“What makes Texas different than the rest of the world is that Texans love freedom, and so do digital asset bulls,” Texas Senator Ted Cruz said in our interview about the growing role of bitcoin in the Texas economy.
He said that he was especially bullish on bitcoin because it enhances freedom by being uncontrollable. Cruz believes this is the characteristic which has triggered governmental resistance, referencing China’s bitcoin ban as an example. Bitcoin’s uncontrollability is achieved through the way the network is secured.
The Bitcoin network is secured through proof-of-work where a geographically distributed network of computers expend energy in order to solve a cryptographic puzzle. This method was intended to serve as a fair issuance mechanism. As an open-source software and network, anybody is free to opt into the network and contribute their computing power.
In return for contributing computational power to the network, these computers are rewarded with the newly issued bitcoin, as well as the transaction fees for propagating confirmed transactions across the network.
While some may criticize the amount of electricity consumed, the Bitcoin network has unique attributes which are providing some positive externalities in the energy sector.
Grid Balancing And Demand Response
“Texas is a hub for jobs, innovation, and freedom, and those things make it the natural oasis for the digital asset industry worldwide,” Cruz said in our interview, alluding to the drastic growth of bitcoin mining in his state due to inexpensive and abundant electricity.
Cruz spoke to the positive benefits bitcoin mining is having on the Texas grid this week on Fox News Radio. Cruz said that bitcoin mining can operate like a battery, describing bitcoin miner’s role in demand response programs.
Bitcoin miners are able to monetize the excess capacity that would go to waste on an average day, but that capacity can be curtailed in seconds, releasing the energy back to the grid when needed.
“It’s essentially an emergency reservoir of power. I think that’s one of the tools we can utilize to enhance resiliency in the grid,” Cruz concluded in the Fox interview.
The emergency reservoir was on full display this August as Riot, a large bitcoin mining company in Texas, curtailed 95% of their power consumption in order to release power back to the grid during a recent heatwave.
Bitcoin miner electricity consumption allows for an economically viable way to keep excess capacity on line that may only be needed occasionally throughout the year.
Bitcoin Is Revitalizing Rural America
Marty Bent, co-owner of Standard Bitcoin energy company and host of the TFTC podcast, spoke to me optimistically about bitcoin mining’s ability to fill the gap left in the wake of manufacturing globalization.
“We target areas with falling population rates and look for substations that were once servicing manufacturing facilities that have left,” Bent said in our interview about the company’s electricity procurement strategy.
In doing so, Bent says that their operations are able to monetize the excess energy and keep rates lower for the consumers in those areas.“There are [energy] companies starting to reach out to us, and I think that will become an underlying theme of on grid mining,” he continued.
Bent also spoke to the impact of their off-grid operations capping stranded and abandoned oil wells, which mitigates methane emissions. “Bitcoin mining ensures wells are being maintained and ensures they’re producing value,” he said.
Meanwhile, Cruz is optimistic about the potential environmental and economic impacts of bitcoin mining as well. “Half of the natural gas being flared in the U.S. is burned in West Texas because we don’t have the pipelines and necessary infrastructure to use it. This is wasted energy,” Cruz told me.
Cruz said that we can kill two birds with one stone and help the environment by reducing flaring and capturing this wasted energy to power on-site bitcoin mining.
CleanSpark, another mining company, has put the economic and social impacts front and center in their business models. According to CleanSpark Data, during the first six months of 2023, the company has delivered nearly $3 million in sales tax revenues to small towns in Georgia.
“City officials have told me that these funds are going to remodel schools, support parks, and build out city amenities and other infrastructure improvements,” CleanSpark Chief Communication Officer Isaac Holyoak told me in an interview.
In addition to tax revenues, CleanSpark has created jobs and directly invested hundreds of millions of dollars into rural communities. Investments include funding projects from substation improvements to power line and pole replacement.
The arrival of bitcoin miners in these towns has an economic boon for the region. As bitcoin miners pursue cheap energy and infrastructure development, it might just be the economic incentive that revitalizes the Rust Belt and rural America.