current rates, the site is earning about $ 32,000 a day. The electric bill is over $ 5,000 a day, Baric said.

Baric discovered the Iowa site through an economic development team in Colorado that identifies low-energy areas.

“It does not surprise me that they are moving to Grundy County because they have very cheap energy there,” said Jim Martin-Schramm, professor emeritus at Luther College, who specializes in energy and climate policy.

At 4.05 cents per kilowatt hour, the Grundy County REC has the cheapest industrial electricity in the state, according to applications to the Iowa Utilities Board. MiningStore bought one hectare of land in 2019 right next to an electric transformer station.

Magnus Anderson, Grundy County Site Manager at MiningStore, explains how electricity flows through an underground 1,500 kilowatt transformer directly to the site. The company’s contract with REC says that MiningStore six months a year will agree to temporarily shut down in case of peak load of electricity consumption, such as on hot summer days.

“It’s a cargo ship for the net,” he said of the mine site. “We use it (electricity) until everyone needs it.”

The site uses 6 megawatts of electricity during operation, which is 24 hours a day, 7 days a week, unless part of the system is being repaired.

To put that in perspective, Luther College with 1,800 students at Decorah uses about 2 megawatts most of the year, which has risen to 2.8 megawatts in the summer, Martin-Schramm said.

An average home in Iowa uses about 11,000 kilowatt hours of electricity a year, Johannsen said. MiningStore uses approximately 54 million kilowatt hours per year, or the equivalent of 4,900 homes.

“The entire Grundy County census has 5,146 households,” she said. “We’re talking about 95% of Grundy County households.”

So where does the power come from?

Grundy County REC is one of nine rural electric cooperatives and a municipal cooperative that owns the Corn Belt Power Cooperative, based in Humboldt and serving 41 northern Iowa counties. Corn Belt owns Grundy County’s nine REC transformer stations, including the one that supplies MiningStore.

The Corn Belt energy mix in 2019 was around 50% coal, 18% purchased electricity, 15% renewable energy and smaller proportions of natural gas, hydropower and nuclear, according to the cooperative’s website.

Half a dozen wind turbines are visible from the MiningStore site, but these turbines are owned by MidAmerican Energy and do not operate the cryptocurrency plant, said REC CEO Mike Curtis.

The co-op’s electricity sales to large commercial and industrial customers more than doubled from 16.5 million kilowatt-hours in 2018 to 36.9 million kilowatt-hours in 2020, which Curtis says is largely due to MiningStore. .

For bitcoin to become a viable global currency, some environmental groups say it needs to reduce its energy consumption.

A group called Change the Code Not the Climate says changing a “proof of work” required to validate transactions to “proof of effort” – meaning miners promise coins to verify transactions – would reduce consumption of coins. 99% energy, according to a March article in The Guardian.

Energy consumption is not the only challenge.

“Since cryptocurrencies are too volatile to be used as real money, people are treating them as a kind of investment plan,” wrote Jon von Tetzchner, co-founder and CEO of Vivaldi Technologies, in an article. Blog post January 13th.

“The problem is that in order to pull real money out of the system, you need to find someone who is willing to buy the tokens you have. And that will probably only happen as long as they think they can resell them. to someone who will pay even more for them. And so on. “

The same day that The Gazette visited the Grundy County mine site, Baric showed it to Josh Terry, an Austin-based YouTuber whose channel, JoshTerryPlays, explores cryptocurrency, game theory and several related topics and has over 5,000 subscribers.

Terry used social media to recruit 1,000 people to invest $ 100 to become part of a “mining team” in the company, Baric said.

Bitcoin mining, which wants to grow, has to keep adding investors because computers cost thousands of dollars, Baric said. But it is not like in a pyramid scheme that new investors are needed to make previous investors whole.

“People are buying bitcoin because they think more people will believe bitcoin has value,” Baric said. “That’s why people put money into it.”

Baric and his investors would like to open five more bitcoin mining sites in eastern Iowa: another in Grundy County, one in Black Hawk County and three in Tama County.

The Grundy County Planning and Zoning Commission recommended the Board of Supervisors reject the application to change the zoning from agricultural to commercial to allow the center there. There will be a public hearing on May 9 at. 9 of the Grundy County Courthouse in the Grundy Center.

“With any kind of expansion like this, there will be concerns that you take into account, such as environmental concerns or land issues,” said Supervisor Lucas Halverson. “We are interested in seeing what the public has to say. We would be happy to hear from Mr Baric ourselves. We were not contacted directly by any of this company. We would very much like to hear the positive and the negative .

Baric said he plans to be at the hearing.

MiningStore pays property taxes, employs nine full-time employees and hires electricians to help on-site, Baric said. Business leaders are also looking to do more community outreach work, such as organizing school trips and talking about bitcoin.

The Iowa Economic Development Authority does not offer incentives for cryptocurrency mines to open in Iowa. The agency is not tracking them either, spokeswoman Kanan Kappelman said.

That should change, said Johannsen of the Iowa Environmental Council.

“If an expansion is planned, it would be something the state should be in control of from a point of view of what we can expect in terms of (energy) load growth,” she said. . “It’s not that the organization is anti-crypto, or that we have any particular reason to be. But if we want to use our energy resources as efficiently as possible, is that really the most efficient use of energy resources?”

Leave a Comment